Minnesota Beer Sales Hindered by Growler Cap

Last December, six Minnesota breweries launched a campaign in the hopes of lifting the state’s growler production cap. Called #FreeTheGrowlers, the campaign is a response to the hardship that breweries have faced making Minnesota beer sales during the shutdown.

To explain it simply, Minnesota allows breweries to sell growlers — 64-ounce containers — only if they produce less than 20,000 barrels of beer a year. Large breweries — any brewery producing over the cap — relies on distributors, which in turn sell to retailers. However, this whole system got disrupted during the shutdown.

Minnesota beer sales operate under the three-tier system, with most beer moving through distributors and then on to bars or retailers before reaching consumers. Growlers cut out these middlemen (aka distributors and retailers), providing the primary source of pushback against any rule change.

And yet, the COVID-19 pandemic has disrupted supply chains — beer included — leaving plenty of brewers stuck with draft beer that had been earmarked for bars. Without the option to sell this kegged beer directly to consumers in growlers, breweries argue that, in the short-term, the current rule can leave them literally pouring beer down the drain. “I have over 800 half-barrel kegs in my warehouse that, as soon as the governor made the announcement of the shutdown, no longer had a home,” Jim Diley, chief operating officer of Fulton Beer, was quoted as saying, last month. “If I had growlers, I could do something with that product… We have breweries a block away that are able to sell growlers.”

Minnesota generally has one of the most restrictive liquor laws in the nation. During the pandemic, those laws have proved even more harmful than normal. With their taprooms closed, large breweries have no other way of selling beer in packaged containers to customers, hence losing business.

Why these laws exist

When lawmakers introduced a bill to repeal the cap, opponents of the cap worried that retailers would be harmed. Additionally, distributors would go out of business if consumers can buy directly from breweries. The law exists to protect distributors, and retailers as well.

This is essentially the idea behind several other laws that hamstring producers into relying on the three-tier system. According to the surly law, for instance, breweries producing over 250,000 of beer cannot sell beer on-site in taprooms, lest they possess an advantage over retailers and small breweries. In the same way, craft breweries can only sell growlers and no other prepackaged containers. This is so they do not compete with retailers.

Minnesota liquor laws are anti-consumer and anti-growth

Scrutinized deeply, a growler cap is anti-growth. It discourages breweries from making investments into growing their establishments, since losing growlers can cost a lot. This, however, is very harmful for the economy. For most industries, growth means being able to utilize economies of scale in order to produce and provide goods more cheaply. Growth also means more jobs, and more income flowing into the Minnesota economy.

Additionally, these laws are also hurtful to the consumer. A three-tier system not only raises prices for the consumer but also reduces choice and convenience. During the pandemic, for instance, consumers were preferring to buy prepackaged small containers of beer instead of growlers. However, it is illegal for any other entity except retailers to sell them.

One thing that is very striking about the growler cap is how little it has to do with protecting consumers. Opponents have repeated over and over again about how harmful repealing caps would be for retailers. But there is never any mention of consumers and how they would be hurt. This is because these laws only exist to restrict competition and hurts the consumer. Consumers would in fact benefit if these restrictive laws were repealed and instead businesses profited from their ability to satisfy consumer demand, and not due to laws that stifle competition.