Illinois Gov. Rauner Signs Craft Brewing Distribution Bill

Published September 22, 2018

Craft breweries in Illinois may now directly distribute beer to bars and pubs, after decades of being forced to use government-mandated middlemen.

House Bill 4897, signed into law by Gov. Bruce Rauner (R) in August, allows breweries to sell directly to retailers instead of having to go through third-party distribution companies.

Relics of Prohibition

C. Jarrett Dieterle, a senior fellow with the R Street Institute, says the previous requirement was derived from an outmoded, government-mandated scheme of alcohol transport and sales.

“It all is derivative of the three-tiered system of alcohol distribution,” Dieterle said. “There are different manifestations of the three-tiered system, but the general idea is that producers—the brewers and distillers of the world—produce the alcohol and then the distributers distribute it, and then the retailers sell it in stores, restaurants, taprooms, or pubs. The Illinois law was a vestige of that system, in a particularly stringent form, where basically the brewers had to go through a distributer to sell their own beer in their own taproom.”

Dieterle says the old system of government interference in the beer business is a holdover from nearly a century ago.

“The three-tiered system was originally set up in the post-Prohibition era, where the idea was to prevent a vertical monopoly,” Dieterle said. “When you create government artificial middlemen like that, you’ve created the incumbent interest group that wants to protect its turf and have its role preserved.”

Bubbly Benefits of Freedom

Vincent Caruso, a researcher with the Illinois Policy Institute, says reducing government regulations on small breweries benefits more than beer drinkers.

“Beer freedom affects more than microbrew aficionados, and more than just beer drinkers in general,” Caruso said. “Freeing the industry from arbitrary regulations means enabling breweries to craft menus that satisfy a range of tastes.”

Even though Illinois craft breweries are now freer, Caruso says there’s more deregulatory work to be done.

“Unfortunately, much of the alcoholic beverage market in Illinois still operates under the three-tier framework, which imposes constraints on producers and unseen costs on consumers,” Caruso said. “Distributors have expended considerable political energy to protect their midway channel between brewers and store shelves. However, consumers and producers alike would be better served by a system that emphasized the growth of the industry rather than the composition of its supply chain.”

Brewing Up Better Laws

More freedom of distribution means more choices for consumers, Dieterle says.

“If you go to a brewery and all they can sell is beer, a gluten-free person can’t drink there, but if they’re allowed to sell cider from a cidery down the road, then it creates a better experience and helps the brewery and the cidery,” Dieterle said. “It’s a beneficial arrangement where the biggest winner is the consumer.”

Illinois lawmakers should do more to get the government out of the alcohol business, Caruso says.

“Illinois has what it takes to become the nation’s craft beer capital, a distinction that would bring an economic boost to a state that needs it,” Caruso said.” Lawmakers should build on the success of H.B. 4897 and continue to advance legislation that reduces outdated barriers standing between beermakers and their beer tasters.”