In 2014, for the first time, sales of craft beer in the US broke the double-digit mark with a respectable 11% of the domestic market. Budweiser – the Big Brother of Beer – has noticed and reacted with a strange “Drink Macro” campaign. So raise a pint to your local brewer, the hometown kid is making good. If you live in Mississippi, however, this is easier said than done.
Some 26 million cases of beer were sold in Mississippi last year, 99% of which was made out of state. For a state that has always been proud of its unique culture and heritage, this is a tremendous misfire. The problem with Mississippi’s craft beer industry isn’t demand – a sparcely populated state putting away 26 million cases annually says that a Mississippian will drink some good damn beer given half a chance. It’s the law.
In 2003, when Lazy Magnolia Brewing became Mississippi’s first brewery to open since 1907, Mississippi’s beer laws had only barely emerged from Prohibition. Like a lot of Southern States, ABV (alcohol by volume) was capped (at a lowly 6%) meaning that watered-down pilsner, for which America is infamous, was the only legal beer. Lazy Magnolia persevered, even thrived, in this limited environment, introducing its Southern Pecan Nut Brown Ale – using local ingredients to put a Mississippi stamp on a classic style.
A lot of that changed in 2013 when Mississippi passed legislation upping the ABV cap to 8.5%. The cap increase allowed Lazy magnolia to innovate and experiment with new styles, like popular farmhouse ales and a good showcase IPA. Since then, eight breweries have opened up in the state. I called Matthew McLaughlin, a Jackson lawyer who wants to change the way Mississippi and the rest of the South looks at homegrown beer. He has craft brewing clients spanning Mississippi, Tennessee, Texas, Louisiana and Florida. While the 2012 reform was a step in the right direction, McLaughlin points out that Mississippi might be dead last in laws helpful to craft brewers.
Perhaps the most rigid roadblock to a flourishing craft beer scene in Mississippi is its adherence to the antiquated three-tier system. “As a law, it had noble intention.” Says McLaughlin, as the system was enacted in most states to ensure that those who controlled production didn’t control access – which lead to abuses like “tied houses” where bars and vendors could only serve one brand of beer. But times have changed, “…the beer industry has experienced a significant shift over the past few decades. Up until the 1970s, there were as few as 50 breweries in the United States and more than 5,000 distributors. Now, there are over 3,000 breweries and fewer than 1,000 viable distributors.”
The end result of these outdated laws is that direct-to-customer sales aren’t allowed, so there are no taprooms where a wild innovation can be cheaply and quickly market tested. Brewpubs are allowed in the state, but they can only sell their beer for on-premise consumption. Buying a growler or bomber to take home is forbidden. The business costs of these laws are enormous. The average revenue a craft brewer makes on a keg is anywhere from $375-$600. In Mississippi, thanks to cumbersome legislation, that figure is $250. In short Mississippi’s beer laws reduce per-unit profit, as well as retail and distribution opportunities.
Still, McLaughlin does not advocate scrapping the three-tier system, only to reforming it to reflect the changes in the industry. Not only do certain aspects of three-tier ensure market access to small brewers, but as McLaughlin suggests, “Most small brewers love their distributors; they provide a tremendous service.” As he recently pointed out to the Mississippi Economic Council, about 75 percent of states have allowed some self-distribution within the three-tier system. Those kinds of adjustments would make a big difference for Mississippi – its brewers and the state.
A pint of legislation will lead to a growler of progress – or a keg. Consider the 26 million cases of beer that Mississippi drinks: it represents a value surpassing $312 million. Factoring standard multipliers for economic impact, that’s roughly $1 billion in economic benefit headed to manufactures out of state. Craft brewers – wherever they are – may be small, but they are big business.