All the controversy and scuttlebutt the past few weeks over House Bill 168, aka the “Beer Bill,” bordered on ridiculous. I found myself confused over the entire issue, because, to me, it came down to one simple question: Do we have a three-tier system of alcohol distribution, or don’t we?
If we do, then the obvious action was to block A-B InBev (or any brewery) from being able to distribute its own products in Kentucky. That’s why there is a separation between supplier, distributor and retailer in the first place (thanks, Prohibition). If we don’t have a three-tier system, well, then it’s open season — all Kentucky breweries should be empowered to sell and distribute their products as they see fit. But a long-existing loophole enabled out-of-state brewers to distribute in Kentucky while in-state breweries could not.
So, the Kentucky General Assembly’s approval of HB 168 — which the Senate passed yesterday and will become law once it reaches Gov. Steve Beshear’s desk — was tantamount to lawmakers righting a longstanding wrong. A sort of political “Oops, our bad.” If Kentucky’s breweries were David armed with right versus wrong, then Goliath never had a chance. It just took awhile.
In 1978, Anheuser-Busch opened a distributor in Louisville thanks to the aforementioned loophole. That distributing company has done business here for nearly four decades without a peep of dispute. But when A-B InBev (Anheuser-Busch was acquired by foreign-owned InBev in 2008) bought a distributor in western Kentucky back in the fall of 2014, it sparked a new round of examination.
Why? One simple reason, as far as I’m concerned: the soaring popularity of craft beer. In 1978, beer was beer — nearly every American thought of beer as being fizzy yellow liquid that almost had a flavor. Why? Because thanks to companies like Anheuser-Busch, Schlitz and Miller, that’s what it had become. It was a thoroughly homogenized commodity. So, it’s 1978 and A-B is going to distribute beer outside the three-tier system thanks to a careless loophole in the law? Who cares? Falls City closed that same year, leaving Louisville without any local breweries.
It’s a different world now. Kentucky breweries have the Kentucky Guild of Brewers. They have leverage and support as state-owned and operated businesses. The playing field may not be level, as A-B InBev has a hell of a lot more money and clout than the barely funded KGB, but the Kentucky Guild had one thing on its side going into this standoff: It was right. When A-B InBev bought the distributorship near Owensboro and then Cincinnati brewery Rhinegeist Brewing formed its own distributorship, River Ghost, to take advantage of the same ridiculous loophole, in-state breweries spoke up, and lawmakers finally recognized it was time to close that loophole. It simply wasn’t fair.
The passage of HB 168 wasn’t easy. For one, ranks in the KGB split, with a handful of local breweries taking an “if-we-can’t-beat-’em-join-’em” stance and urging others to withhold support for HB 168 in an attempt to gain self-distribution rights. That notion was not without merit, as more than half of U.S. states have some form of self-distribution for small breweries, including Indiana, Ohio and Tennessee.
But early on in the struggle, Kentucky lawmakers reportedly drew the line on that possibility. And so, the remaining KGB members took up the fight. A-B InBev employed more than a dozen lobbyists in Frankfort and spent upwards of $2 million in an attempt to convince lawmakers and the public that their special privileges should not be taken away. Like a petulant child that had long been getting away with something, the mega-brewing conglomerate stomped its foot and whined about fairness.
The giant spent money on social media (@KYBudFacts) to spread its story. It referred to the in-state brewers as “greedy special interests” intent on killing Kentucky jobs. It insisted that craft beer had still thrived in spite of 40 years of A-B self-distribution in Louisville. It whined that it had had its special privileges for almost four decades and didn’t want to give them up.
But in the end, Kentucky brewers had one important trump card: They were right. The three-tier system was not being upheld. The loophole was unfair, and the brat had to finally start playing by the same rules as all the other kids on the playground. The brewers turned out in force to plead their case to lawmakers. Lawmakers listened and agreed. In this case, right made might.
During a text exchange with KGB executive director John King yesterday while he was in Frankfort, he relayed that one A-B InBev rep commented, “Maybe if we grow beards and wear jeans, we can get meetings with legislators.”
Spoken like a truly entitled brat.
Personally, I’m glad this thing is almost over — well, except for the inevitable lawsuit which A-B InBev is already threatening. Who knows how ugly that might get? But the three-tier system is the three-tier system, and it sounds like Kentucky has made its decision on the long-open loophole: It’s closed for business, at least for now. Perhaps if it ever reopens, it will open for all brewers — not just those from outside Kentucky. That never made any sense to begin with, and Kentucky lawmakers are finally acknowledging the fact.
So, congratulations to Kentucky brewers on this win, which we can hope will be the first of many. New breweries are opening all the time; Against the Grain Brewery & Smokehouse just made RateBeer’s Top 100 Breweries on Earth list. Good things are ahead.
King also passed along a quote from Against the Grain co-owner Adam Watson that perhaps sums it all up: “This three-year-old group of ragtag brewers just beat the largest brewer in the world.”
Goliath, meet David.
This post was originally published by Insider Louisville.