It might be time to revisit a topic we've discussed before: Indiana's barrel limit law. As things stand right now, Indiana breweries are limited to making no more than 30,000 barrels per year for in-state sales if they want to do things like distribute their beers directly to bars and other retailers, have a restaurant on-site, and sell beer on-site (see Indiana Code section 7.1-3-2-2). The barrel limit used to be 20,000 until a lobbying effort spearheaded by Three Floyds and Sun King was successful in getting the barrel limit raised to the current limit of 30,000.
An August article in the Times of Northwest Indiana noted that Three Floyds is on pace to produce 25,000 barrels this year and will surpass 30,000 barrels in the near future. I'm not sure what Sun King's current barrel production is for 2012, but it can't be far behind Three Floyds'. Given that these two breweries will probably be bumping up against the limit again soon, I suppose the question is this: Why do we still have the barrel limit? What practical purpose does it serve? What parties have a stake in seeing it remain? I suppose one fortunate thing is that the barrel limit doesn't apply to out-of-state sales. But given that most Indiana breweries have Indiana consumers as their target market, why should Indiana breweries have their hands tied in this fashion? (I know that these may seem like facile questions to some, but they're worth asking for readers who might be unaware of the barrel limit.)
Why do we still have the barrel limit?
I honestly can't think of a good reason to limit production. With greater production comes greater tax revenue for the state, more jobs to run expanded production, and the potential for re-use of industrial/commercial property that may otherwise be vacant.
What practical purpose does it serve?
I suppose the limit could make it a more equal playing field for new breweries and established breweries within the state. But again, I do not see the upside.
What parties have a stake in seeing it remain?
I see where the limit could benefit distributors that have sister companies in other states and could help a brewery by getting their beer out of state to stay under the 30k limit. That said, for new breweries that want to self-distribute and grow unfettered, I can see where they may consider moving over the border to a surrounding state.
I suppose one fortunate thing is that the barrel limit doesn't apply to out-of-state sales. But given that most Indiana breweries have Indiana consumers as their target market, why should Indiana breweries have their hands tied in this fashion?
One of the things that I enjoy most about Three Floyds is being able to go to the Brewpub. The limit threatens to close that part because they will continue to pump more and more beer through the pub. I also enjoy seeing the Sun King trucks around the streets of Indy on their morning delivery routes. I know that Dave, Clay, and their team have a focus on continued growth within Indiana and I see no reason to handcuff them. The only negative to larger growth that could be argued would be the environmental impact from using more caustic to clean more tanks. However, I see this as a minor detraction from the tax revenue, jobs, and other benefits the brewing industry brings.
From what I have heard, a lot of out-of-state breweries are envious of Indiana breweries because they can sell on site, operate restaurants, and self distribute. I think it makes Indiana fertile grounds for new breweries. But as we have seen, breweries are pushing the limits and their success is now a hindrance. For the successful, it raises the question: What do I do now? Three Floyds could move some or all of its operations to Illinois with relative ease. Or Michigan. Or Wisconsin. Sun King could, instead of continuing expansion in Indiana, open a second brewery elsewhere. That is lost jobs and lost taxes, and most importantly, lost pride. Indiana has great momentum in the craft beer industry. Let's not hinder the momentum for puritanical reasons.
If I had to guess, the law was originally put in place to separate the business of a brewpub and a production brewery. In some ways, it would even protect the idea of a neighborhood brewery. But that's entirely speculation, as there is obviously a very real history to the law that would require a lot of investigation to uncover. The law itself doesn't translate properly to our modern society. Breweries are bigger, there are more people, and the three-tier system provides a mechanism to bring the world's beers to Indiana. Whatever original purpose the law held, it only serves to hinder progress today. Much as the barrel limits were increased recently, they will likely need to be increased again.
It hurts the business, the state, and the consumer for the limits to prohibit self-distribution or restaurant operation, and there is no logical reason I can figure out for them to remain in place. I am very curious to hear what the counter-argument is to raising the limit. I hope it is not the sensationalist nonsense about underage drinking and drunk driving that I frequently see spewed in public forums.
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