Photo via Shady Oak Brewery's Facebook.
Written by Edward Smith
One study ranks the Golden State as having the most regulations in the country when it comes to getting beer made and poured in your glass.
Some brewers say that while laws protect microbreweries from giant producers, they can be burdensome. And researchers say those regulations could end up costing more at the tap.
Using data analytics, three researchers analyzed the sheer number of regulations that go into the beer-making industries for each state.
“We wanted to see what it takes to get beer from producers to consumers,” said Dustin Chambers, professor of economics at Maryland’s Salisbury University, who co-authored the study on behalf of Utah State University’s Center for Growth and Opportunity.
“California was far and away the most regulated state,” said Chambers.
Chambers co-authored the study using a database called State RegData 2.0 from the Mercatus Center at George Mason University.
The database quantifies industry-level regulatory restriction from both state and federal governments.
Brewers of all sizes have to navigate 115,000 individual regulations from the federal government alone. From there, different states have varying rules regarding health, distribution, marketing and more. The goal of the study, said Chambers, was to find the total number of regulations.
California ranked the highest with 25,399 state regulatory restrictions. South Dakota has the fewest regulations with 1,177 rules.
With a national average of 10,212 rules, California’s total puts it two-and-half-times the national average, said Chambers.
The study asserts that large regulatory burdens can restrict business growth, saying that “regulations are often put in place to protect the consumer but have the potential to increase prices along the supply chain, leading to regressive outcomes.”
“It wasn’t until RegData came along that we could get a sense of how many regulations there are,” said Chambers.
He said California has a total of 395,608 industry-level regulations.
Looking at the sheer number of regulations might miss some nuances though, said Lori Ajax, executive director of the California Craft Brewers Association. There are dry counties in the United States, she said. And despite the regulations, she said California has the most craft-brewers in the nation.
A lot of the rules have served to protect the craft beer industry that has evolved over the past few decades.
“In general, when you look at California, there are laws on the books that are post-prohibition that are aimed at maintaining a level playing field between smaller and larger producers,” Ajax said.
A lot of rules follow how suppliers can market their product.
For example, California has rules about how breweries can tell the public about where people can find their product.
With certain exceptions, it’s illegal for a brewery to put out on social media where their beer can be found without naming every other place they’re located. This comes from a law predating the internet by decades.
For smaller breweries, navigating these laws can be difficult, says Michael Cruz, president of Tioga Sequoia in Fresno. He said smaller breweries often break the rules without knowing it.
Cruz says these rules date back to the post-prohibition era and are outdated.
Telling the public on social media that they have a tap at a restaurant or a shelf at a grocery store can be a cost-effective way of distinguishing themselves from the competition.
The law was created to prevent pay-to-play at watering holes where larger breweries could have out-muscled smaller breweries, said Ajax.
But in the modern marketplace, it’s evolved to where Cruz can’t mention other partners for events held in Downtown Fresno because those mentions could be considered “a thing of value,” which the law prohibits being given away.
The study acknowledges that little is known about the full extent of the regulatory burden on the supply chain. Chambers said eventually, they want to take a more qualitative look at how regulations affect an industry, but that they have the tools to begin that work.
“It’s a very preliminary piece of research to measure how heavily regulated California is,” said Chambers. “Hopefully that will get lawmakers and individual regulatory agencies to be more intentional about cutting red tape.”