Getting a Handle on Growler Laws

• Publication year: 2016

SEATTLE UNIVERSITY LAW REVIEW Volume 39, No. 3, SPRING 2016

Getting a Handle on Growler Laws

Adam Star(fn*)

CONTENTS

INTRODUCTION..........................................................1080

I. GROWLER DEFINITION, HISTORY, AND BENEFITS...........................1081

II. OVERVIEW OF THE THREE-TIER ALCOHOL DISTRIBUTION SYSTEM..............................................1083

A. History and Recent Case Law....................................................1083

B. Small Brewery Critiques of the System.......................................1085

III. FALL AND RISE OF THE SMALL BREWER.....................................1088

IV. GROWLER LAWS BY LICENSE TYPE..............................................1090

A. Growler Distribution Under Manufacturer Licenses.................1091

B. Growler Distribution Under Brewpub Licenses.........................1093

C. Growler Distribution Under Retailer Licenses..........................1097

V. BENEFITS OF WASHINGTON STATE'S MODEL..............................1099

VI. CONTESTED GROUND: OTHER ATTEMPTS BY SMALL BREWERS TO LEVEL THE PLAYING FIELD ................................................................1102

A. Florida's S.B. 1714....................................................................1103

B. Minnesota's "Save the Growler" Campaign.............................1105

C. The Sherman Antitrust Act.........................................................1107

CONCLUSION AND RECOMMENDATION FOR FUTURE GROWLER REGULATION........................................................................1108

INTRODUCTION

The growler has served its humble purpose as a vessel for consumers to transport draft beer to their homes since the 1800s. Growlers are both economical and environmentally friendly. Growlers provide benefits not only for consumers, but also for breweries, especially for smaller craft breweries. Despite the utility of growlers, the current law in the United States regarding growler use remains a jumble of conflicting and often confusing regulations varying widely by state. This Note will argue that both breweries and consumers would be better served by more consistent and even-handed legislation that encourages growler distribution.

In recent years, growler law has been subject to intense lobbying efforts. This regulatory battle has effectively split the market into two camps. On one side are consumers, retailers, and smaller craft breweries that favor a liberation of growler regulation. Opposite them are the two major brewing conglomerates, Anheuser-Busch InBev and MillerCoors, along with large regional beer distributors who stand to benefit most under a restrictive regulatory environment for growlers. Everything from the legality of growler use, to the parties that can distribute growlers, to the size of growlers is currently subject to debate.

The present growler conflict can also properly be viewed in light of two broader historical movements: (1) the three-tier alcohol regulatory system, which developed shortly after the ratification of the Twenty-first Amendment to the United States Constitution; and (2) the present explosive growth of small craft breweries over the last fifteen years. Over time, the three-tier regulatory structure has led to a broad proliferation of laws that hindered consumer access to smaller craft brewers' beer in favor of protecting the market share of larger breweries and distributors. However, given the growing popularity of craft beer with consumers and the efforts of many determined small brewers, the pendulum has started to swing the other way.

This Note will begin with a brief general history of growlers in the United States and the benefits they provide to consumers, retailers, and small craft brewers. Part II will provide an overview of national alcohol distribution regulation and how the present growler law exists within this larger framework. To complete the necessary background information, Part III will provide context to the competitive landscape by way of an examination of the craft beer industry's explosive growth.

The substantive portion of the Note will follow in Part IV, beginning with an outline of the various key types of growler restrictions such as the size of the vessel, the type of license that is required, and the regulatory practice of "locking" growlers to specific establishments. After this discussion, there will be an analysis and comparison of recently passed and pending key legislation in major beer producing states. Part V will review the regulatory environment for growlers within Washington State. In this section, I will argue that states should adopt laws similar to those in Washington, which by virtue of having some of the least restrictive regulations on growler use, has built a model that is beneficial to the consumer while also encouraging business growth within the state. Part VI will then focus on more controversial legislation such as Florida's S.B. 1714 and the impact of grassroots organization within the craft beer community to counter such measures. Tied to this discussion will be a brief examination of whether the efforts of larger brewers and distributors in sponsoring bills like S.B. 1714, when viewed under the Sherman Antitrust Act, provide for the possibility of finding collusive, coordinated action.

Finally, the Note concludes with proposed recommendations for the future of growler law by reiterating changes that align closer to Washington State's regulatory model.

I. GROWLER DEFINITION, HISTORY, AND BENEFITS

A growler is a container, typically sixty-four ounces in capacity that is usually made of glass.(fn1) It is generally used by the consumer to transport beer from the draft line of a brewery or retail store to an offpremises location for later consumption.(fn2) Growlers gained popularity in the late 1800s when most beer was consumed on draft.(fn3) During those times, "[f]amilies would routinely send someone, usually a woman or child, to the local saloon to bring home beer for the evening meal."(fn4) The original growlers were usually a galvanized steel pail with a lid.(fn5) The growler's unique name is believed to have come from the rumbling sound of the carbonation escaping as it rattled the lid.(fn6)

Following Prohibition, growler use declined due to the closing of both saloons and many smaller breweries.(fn7) By the 1960s, with consumers' increased preferences for canned and bottled beer, coupled with a sharp decline in the number of small breweries, growlers disappeared almost entirely.(fn8)

Given the recent increase in the craft beer movement's popularity, growlers have made a comeback within the last decade.(fn9) Growlers are now "big business for many small breweries, and some beer shops do a brisk trade in them."(fn10) This popularity can be attributed to the variety of benefits growlers offer to consumers, producers, and retailers of craft beer.(fn11)

For consumers, growlers provide the freedom to consume beer, which might not be available anywhere else other than the brewery, in the comfort of their own homes.(fn12) Just as one might have brought wine to a dinner party in the past, it has become more common for guests to bring a growler as a gift to the host to be shared during the evening.(fn13) Also, growlers provide the chance for customers to acquire, for later consumption, unique small batch or limited run beers.(fn14) Finally, as growlers are by design reusable containers, they are more environmentally friendly than either cans or bottles.(fn15)

Growler benefits for breweries are twofold. The first advantage is that growler use naturally expands the revenue base because customers who might not otherwise have the time to spend consuming beer at a brewery or bar can enjoy the beer at their convenience at home.(fn16) In addition, growler distribution lowers the market entry cost for smaller breweries because the associated cost of setting up bottling or canning lines is prohibitively expensive.(fn17) The initial investment to open a bottling or canning line is between $200,000 and $500,000.(fn18) This cost estimate also does not take into account the additional labor required to operate those lines once they are up and running.(fn19) Even more, if the brewery wants to place its bottles or cans on a retail shelf, further effort is required in setting up a relationship and sharing profits with a distributor.(fn20) Furthermore, any label placed on the bottles or cans needs to meet the strict requirements of the Alcohol and Tobacco Tax and Trade Bureau.(fn21) Meeting these requirements is yet another cost for a fledgling brewery to bear. Thus, the interim revenue that growler sales provide to a young, expanding brewery can often serve as a critical financing bridge until it reaches a more stable capital position.

Finally, the additional outlet for selling smaller batches of beer encourages creative experimentation at breweries.(fn22) A new recipe concept that would be a risky investment if bottling was required is more readily undertaken when a brewery can sell for off-site consumption using growlers.

II. OVERVIEW OF THE THREE-TIER ALCOHOL DISTRIBUTION SYSTEM

A. History and Recent Case Law

Since growlers are used to transport beer, an alcoholic product, growler law is inexorably tied to the three-tier distribution system that dominates alcohol regulation within the United States. Under this...