opinion

Editorial: Allow craft brewers to let their business flow

There are a flurry of proposed changes and updates to South Dakota liquor laws that will be debated this legislative session, and at least one seems like a simple and needed fix: the outdated and prohibitive limits on beer production.

Many of our state’s craft brewers object to the arbitrary 5,000-barrels-a-year ceiling and want lawmakers to raise their allowable production cap.

And why wouldn’t they? These are businesses, after all. And we live in a pro-business state. One that also happens to have what is becoming an annual tax revenue shortfall. Our state is missing an opportunity to take its “experience economy” up a notch.

Reduced wild game populations and other tourism challenges should push us to find other smart revenue-builders. Our fast-growing brewery scene is ripe for the support.

A recent trip to Montana, where microbreweries have become tourism hotspots, inspired Governor Dennis Daugaard’s effort to create more growth opportunities for South Dakota’s burgeoning small brewers.

Among multiple possible bills to amend standing law – including two from the Department of Revenue and one directly from the governor’s office – are provisions to allow microbreweries to produce up to six times the current number of barrels while keeping their taprooms open and maintaining their option to sell wine and cider with a license.

“Everybody’s doing it” isn’t necessarily a sound justification for policy change, but current state law puts our brewers at a distinct disadvantage compared to our neighbors. Minnesota and Nebraska’s barrel limits for smaller brewers stand at 20,000. Iowa sets no cap.

And in our seven-state border region, only South Dakota and Nebraska forbid small breweries from self-distributing without a wholesaler middleman.

As South Dakota faces continued budget shortfalls, the economic impact other states can attribute to craft breweries (and their growing younger consumer demographic) looks enticing.

Not everyone is rooting for upstarts such as Fernson Brewing in Sioux Falls or Spearfish’s Crow Peak to shed their shackles. Opposing interests, specifically distributors and their lobbies, will play a large part in whether these bills advance to become signed law or sink to 41st-day oblivion.

South Dakota’s current three-tiered system of alcohol distribution – manufacturer to wholesaler to retailer – was mandated post-Prohibition. Inserting protective layers between distillers and consumers was intended to cut back on intemperate overindulgence by limiting large brewers’ control of the market.

Over time, however, some distributors have essentially become extensions of the largest manufacturers. While these distributors can help craft brewers get their products onto retailers’ shelves, they can likewise be a barrier and a cost that some small businesses might be hard-pressed to absorb.

Consider also that large breweries are developing products meant to directly compete with craft beers. Several registered lobbyists in Pierre list out-of-state behemoths like MillerCoors and Anheuser-Busch Companies as employers.

More recent additions to the lobbying directory: Fernson Brewing and the South Dakota Craft Brewers Guild, looking to exert their own influence in the capitol.

For states like South Dakota with part-time lawmakers who have minimal staff, lobbyists are a tempting and omnipresent source of topical expertise.

Stakeholders also occupy legislative seats. District 12 Representative Arch Beal and first-term District 13 Senator Jack Kolbeck, both of Beal Distributing, sit on Commerce and Energy committees. The House committee is currently considering the proposed liquor law reforms.

Without recusal requirements to keep legislators from voting on policy that directly affects their business or industry, bad optics at the very least are the result. These conflicts of interest are in no way confined to members employed in the alcoholic beverage industry, but consider this issue a timely microcosm.

With multiple proposals on tap, the battles have just begun.