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Economist’s View Column: Growler regs aren’t about protecting consumers

This op ed appeared in the Duluth News Tribune on July 12th, 2019

In March 2011, Clint MacFarlane, who had been home-brewing and developing his own recipes since 2006, opened a brewery in Castle Danger. He began self-distributing via 13 local bars and restaurants and selling growlers three nights a week from the 700-square-foot brewery. By 2014, a 10,000-square-foot production facility with taproom was being built in Two Harbors. That year, 1,500 barrels of beer were produced. By 2017, that was up to 14,800 barrels, quantity going hand in hand with quality. In 2018, Castle Danger beat Minneapolis-based Surly to become Ultimate Minnesota Beer Bracket champion.

This is a thoroughly American story of entrepreneurial success.

Sadly, there is an equally American twist to the tale: regulation.

Minnesota law prohibits a brewery from selling growlers — beer in half-gallon, reusable containers — if the brewer produces more than 20,000 barrels of beer annually. Last year, Castle Danger’s success brought it up against that limit. As a result, starting Oct. 1, Castle Danger will no longer be able to sell growlers.

Maddy Stewart, marketing and events manager for Castle Danger, told the News Tribune that the loss of growler sales would impact them financially and that they’d have to make “some pretty tough decisions” (“Castle Danger to halt growler sales,” July 8). Growlers make up around 30 percent of all taproom sales, she said, and to account for the lost sales, the company will eliminate a handful of part-time positions as well as one full-time position.

Craft breweries across the region are running up against this legislated limit. Lauren Bennett McGinty, executive director of Minnesota Craft Brewers Guild, said in the story that Bent Paddle Brewing, Lift Bridge Brewing Company, and Indeed Brewing Company are also “quickly approaching” the 20,000 mark.

Cutting growler sales isn’t the only way Minnesota breweries can respond to this law. As Jeffrey O’Brien, attorney with the Minneapolis-based law firm of Chestnut Cambronne PA — and counsel to several Minnesota breweries, distilleries, and wineries — points out, they can expand into neighboring states to avoid hitting the cap. Ditto with distilleries such as Tattersall which are approaching the 40,000-gallons limit for a cocktail room. If these caps are not raised or eliminated, these businesses will expand in a neighboring state outside of Minnesota.

Often, when you speak out against regulation, people think you want to have little kids licking lead pipes. But who is being protected by state regulations dictating which breweries can and cannot sell growlers to willing customers?

Who supports a regulation? As the News Tribune reported, “Those in favor of this law say the cap supports a three-tiered distribution system that includes producers, distributors, and retailers.” In other words, the law exists to prevent the sale of beer by producers such as Castle Danger to you, the consumer. Its sole purpose is to guarantee the positions of the middlemen, the distributors and retailers. They and their lobbyists in the Minnesota Beer Wholesalers Association support it to protect their market share, not the consumer.

Our state’s craft brewers have been an economic success story in the last decade. This is largely the result of the repeal of various regulations — like the 20,000-barrel production cap, which has little to do with protecting the public. Minnesota’s craft brewers have flourished in spite of these regulatory barriers. Just imagine how well they could do without them.

John Phelan is an economist for the Center of the American Experiment (AmericanExperiment.org), which is based in Golden Valley, Minn. He wrote this for the News Tribune.

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