State regulations will force craft breweries to lay workers off

Yesterday, I wrote about how regulations stifle the economy. Another example comes from today’s Pioneer Press.

At present, breweries in Minnesota can sell ‘growlers’ – beer in half-gallon reusable containers – as long as they produce no more than 20,000 barrels of beer annually. If they produce more than that, they can’t.

The Castle Danger brewery in Two Harbors is finding this out the hard way. They have grown since their establishment in 2011 and have now passed the legislated limit of 20,000 barrels. As a result, from October 1st, they will no longer be able to sell growlers by law.

As the Pioneer Press reports,

The loss of growlers for Castle Danger will impact them fiscally, and they’ll have to make “some pretty tough decisions,” said Maddy Stewart, marketing and events manager for Castle Danger.

Growlers make up around 30 percent of all taproom sales, she said. To account for the lost sales, the company will eliminate a handful of part-time positions, as well as one full-time position, she said.

Lauren Bennett McGinty, executive director of Minnesota Craft Brewers Guild, said she’s heard that businesses’ lost revenue can near $300,000.

“A lot of our breweries do their best to prepare for (hitting the cap). … We know that Castle Danger has done their best to do that,” she said. “But it’s still a huge loss.”

Castle Danger is the first in a “wave” of breweries that are going to lose their growler-selling ability, Stewart said.

Bent Paddle Brewing, Lift Bridge Brewing Company and Indeed Brewing Company are also “quickly approaching” the 20,000 mark, Bennett McGinty said.

Regulation to protect who?

This example shows clearly the economic damage that regulations can do. Who supports such harmful measures?

Cui bono? As the Pioneer Press reports, “Those in favor of this law say the cap supports a three-tiered distribution system that includes producers, distributors and retailers.” In other words, it exists to prevent by law the sale of beer by producers such as Castle Danger to you, the consumer. Its sole purpose is to guarantee the position of the middlemen, the distributors and retailers. If you want to know who supports this harmful law, it is the distributors and retailers who need it to protect their market share and their lobbyists in the Minnesota Beer Wholesalers Association.

This is unfortunate. As I wrote in a recent edition of our magazine, Thinking Minnesota, 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.

Regulations are generally pushed as protecting the consumer or the public more generally. But who is being protected by state regulations limiting the size of vessel smaller brewers can sell or whether they can sell growlers or not? Are the consumers being protected from too much choice? No. It is middlemen and larger competitors who can afford the lobbyists to push these regulations who are really being protected.

Minnesota’s craft brewers have succeeded in recent years despite these regulatory barriers. Just imagine how they could flourish without them.

John Phelan is an economist at the Center of the American Experiment.