POV: Have Gun, Will Nudge
by Ayn Rand | March 1962
It's Not the Unions — It's the Labor Laws
by Doug Altner | March 19, 2014
Regulatory Strangulation
by Steve Simpson | March 13, 2014
Obamacare creates a new class of free riders
by Rituparna Basu | January 23, 2014
Obamacare Is Suffocating An Already Sick Health Insurance Patient
by Rituparna Basu | January 22, 2014
The Broken State of American Health Insurance Prior to the Affordable Care Act: A Market Rife with Government Distortion
by Rituparna Basu | January 21, 2014
Obamacare is Really, Really Bad for You, Especially If You're Young
by Rituparna Basu | August 21, 2013
Justice Department should let US Airways & American Airlines merger proceed
by Tom Bowden | August 16, 2013
Why Is Apple Inc. On Trial? For Good Behavior, It Turns Out
by Tom Bowden | June 20, 2013
The Forgotten Man of the Minimum-Wage Debate
by Doug Altner | June 19, 2013
Why Delivering Beer Isn’t Easy
by Doug Altner | June 11, 2013
What Explains GM’s Problems With The UAW?
by Doug Altner | May 20, 2013
What Are The Search Results When You Google ‘Antitrust’?
by Tom Bowden | April 18, 2013
To Protect the Defenseless, We Must Abolish the Minimum Wage
by Don Watkins | March 27, 2013
I’ll Buy My Own Contraception, Thanks
by Rituparna Basu | November 13, 2012
Why The Glass-Steagall Myth Persists
by Yaron Brook | November 12, 2012
Why Ayn Rand’s Absence From Last Thursday’s Debate Benefits Big Government
by Yaron Brook | October 15, 2012
Changing the Debate: How to Move from an Entitlement State to a Free Market
by Don Watkins | July 02, 2012
3 Things Everyone Needs to Know About the Apple Antitrust Case
by Don Watkins | April 10, 2012
What's Really Wrong with Entitlements
by Don Watkins | February 21, 2012
The Entitlement State Is Morally Bankrupt
by Don Watkins | September 13, 2011
How Important Is the Obamacare Litigation?
by Tom Bowden | August 12, 2011
Atlas Shrugged: With America on the Brink, Should You “Go Galt” and Strike?
by Onkar Ghate | April 29, 2011
The Road to Socialized Medicine Is Paved With Pre-existing Conditions (Part 3)
by Yaron Brook | April 06, 2011
The Road to Socialized Medicine Is Paved with Pre-existing Conditions (Part 2)
by Yaron Brook | March 10, 2011
In Defense of Finance
by Yaron Brook | February 15, 2011
The Road to Socialized Medicine Is Paved with Pre-existing Conditions
by Yaron Brook | February 10, 2011
The Avastin Travesty
by Tom Bowden | December 12, 2010
Apple Now Targeted for Success Like Microsoft Was in the 1990s
by Tom Bowden | October 04, 2010
The Un-American Dream
by Don Watkins | August 27, 2010
What About Private Health Emergencies?
by Tom Bowden | April 08, 2010
What’s Really Driving the Toyota Controversy?
by Don Watkins | March 26, 2010
Anti-Smoking Paternalism: A Cancer on American Liberty
by Don Watkins | March 06, 2010
Apple vs. GM: Ayn Rand Knew the Difference. Do You?
by Don Watkins | March 02, 2010
Smash the Labor Monopolies!
by Tom Bowden | September 15, 2009
America’s Unfree Market
by Yaron Brook | May 2009
Atlas Shrugged and the Housing Crisis that Government Built
by Yaron Brook | March 2009
The Green Energy Fantasy
by Keith Lockitch | February 25, 2009
Stop Blaming Capitalism for Government Failures
by Yaron Brook | November 13, 2008
The Resurgence of Big Government
by Yaron Brook | Fall 2008
The Government Did It
by Yaron Brook | July 18, 2008
From Flat World To Free World
by Yaron Brook | June 26, 2008
How Government Makes Disasters More Disastrous
by Tom Bowden | April 29, 2008
Life And Taxes
by Yaron Brook | April 17, 2008
War On Free Political Speech
by Yaron Brook | March 21, 2008
To Stimulate The Economy, Liberate It
by Yaron Brook | February 14, 2008
Exploiters vs. Victims in the Grocery Strike
by Elan Journo | January 30, 2004
Prescription Drug Benefits Violate the Rights of Drug Companies
by Onkar Ghate | July 24, 2002
Drop the Antitrust Case Against Microsoft
by Onkar Ghate | March 17, 2002


Government And Business in Voice for Reason
Government & BusinessRegulations

Why Delivering Beer Isn’t Easy

by Doug Altner | June 11, 2013 |

Anheuser-Busch InBev just wrapped up its controversial merger with Grupo Modelo — the parent company of Corona — despite initial opposition from the Department of Justice and then last-ditch efforts of consumer groups, rejected by the court. The merger, it was alleged, would lead to higher prices and less variety in beer. Leaving aside whether these concerns were real, there is something impacting beer prices and impeding the ability of brewers to bring new beers to market: government regulations.

Delivering better beer at lower prices isn’t easy. To continue to introduce interesting new beers, brewers like Anheuser-Busch are constantly experimenting with new tastes — Christmas beers, “strawberry lemonade” beers, etc. Bud Light Lime resulted from an initial crop of 26 experimental flavors. Brewers are constantly engineering better cans and bottles that are not only pleasant to drink from but also ensure the beer remains cold and fresh during transport. But there is one common business practice that brewers are prevented from undertaking: improving the distribution of their products.

Brewers are forbidden by law in many states from distributing their own beer because the government artificially partitions alcohol distribution into a three-tier system of brewers, distributors, and retailers. A relic from the tail end of Prohibition, this system forbids brewers from selling to retailers directly, mandating that they instead use middlemen. (There are exceptions. For instance, some states allow certain microbrewers to self-distribute provided they secure a license.)

In other industries, large companies such as Coca-Cola frequently distribute their own products to stores, allowing them to cut costs by centralizing operations like truck maintenance and routing. This also allows them to ensure that delivery schedules are planned in a manner that is most efficient for them, rather than relying on third-party shippers who may have several customers to please.

But brewers like Anheuser-Busch are prohibited from doing the same, and instead must deal with hundreds of distributors, each of which has its own priorities and procedures. In many states, it does not matter if Anheuser-Busch can cut costs by 20 percent with their own trucks; by law it has to rely on middlemen (five different ones in the St. Louis area alone).

The costs and hardships imposed by the three-tier regulations also impact small brewers. Rhonda Kallman risked everything to start her own beer company. She left a top executive position at the Boston Beer Company — the brewer of Samuel Adams — and mortgaged her house to finance her vision of introducing a caffeinated beer, which she called Moonshot. She worked hard to promote it, often spending late nights promoting her beer in local bars and visiting stores to ensure her beer had the display space she was promised.

But the government-imposed three-tier system was one significant obstacle that stood in her way. “Daily, I will get a request from a consumer that wants to buy a case or two or three,” Kallman explains in the documentary Beer Wars, “[but] I cannot get it to them. We can’t ship beer because we have to go through the three-tier system.”

In a truly free market, the main thing that a craft brewer would need to do to get his product on shelves is persuade the retailer to carry it. But under today’s government-imposed three-tier system, entrepreneurs face a giant hurdle: the requirement that they go through distributors, who may prefer to sign exclusive deals with larger brewers.

How absurd is it that in many states a microbrewer is forced to use a third-party distributor to take a few cases of beer to a convenience store down the street from his brewery?

Beer aficionados debate whether the three-tier regulations favor large brewers or small brewers. But what is essential is that they impose artificial obstacles on all brewers, big and small. Especially at a time when our sluggish economy is at the forefront of people’s minds, policymakers should be bending over backward to remove government-created obstacles that impede American businesses.

About The Author

Doug Altner

Doug Altner was an analyst and instructor at the Ayn Rand Institute between 2011 and 2014.