Brewing desire

Louisiana brewers believe craft-friendly regulations could help them make the good times roll. BY DAVID JACOBS

MORE HOPS: Chris Peneguy, president of Pelican Craft Brands, says craft brewers struggle to succeed in Louisiana because they aren’t a big priority for the area’s dominant beer distributors.

PELICAN CRAFT BRANDS

launched in 2019 with the goal of filling what company president Chris Peneguy saw as a gap in the marketplace: a distributor focused on craft beers.

In the Capital Region, the dominant beer distributors are Mockler Beverage, most closely associated with Budweiser, and Crescent Crown. While large distributors can and do work with small breweries, and those business relationships certainly can succeed, some local brewers feel they aren’t a very high priority for the big wholesalers.

“There were no options here for the little guys,” Peneguy says. “They just get lost in these big portfolios.”

Most of the breweries the company works with have 30 or fewer employees, he says. Pelican serves both Louisiana-based breweries and brewers from outside the state looking for distribution here.

“We couldn’t be in business if we only served Louisiana breweries,” he says. “There’s just not enough [local] product out there.”

Despite a national reputation for its local cuisine and “let the good times roll” approach to life, Louisiana is at “the bottom of the heap” in terms of the number of local breweries per capita, says Cary Koch, executive director of the Louisiana Craft Brewers Guild. He says a thriving craft beer sector would provide an economic boost for a state that spends a lot of time and money promoting the local food and culture.

“When people come here, they are surprised by the lack of breweries,” he says. “That’s something that we need to talk about as far as economic development and tourism.”

Part of the problem, he believes, is a set of regulations “created decades ago” that don’t line up with what a 21st century brewery needs. The guild supported Republican Rep. Gregory Miller’s resolution, HR210, which passed during the last regular session and asks the House judiciary committee to “study and make recommendations for legislation on the regulation of the craft brewing industry in this state and to report its findings to the House of Representatives prior to the convening of the 2022 Regular Session.”

The pending state study dovetails with a similar effort at the federal level. In July, President Joe Biden issued a wide-ranging executive order meant to promote competition in the American economy. The order names the alcohol business specifically as needing scrutiny and directs the Treasury Department to look into potential barriers to new entrants to the marketplace.

Koch says the state review could go in “a thousand different directions.” One thing other states allow that might help Louisiana breweries is letting small brewers sell directly to retailers rather than going through a wholesaler, he says.

After Prohibition ended, the American beer industry was divided into three tiers:

manufacturers, distributors and retailers. While manufacturers generally must go through a distributor to get to the consumer, many states allow exceptions for small breweries. But Louisiana brewers must sign an exclusive contract with a distributor to get their beer into a given market.

In theory, self-distribution might allow small brewers to play in the minor leagues for a while, keeping all of their sales revenue until they grow enough to need a distributor. At that point, the distributor could pick up a more established brand, while the brewer would be more likely to be a priority for the wholesaler.

Another area that might merit discussion is Louisiana’s rigid distinction between craft beer manufacturers and microbreweries. The state has 27 manufacturers producing beers you can find in stores and restaurants but they can only sell their own product, Koch says. Louisiana also has 21 microbreweries, which are allowed to sell wine and spirits as well as the beer they brew but can only sell on-site, operating essentially as bars and restaurants.

“That’s a big line in the sand,” he says. “You’re either one or the other, and you can’t co-mingle, which is what we really want to do.”

Perhaps the biggest point of contention between small brewers and large distributors has to do with the state’s franchise laws. The contracts are extremely difficult to get out of, and small breweries with far less market power than the distributors are reluctant to pick those fights.

But distributors say the system works pretty well as it is, stressing that it is in the best interest of both parties for the craft brewers to succeed.

“We’ve worked with [brewers] independently if there is ever an issue,” says John Williams, executive director for the Beer Industry League of Louisiana, which primarily represents distributors. “We’ve worked with every brewery that wanted to change their business plan or make a change in their operations.”

The beer league backed Republican Rep. Robert Owen’s bill, HB291, which Williams says would have allowed brewers to self-distribute. Koch, however, called the bill a “poison pill” that did not address his members’ concerns, and the legislation failed to get out of committee.

Craft beer has about 18% of the shelf space in grocery stores and more than half of the barroom taps but only about 5% of the market share, Williams says, though he doesn’t object to Rep. Miller’s call to study craft beer regulations.

When bars were shut down as part of the effort to control the spread of COVID-19, craft brewers, who depend on those taps more than the big brands, took a hit while other booze purveyors were doing big business. Last year, the craft brewing industry incurred an 8% volume sales loss nationally and a 22.2% loss in Louisiana, Miller’s resolution states.

“It’s always a good idea to consider looking at helping businesses in the state,” Williams says.

“When people come here, they are surprised by the lack of breweries. That’s something that we need to talk about as far as economic development and tourism.”

CARY KOCH, executive director, Louisiana Craft Brewers Guild

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