23 November 2010

The Ugly Side of the Booze Business

Those of you who pay attention to political happenings elsewhere in Maryland, and particularly to our south, may have noticed the recently-evolving story on a corruption scandal involving Prince George's County officials and, among other things, the alcohol and tobacco trade there--both commodities whose commerce is regulated by government on the federal, state, and local level, usually for the purposes of "revenue enhancement" of one sort or another.

In the case of P.G. County, according to the Washington Post article:
The county's chief liquor inspector is also the head of the local Democratic Party. One of the five members on the Board of Liquor License Commissioners - responsible for granting and revoking liquor licenses - is also on the party's central committee, which helps choose the board members.
The liquor board's chairman was first appointed while his wife led the county Democrats in the mid-1990s. And a third board member is married to a senior state delegate.
Corruption of a different sort runs on the other side of the business: the supply side.  Ever since the end of Prohibition and the set-up in the majority of states of the three-tier distribution system--a system ostensibly meant to avoid the situation that arose in Britain, where bigger breweries expanded and obliterated smaller breweries by means of owning the bars as well as the breweries--the "seedy" underbelly of the alcohol business, full of winks, handshakes, and secret deals right out of the campaign-finance playbooks and manuals, has been an "open secret" that nobody has seemed interested in addressing.  And it's not a Maryland problem (although the one-party nature of most of the state's politics is a factor that no doubt perpetuates the scenario); it's a nationwide problem.

It would be easy for craft beer enthusiasts to believe that their favorite places and beers are above that kind of stuff.  After all, there isn't that kind of money involved in craft beer, is there?

Think again.

Crain's Chicago Business, a Chicago business journal, has published a major story highlighting the Chicago beer business scene: "Pay-to-Play infects Chicago beer market, Crain's investigation finds."  In it, the newspaper highlights, among other things, why New Glarus Brewing, one of the Midwest's most successful and popular micros, retreated from the Chicago market (hint: it wasn't, as alleged by Chicago store owners, that they couldn't make enough beer to supply Chicago anymore--a quick trip outside the city lines exposed that fib); that Chicago has lower craft-beer prices than the national average but a dearth of locally-produced beer/breweries; and that craft beer claims only 5.3% of the local market instead of a national average of 6.3%.

Also highlighted and detailed, largely in off-the-record allegations for obvious reasons: the "pay-to-play" atmosphere, where distributors are asked to pay, or offer to pay, to put a particular beer in a bar or chain:
A craft brewer tells Crain's that Rockit Bar & Grill, with locations near Wrigley Field and in River North, wanted to charge him $3,000 to put his beer on tap.
Is there anyone in the business who can explain to us just why the booze business can't be just above-board and straightforward with its business practices?  Indeed, after several generations of this balderdash, it's become a case of "that's how it's always been."  But does it have to be that way?  (Of course, ask them directly, as this article's authors did, and the answer is always flat-out denial that they do it, or "no comment".)
Mike Roper, who owns Michael & Louise's Hopleaf Bar in Andersonville, says large brewers and bars have a strong incentive to keep pay-to-play alive. The bars get free beer and lower costs while the brewers gain access to lucrative outlets. Though Hopleaf is one of the city's best-known gastropubs, featuring 34 regional microbrews and specialty beers from Belgium on draft, a bar in Wrigleyville will sell more draft beer on a Chicago Cubs game day than Hopleaf will sell in a month, he says.
“Craft brewers have to compete in a marketplace that is not completely fair, and it's like athletes having to compete against someone on steroids,” says Mr. Roper, who has been working in Chicago bars since 1982 and says he hasn't engaged in pay-to-play. “Being with Bud or Miller gives craft beers a better chance to get into popular bars or chain stores.” The larger distributors have more clout, but they also can drag craft breweries into the pay-to-play world, he adds.
The follow-up comments to the article are worth reading, as they include important details left out of the original article for space reasons.

I'm currently talking with a brewery owner that's trying to get his products into this market.  He wants to have wider distribution here, but finds himself looking at the demands of the distributors and balking.  Even though we have several distributors in this market that are relatively kind to craft beer and even one or two that are outright craft-beer boosters, he calculates that it would cost him more to enter this market with wider distribution than his brewery would make from it.

And you wonder why your "cheater pint" shaker glass of a craft beer costs so much.

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