Unhappy hour: 1930s law bars Florida breweries from distributing their own beer

Florida's 3-tier alcohol sales system aims to prevent monopolies, ensure beer is delivered safely to retailers.

Steve Shannon , co-owner/ brewer at Bugnutty Brewing Company, located at 225 King Street, in Cocoa Village.
  • In 2011, Florida had 45 craft breweries. In 2020, that number jumped to 368
  • In addition to picking up and delivery, distributors market and sell retailers on new beers
  • Even online orders can't be shipped. Law requires customers pick them up at the brewery

Jason Estes serves craft beer from around Florida and across the country at Village Idiot Pub in Cocoa Village, but he cannot stock any from Dirty Oar Beer Co. down the street, although he'd like to.

Dirty Oar, a small operation producing less than 300 barrels a year, doesn’t sell through a distributor. In Florida, it’s illegal for a brewery to sell its beer directly to another business.

“If they could self-distribute, it would be awesome for them and for us,” Estes said.

Village Idiot does carry beer from Bugnutty Brewing Co., another Cocoa Village brewery, which has a contract with Orlando-based Sunshine State Distributing.

Owner Jon Sheldon said he could wheel a keg to the pub in less than 5 minutes using a handcart. Instead, a Sunshine State representative picks up Bugnutty's beer and takes it back to Orlando. Florida law requires the beer "come to rest" in the wholesaler's warehouse before it can be delivered to the retailer. Only after the beer makes a stop in Orlando can it come back to the Village Idiot. Even beer destined for Rec 225, which is in the same building as the brewery, has to travel to Orlando first.

The sign for REC 225 and Bugnutty Brewing Company, located at 225 King Street, in Cocoa Village.

Sheldon and his partner Steve Shannon don't want to get into the distribution business, “but it would be great to wheel a keg next door or down the street to Jason," Shannon said.

The reason they can't has its roots in the 1930s and the end of Prohibition.

Florida has a three-tier alcohol distribution system aimed at preventing monopolies by giant beer manufacturers that could lead to every bar serving only one brand. Giving power and protection to distributors was a way to break those monopolies. And the system was set up to ensure, through the distributors, that government got its share in taxes from alcohol sales.

Distributors collect and pay state excise taxes from beer sales, $823 million annually, according to the Beer Industry of Florida, an association of 90 distributors across Florida. Distributors handle major brands such as Miller and Budweiser in addition to local beers.

But the beer industry has changed dramatically in the past decade with an explosion of craft brewers and beer-drinkers who love sipping hyper-local products.

Many of those brewers want to see changes to what they consider antiquated laws.  

The changing landscape of Florida breweries

In 2011, Florida had 45 craft breweries. That number jumped to 368 in 2020 with 27,919 fulltime jobs, according to the national Brewers Association, and 95% of those produce less than 1,000 barrels of beer a year. (One barrel holds 31 gallons, or 248 pints.)

Thirty-seven states already allow breweries various forms of self-distribution, and the Florida Brewers Guild, a non-profit trade association founded in 1996 to preserve the rights and interests of craft brewers, has tried — unsuccessfully — to get bills through the Florida House and Senate for the past three years that would do the same.

"It’s kind of crazy when you think about it," said Josh Aubuchon, a partner with Delegal Aubuchon Consulting in Tallahassee and a lobbyist for the Florida Brewers Guild. "You’ve got folks who make a product, but can’t sell it to other retailers. They're required by law to sell it to a third party to pick it up and deliver it."

That third party is important for insuring a quality product and the safety of beer drinkers, said Justin Hollis, executive director of the Beer Industry of Florida.

"At the end of the day, we're not selling toothpaste here," Hollis said. "We're selling an alcoholic product. We have to be careful how alcohol is transported and delivered into the marketplace."

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Distributors are licensed and regulated by the state of Florida, and they assume the risk and responsibility for delivering quality products to bars, restaurants and stores.

They also open doors that would remain closed to smaller operations, Hollis said. An individual craft brewery wouldn't easily get access to the shelves of Publix, for example, but distributors already have a relationship there. 

What is the three-tier beer distribution system?

Here's how the three-tier beer distribution system works:

Manufacturers, in this case brewers, make the beer.

Distributors buy the beer at wholesale prices and pay state excise taxes. 

Retailers, such as grocery stores, package stores, bars and restaurants, buy the beer from the distributors and sell it to the beer-drinking public.

The system was designed to prevent "tied houses," bars tied to a particular brewery or distillery and supplied exclusively by that producer, Aubuchon said.

A large brewery could buy all the bars and retail outlets in an area and require them to sell only that brewery's products. 

"They could have a near-monopoly on products being sold in that area," Aubuchon said. "The three-tier system was a way of breaking up the monopoly."

Why breweries want to sell their own beer

The three-tiered system was set up across the country when only a few major brewers were in operation.

"Here we are 90 to 100 years later, and there are still massive breweries," said Don DiFrisco, owner of Hell 'n Blazes Brewing Co. in downtown Melbourne, "plus thousands of craft breweries. But we're still operating under prohibitionist rules designed to protect distributors."

Hell 'n Blazes produces about 900 barrels of beer a year and ships out about 225 those across Brevard and into Northern Indian River County through a partnership with Carroll Distributing.

Smaller breweries like Dirty Oar don't have much left over after meeting the demand in their tap rooms. 

"Nobody wants to take away protection for distributors from big breweries," DiFrisco said. "They just want limited distribution in their own small town."

COVID-19 hit smaller breweries especially hard. Bars and breweries that don't sell food were shut down for more than two months last year. Brewers without a distributor were limited to selling growlers and beer to-go. 

"Right when COVID hit, we literally were on the front deck of the brewery when a sheriff walked up with a letter that said, effective immediately, you are closed," said Pete Anderson, head brewer and co-founder of Pareidolia Brewing Co. in Sebastian. "So, we had to go to just takeout only, like everybody else."

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Even online orders couldn't be shipped; law requires customers pick them up at the brewery. 

"The three-tier system, as it's written, really left us trapped in our buildings," said Matthew Dahm, CEO of Mastry's Brewing Co. on St. Pete Beach and a board member for the Florida Brewers Guild.

"If we had self-distribution, those little brewers could have been selling kegs to these restaurants that were just killing it," Anderson said, who noted that small breweries often produce a larger variety of beer styles.

Distributors also control which beers they will deliver. India Pale Ales and lagers sell well. Looking for a gose? You may need to get that directly from the craft beer taproom.

"It's denying the retailer access to the products they want," Anderson said. "The choices were limited instantly.

"Distributors are dictating what the consumer will see, what the consumer will receive, and what the retailers will get,” he said. “And that's a monopoly."

The case for using distributors

"I respect the craft people tremendously," said Ron Chabot, on-premise sales manager for Melbourne-based Carroll Distributing, which is associated with Anheuser-Busch. But distribution is more complicated than selling a keg here and there.

Distributors are far from big, evil empires, Chabot said. They invest in refrigerated trucks so beer is delivered to retailers at the appropriate temperature, and, along with pick-up and delivery, they carry liability insurance, pay alcohol taxes, clean tap lines at the bars, rearrange coolers so all the beer fits and help with inventory. Distributors also market and sell retailers on new beers.

And distributors helped many breweries during the pandemic, Hollis said, making it easier to get their beer into the marketplace when taprooms were closed.

Cheney Bros. Inc. and Carroll Distributing join forces to provide Easter dinner to laid-off bar and restaurant employees.

"Carroll Distributing has been part of this community since 1960," Chabot said, and has supported the community in multiple ways, from sponsoring charity events to serving food to hospitality industry workers during the pandemic. Donation requests come through Chabot.

"It's humbling on my end to know what we do for the community," he said.

Florida beer distributors support scholarships for 22,000 students in Florida, according to the Beer Industry of Florida, worth $155 million last year.

It can be a profitable business, but not without a big investment in equipment and manpower. 

"We've got 60 years of building a business with a lot of hard work and sweat," Chabot said. Carroll started with two trucks and a small warehouse in Cocoa. Now the distributor runs 40 trucks and moves more than 5 million cases of beer a year.

Carroll works with some of Brevard's larger craft breweries, including Intracoastal Beer Co. and Hell 'n Blazes Brewing Co. in Melbourne and Florida Beer Co. in Cape Canaveral.

When it comes to selling different styles of beer, Chabot said, "We'll sell anything that's palatable.”

Some beers, like sours and stouts, have fewer fans. Pilsners, IPAs and Lagers are more popular. "When you go into a bar, you've got to look at, do you have a style that meets everybody's taste buds. We try to own the whole bar. We're very successful with that with our craft partners."

And craft beer is successful for distributors, too, Hollis said. Those he works with have noticed an interesting trend lately. Tourists and snowbirds want craft beer. They want local products. People visiting Jacksonville want Jacksonville beer, not beer from Tampa.

Do breweries want to compete with distributors?

The owner of a brewery can't start a distribution company, Hollis said, but a friend or relative could get a license through the Florida Department of Business and Professional Regulation and start a small distributor service.

The thing is, most craft breweries don't want to self-distribute, at least not on a large scale. 

Self-distribution would mean buying trucks and hiring drivers and sales and marketing people, DiFrisco said. 

Most craft brewers got into the business to make beer, not drive trucks, Aubuchon said.

"A local brewery might only produce 500 to 1,000 barrels a year," said Dahm of Mastry's in St. Pete, "so the economics to support distribution is just not there to offset those costs."

Dahm works with a distributor, but, he said, beer sold outside his taproom mostly serves as marketing. There’s not much profit after the distributor and retailer both take cuts.

“It’s practically a wash in the finances,” he said. “There’s little to no profit. It covers its own cost.”

In addition to several bars and restaurants in Cocoa Village, Sunshine State Distributing delivers Bugnutty's beer across the Space Coast and into Orange, Volusia and Indian River counties.

The Bugnutty owners said they brew about 300 barrels a year, and sell as much as they can in their taproom, then sell the rest through the distributor. Their goal is to make enough with distribution to pay for the grain that goes into brewing. 

"I don't want to take my beer to Orlando," Sheldon said. "I don't have to go out and clear a tap line at 4th Street Fillin Station (in Cocoa Beach). The distributor does that."

Still, he’d like to be able to sell directly to a neighboring retailer.

"We don't want to take your job," Sheldon said. "We just want to take care of the people that we know, that take care of us locally."

Paul Hill, a co-owner of Dirty Oar, said his is the only brewery in Brevard County that doesn't distribute its beer. He would love to sell kegs to nearby bars, like Village Idiot Pub and Tracy's Lounge in Suntree, places where he knows the owners and knows his beer would be treated with care. 

But at least right now, Dirty Oar isn't producing enough to make partnering with a distributor worthwhile.

"It's just not a financially sound decision at this size," he said. "We'd basically be cutting our profit into thirds."

Hollis said he understands the desire to sell the occasional keg to a neighborhood business, "but you can't legislate on one instance out of hundreds of thousands. ... What's good for DeFuniak Springs is not good for the Everglades."

Bills that never leave committee

For the past several years, the Brewers Guild has tried unsuccessfully to pass bills through the Legislature, bills that would loosen distribution regulations.

“I sponsored HB 1443 because it is good public policy and would help a growing industry in Florida," District 26 Rep. Elizabeth Anne Fetterhoff of Deland said in a written statement. "Although Florida has 300+ breweries, there is a lot of potential for continued growth."

Florida craft breweries are great examples of small business success, Fetterhoff said, with an economic impact of approximately $3.8 billion.

"Even though HB 1443 was not heard in any committees during the 2021 Session, any good public policy takes time," she said, "and decreasing regulations on one of the most heavily regulated industries in the state is a difficult task.”

Fetterhoff is a Republican, but Dahm said craft beer is bipartisan.

"We feel a lot of support," he said. "I do firmly believe we will see changes."

Anderson of Pareidolia even created a website, freethebrew.com, asking beer lovers to contact their senators and representatives.

"We are a collection of Independently Owned Florida Craft Breweries pushing to change the antiquated beer laws in Florida," an introduction on the site reads.

Pareidolia opened in 2014, and Anderson said Florida breweries have been trying to change the three-tier system laws at least that long.

Dahm and Anderson hope the goodwill and voices of the beer-loving public will help get the bills through the next legislative session.

"We're not going to win with money," Anderson said. "We're going to win with education."

Most people don't know breweries can't sell to the restaurant next door. When they find out, Anderson hopes they'll contact their lawmakers.

"How long ago was prohibition?" Anderson said. "All those things that the politicians love to spout, yet here we sit in Florida, hands tied behind our backs, basically sharecroppers for the distributors."

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