LEGISLATIVE ANALYSIS

Keeping Craft Beer Competitive in the Market and the Consequences of Overregulation
An In-depth analysis of SB 1714 and how the three tier system affects microbreweries

The Liberty First Network 1334 Tampa Rd #6, Palm Harbor, FL, 34683 info@libertyfirstfl.org http://www.libertyfirstfl.org

Analysis of SB 1714
Keeping Craft Beer Competitive in the Market and the Consequences of Over-Regulation
Senate Bill 1714, Malt Beverages, provides regulations, licensing and bonding requirements for the craft brewery industry in Florida. Currently there are no specific regulations on microbreweries and they have been operating under the license requirements within the alcohol industry with some existing exemptions. Due to this quasi-unregulated status of microbreweries, the Florida legislature is now trying to reform and define the requirements for this growing industry. To read SB 1714: http://myfloridahouse.gov/Sections/Documents/loaddoc.aspx?FileName=_s1714c1.DOCX&DocumentType=Bil l&BillNumber=1714&Session=2014

What is Craft Beer?

Craft beer, which is produced in a microbrewery, is a small production of ales and beers. This is done in limited amounts and the circulation of the product is limited in the retail market. Most craft brewers retail their own product in tasting rooms and on premise shops. In Florida, this is a growing segment of the small business industry and microbreweries employ over 10,000 workers in our state. Craft brew fairs, tours and festivals have become a tourist attraction in our state and have provided an increase in the local economies where they reside. Microbreweries not only create tourism and jobs, but also revitalize areas in the manufacturing segment of the real estate industry with new breweries.

What new regulations are found in SB 1714?

A non-sealed container, called a growler, will now be allowed in a 64oz size. This is an industry standard throughout the country but was previously banned in Florida. Microbreweries that brew more than 2,000 kegs of beer per year will now have to enter the 3-tier system in Florida. The bond needed for microbreweries will be lowered to $5,000 from the current $20,000 bond requirement.

What is the 3 tier system?

The 3 tier system is a manufacturing system that separates the producer, the distributor and the retailer. Each tier cannot have a financial interest in the other tiers. This system was created by federal law at the end of prohibition. The 21st Amendment to the US Constitution repealed the 18th Amendment, thus ending prohibition but also allowing states and the federal government to regulate alcohol production and sales. In the 3-tier system a producer cannot have a financial interest in the distribution company or retailer, the distribution company cannot have a financial interest in the production or retail seller and a retailer cannot have a financial interest in the production or distribution company. In this system the wholesaler (or distributor) is the only party responsible for excise taxes and the retailer is the only party responsible for age requirements on sale (not selling to minors).

So how have the microbreweries functioned outside of the 3 tier system before?
The 3 tier system had an exception for Busch Gardens that was created in the 1960s, where the producer (Anheuser Busch) could brew beer on the premises to supply the retail locations within the theme park. This made the producer and retailer the same company eliminating the distribution company entirely. This exemption did not allow sales for off premise consumption but did not completely prohibit such sales. Microbreweries have been using the Busch exemption.

What the 3-tier system means to microbreweries?

Microbreweries that produce 2,000 kegs per year or less will see no changes to the way they do business. They are still exempt from the 3-tier system and will be able to operate their business as they have done until now. Microbreweries that produce over 2,000 kegs per year will have to enter the 3-tier system and sell their product to a wholesaler (distributor) instead of the consumer for all sealed packages of beer for off-site consumption. They will still be allowed to have tasting rooms for onsite consumption by tap and will be able to sell growlers for off-site consumption without the use of a distributor. All bottles and other sealed packages of beer will have to be sold in full to a distributor. If the microbrewery would like to sell their own sealed packaged beer, they will have to buy their own product from the distributor at a 30% higher rate. They will also have to pay the excise tax for all beer sold in this manner, which has historically been the responsibility of the wholesaler (distributor).

Who is supporting this bill?

SB 1714 will be the continuation of large corporations dominating an industry by setting the regulations that make small business noncompetitive in the market. This legislation is largely supported by the distribution companies and large corporations like Anheuser Busch. In this election cycle alone these companies have donated over $848,000 to candidates, legislators and PACs. $167,000 of that came directly from Anheuser Busch. The Republican Party of Florida received $283,920.50 and the Florida Democrat Party received $29,719.88. Current state senators have received $60,170, current state house representatives have received $110,800 and the governor and cabinet have received $29,750. Candidate not currently in office have received $20,791.90. Again, this is only for the 2014 election cycle.

LFN Opinion of SB 1714

While allowing the microbrewery industry to sell 64 oz growlers and lowering the bond requirements is a positive step, forcing them into the 3-tier system will significantly damage an otherwise flourishing industry. The craft brewery industry is on the rise but still cannot be held to the same regulatory standards of large breweries. One of the largest microbreweries in Florida brews close to 78,000 kegs per year. In comparison, Anheuser Busch brews about 80 million kegs per year. The Liberty First Network does not see the need nor the benefit of the 3-tier system in the alcohol industry, but respects the need for businesses to be held at the same regulatory standard to stay competitive. We would agree that there needs to be a definitive line in the industry where a brewer becomes a major producer and can no longer be defined as a microbrewer but 2,000 kegs is an extremely low threshold. A brewer needs to be able to show competitiveness in the marketplace to be subject to the same standards or Florida will be regulating another industry into extinction. 2,000 kegs per year in comparison to 80 million kegs is the same as regulating a local lemonade stand to the standards of Minute Maid. That type of regulation would seem absurd for lemonade and it is equally absurd for the beer industry. Senator Kelli Stargel admitted that the 2,000 keg standard was something she made up to come to a place where breweries were held to the same standard to stay competitive and enter the 3 -tier system. We dont see how a standard that is not even 1/100 of 1% of the volume of the major breweries can be seen as competitive. This new regulation will cause the closing of many of the breweries around the state that cannot afford to buy their own product back at a 30% higher margin to sell to their customers and keep others at a stagnant level who cannot afford to go over the 2,000 keg standard. Damaging the craft brewery industry will not only cause the elimination of jobs in that industry but will also harm our tourism and real estate industries. This is not the right move for the Florida legislature by way of liberty or economics. We cannot allow our small businesses to be regulated away at the whim of large corporations and their political friends in Tallahassee.

FOLLOW THE MONEY

This is a list of the donations made by the beer industry in the 2014 election cycle.

Florida State House Ahern, Larry (REP)(STR) Albritton, Ben (REP)(STR) Artiles, Frank (REP)(STR) Beshears, Halsey (REP)(STR) Bileca, Michael Scott (REP)(STR) Boyd, Jim (REP)(STR) Brodeur, Jason (REP)(STR) Broxson, Douglas V. (REP)(STR) Caldwell, Matt (REP)(STR) Combee, Neil (REP)(STR) Corcoran, Richard (REP)(STR) Crisafulli, Steve (REP)(STR) Cummings, William Travis (REP)(STR) Diaz, Jose Felix (REP)(STR) Diaz, Manny (REP)(STR) Eagle, Dane (REP)(STR) Eisnaugle, Eric (REP)(STR) Fitzenhagen, Heather D. (REP)(STR) Fresen, Erik (REP)(STR) Gaetz, Matt (REP)(STR) Goodson, Tom (REP)(STR) Grant, James William (REP)(STR) Hill, Mike (REP)(STR) Hudson, Matt (REP)(STR) La Rosa, Mike (REP)(STR) Magar, MaryLynn (REP)(STR)

Amount $500.00 $1,500.00 $500.00 $2,000.00 $500.00 $50.00 $500.00 $3,000.00 $2,500.00 $500.00 $2,500.00 $3,000.00 $3,500.00 $1,500.00 $1,500.00 $6,000.00 $2,000.00 $1,000.00 $1,500.00 $1,000.00 $500.00 $1,000.00 $1,500.00 $4,000.00 $500.00 $500.00

Mayfield, Deborah J. (REP)(STR) Metz, Larry (REP)(STR) Moraitis, George Reynold (REP)(STR) Nunez, Jeanette M. (REP)(STR) O'Toole, H. Marlene (REP)(STR) Perry, Warren "Keith" (REP)(STR) Pigman, Edwin Cary (REP)(STR) Pilon, Ray (REP)(STR) Porter, Elizabeth Whiddon (REP)(STR) Raburn, Jake (REP)(STR) Raulerson, Dan (REP)(STR) Ray, Lake G. (REP)(STR) Roberson, Kenneth L. (REP)(STR) Rodrigues, Ray (REP)(STR) Santiago, David (REP)(STR) Smith, Jimmie T. (REP)(STR) Spano, Vincent Ross (REP)(STR) Steube, W. Greg (REP)(STR) Tobia, John Joseph (REP)(STR) Trujillo, Carlos (REP)(STR) Workman, Ritch (REP)(STR) Young, Dana D. (REP)(STR) Antone, Bruce Hadley (DEM)(STR) Berman, Lori Beth (DEM)(STR) Cruz, Janet (DEM)(STR) Dentel, Karen Castor (DEM)(STR) Dudley, Dwight Richard (DEM)(STR) Edwards, Katie (DEM)(STR) Jones, Shevrin D. (DEM)(STR) Kerner, David Michael (DEM)(STR) Lee, Larry (DEM)(STR) McGhee, Kionne L. (DEM)(STR) Powell, Bobby (DEM)(STR) Pritchett, Sharon (DEM)(STR) Rader, Kevin (DEM)(STR) Rangel, Ricardo (DEM)(STR) Rodriguez, Jose Javier (DEM)(STR) Rogers, Hazelle P. (DEM)(STR)

$11,000.00 $500.00 $500.00 $2,500.00 $500.00 $500.00 $1,000.00 $700.00 $500.00 $500.00 $1,500.00 $1,000.00 $500.00 $4,500.00 $500.00 $500.00 $500.00 $1,250.00 $500.00 $3,500.00 $3,500.00 $5,850.00 $500.00 $2,000.00 $500.00 $2,500.00 $1,000.00 $2,000.00 $1,500.00 $500.00 $2,000.00 $500.00 $1,000.00 $1,000.00 $500.00 $500.00 $2,000.00 $1,000.00

Rouson, Darryl Ervin (DEM)(STR) Stafford, Cynthia Ann (DEM)(STR) Stark, Richard Neil (DEM)(STR) Stewart, Linda A. (DEM)(STR) Taylor, Dwayne L. (DEM)(STR) Watson, Clovis (DEM)(STR) Total Florida State House Candidates Avila, Bryan (REP)(STR) Costello, Fred (REP)(STR) Drake, David Bradley (REP)(STR) Ingoglia, Blaise (REP)(STR) Latvala, Christopher John (REP)(STR) Leyva, Daniel Diaz (REP)(STR) Oliva, Jose (REP)(STR) Plakon, Scott (REP)(STR) Renner, Paul M. (REP)(STR) Alexander, Ramon Jermaine (DEM)(STR) DuBose, Bobby B. (DEM)(STR) Herman, Scott (DEM)(STR) Lewy, Alexander Samuel (DEM)(STR) Total Florida State Senate Altman, Thad (REP)(STS) Bean, Aaron Paul (REP)(STS) Benacquisto, Lizbeth (REP)(STS) Brandes, Jeffrey (REP)(STS) Detert, Nancy (REP)(STS) Diaz de la Portilla, Miguel (REP)(STS) Evers, Greg (REP)(STS) Galvano, Bill (REP)(STS) Garcia, Rene (REP)(STS) Hukill, Dorothy L. (REP)(STS) Latvala, Jack (REP)(STS) Lee, Tom (REP)(STS) Negron, Joe (REP)(STS)

$2,000.00 $500.00 $1,000.00 $500.00 $1,950.00 $1,000.00 $110,800.00

$500.00 $500.00 $5,750.00 $500.00 $500.00 $1,000.00 $500.00 $1,000.00 $1,000.00 $250.00 $500.00 $291.90 $500.00 $12,791.90

$500.00 $4,500.00 $5,000.00 $5,250.00 $1,500.00 $1,500.00 $1,000.00 $6,120.00 $750.00 $2,000.00 $6,550.00 $4,000.00 $6,500.00

Simmons, David (REP)(STS) Simpson, Wilton (REP)(STS) Thrasher, John (REP)(STS) Braynon, Oscar (DEM)(STS) Sachs, Maria Lorts (DEM)(STS) Total Governor of Florida Scott, Richard L. (REP)(GOV) Candidate for Governor of Florida Crist, Charlie (DEM)(GOV) Florida Cabinet Atwater, Jeff (REP)(CFO) Putnam, Adam (REP)(AGR) Bondi, Pam (REP)(ATG) Total Candidate for Florida Cabinet Thurston, Perry E. (DEM)(ATG) Total Candidate Contributions Political Parties Florida Democratic Party (PTY) Republican Party of Florida (PTY)

$3,000.00 $5,000.00 $1,000.00 $2,500.00 $3,500.00 $60,170.00

$12,000.00

$3,000.00

$12,250.00 $750.00 $4,750.00 $17,750.00

$5,000.00 $221,511.90

$29,719.88 $283,920.50 $313,640.38

Committee of Continuous Existence Associated Industries of FL Political Ac (CCE) Civic Pride-CCE (CCE) Economic Freedom Foundation (CCE) Limited Government For A Stronger Florid (CCE) PETROPAC (CCE) Total

$26,500.00 $200.00 $5,000.00 $2,500.00 $175.00 $34,375.00

Electioneering Communications Organization And Justice For All (ECO) Let's Get To Work (ECO) The Future is Now (ECO) Voice of Florida Business (ECO) Working Together for Florida (ECO) Total Political Action Committees Beer Distributors Committee for Good Gov (PAC) Brewers Guild of Florida (PAC) Citizens for Economic Freedom (PAC) Florida Committee for Conservative Leade (PAC) Florida Innovation Fund (PAC) Florida Leadership Committee (PAC) Florida Roundtable (PAC) Innovate Florida (PAC) Jobs for Florida (PAC) Northwest Florida Prosperity (PAC) The Policy Council (PAC) The Conservative (PAC) Treasure Coast Alliance (PAC) Total

$7,500.00 $50,450.00 $5,000.00 $11,500.00 $1,500.00 $75,950.00

$32,118.19 $1,000.00 $2,500.00 $7,500.00 $1,000.00 $15,000.00 $10,000.00 $35,500.00 $27,000.00 $10,000.00 $16,078.51 $10,000.00 $35,000.00 $202,696.70

Total PACs and Parties Total Candidate/Politician Grand Total

$626,662.08 $221,511.90 $848,173.98

It is upon us, the citizen, to ensure that freedom is guaranteed and that our government is limited in a manner to not impede on our liberty. JOHN HALLMAN

The Liberty First Network 1334 Tampa Rd #6, Palm Harbor, FL, 34683 info@libertyfirstfl.org http://www.libertyfirstfl.org