The Southern U.S. has some of the worst alcohol laws in America. Many dating back to prohibition. Georgia recently made headlines for making a few modest changes to their alcohol laws. A closer look at these changes shows just how ineffective Southern alcohol reform efforts have been.
Georgia and Mississippi breweries cannot sell their beer directly to visitors. They are the two states in the U.S. where this is not allowed. Georgia’s lawmakers considered legislation designed to fix this last year. Georgia brewers were granted the ability to offer a “free souvenir” of up to 72 ounces of take-home beer to visitors who paid for a brewery tour.
The reforms fell short because of intense lobbying pressure from the powerful Georgia Beer Wholesalers Association. The GBWA worried that allowing more brewery-to-visitor sales would undermine the profit of alcohol wholesalers in the state. Georgia brewers are now in an almost identical spot to where they started: barred from selling their products directly to their on-site customers.
A handful of Southern states still use prohibition laws to manage some portion of alcohol sales within their borders. These so-called “control states” have government-run stores that strictly regulate the brands of alcohol available for purchase. In places like Virginia, hard liquor can only be purchased through government ABC stores. These stores mark up liquor by 69 percent prior to sale. Control states often have higher alcohol prices and less variety of spirits for sale.
Even when the government is not in charge of alcohol sales, alcohol producers in the South are strictly regulated in how they can sell their booze. Many Southern states have harmful self-distribution laws that stem from the heavily regulated three-tier system of alcohol distribution present in most states. This includes producers, wholesalers, and distillers. Alcohol producers are forced to sell their spirits through an independent wholesaler licensed by the state. Most businesses allow the customer to buy directly from the producer.
Wholesalers function as monopolies within their domain, as the prohibition laws prevents any competing wholesaler or producer from selling in the same area. Many states have strict franchise laws that make it nearly impossible for producers to switch wholesalers or get out of a contract with a wholesaler. While many states around the country have started allowing brewers to self-distribute their beer, almost no states below the Mason-Dixon Line do.
These franchise laws and limits on self-distribution do not just hurt alcohol producers—they dry up the scene for consumers too. Research has shown that states which restrict self-distribution are also the states with the fewest number of craft breweries. There is a similar link between economic growth and allowing breweries to sell to visitors. The result is less craft distilleries and breweries, and therefore less variety for consumers.
The South also has some of the highest alcohol taxes in the country—Tennessee, Georgia, and Alabama have the first, second, and fourth highest beer taxes. Wine doesn’t fair much better, with Florida, Alabama, and Georgia checking in with the third, fifth, and seventh highest wine taxes, respectively.
The Cato Institute’s Freedom in the 50 States ranking frequently ranks the South among the top. It has been dubbed the region as the “Economic Engine of America.” So why does a region with seven of the top 20 Best States for Business fail to extend its pro-business approach to booze?
One popular explanation is the region’s religiosity and cultural conservatism. Many cite this as the reason so many Southern states still ban Sunday liquor sales. Georgia’s recent failed reforms show protectionist influences and cronyism often play a bigger role. The three-tiered alcohol system that operates in most states creates an environment that strongly resists reform. Wholesalers are an extremely well-funded and powerful lobbying presence in most state capitals. Unsurprisingly, they vigorously oppose any attempts to allow alcohol producers to bypass wholesalers and sell directly to customers.
Protectionist pressure can also come from within the craft spirit industry itself. Oftentimes, states will create more favorable legal climates for one type of alcohol over another. Virginia brewers often lobby against reforms that would de-regulate distilled spirits, all in the hopes of avoiding greater competition. In control states that directly manage alcohol sales the government itself is usually hesitant to give up the revenue. As well as the government jobs generated from liquor retail prohibition.
The booming craft spirits movement has is unable to flourish in the South . Drinkers also lose out when their states deter new distilleries, wineries, or breweries from opening up in their neighborhoods. Southern states must recognize that small tweaks around the edges—like allowing breweries to give out “free souvenirs” of beer to-go—are not enough.
The South needs to change its entire approach to alcohol. This means privatizing any remaining state-run liquor stores, reducing the region’s massive alcohol taxes, and loosening limits on producers who want to sell their spirits directly to customers. It’s time for Southern states to extend their impressive record on economic freedoms to the booze business and allow Southerners some liberty alongside their libations.