Brewers Association: Self-Distribution Leads to More Craft Production

New information released by the Brewers Association (BA) indicates that U.S. states with lenient self-distribution laws play host to more breweries per capita and produce more beer than states that ban the practice outright.

According to a recent BA analysis, 33 states allow brewers to self-distribute their products and three states permit the practice in a limited capacity. Those three states were excluded from the BA’s examination.

In 14 states and in Washington D.C., however, breweries of all sizes must sign with a distributor before their beers can be sold in the wider retail marketplace.

In those 15 territories, there are .77 craft breweries for every 100,000 adults of legal drinking age, according to the BA’s staff economist, Bart Watson. Conversely, in the states where self-distribution is legal, there are 1.41 craft breweries for the same number of people.

In a post on the BA’s blog, Watson asserts that the gap is “statistically significant.”

“That means there is less than a 5 percent chance you’d get a difference that big randomly and strongly suggests that the independent variable in question (self-distribution) has a relationship with the dependent variable (number of craft breweries),” he wrote. “So there’s a high probability that self-distribution laws (either by themselves or in tandem with other regulation) help more breweries get off the ground.”

The same is true for production, Watson wrote. Where there is state-sanctioned self-distribution, more beer is produced per legal drinking age adult than where brewers are required to sell beer through a wholesaler.

“With the exception of one outlier state, the states with no ability to self-distribute are clustered at the bottom of per-capita production by craft breweries (average = 1.05 gallons produced per 21+ adult) whereas states with the ability to self-distribute average higher levels of production (average = 2.51 gallons produced per 21+ adult),” according to Watson.

That outlier, Watson told Brewbound, is Delaware. The reason being, he said, is largely attributed to presence of the country’s 13th largest craft brewery, Dogfish Head, coupled with a smaller state population.

“In addition, there is some ability to sell at the ‘licensed premises’ for ‘off-premises consumption,’ which certainly helps a startup,” he added. “I will note that Delaware isn’t an outlier in terms of number of breweries.”

In 2012, Delaware had just nine craft breweries and ranked 44th on the BA’s annual list of total craft breweries per state.

Nevertheless, the gap between production in states where self-distribution is legal versus where it is not remains of note.

“Once again,” he writes, “this difference is statistically significant.”

Watson clarified the BA’s position in favor of a “truly independent three-tier system” however, adding that self-distribution is a “common-sense solution” for brewers lacking “adequate sales levels to find distribution” of their own.

A more comprehensive list of where in the country self-distribution is legal can be found here.

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