Franke: Now They Are Coming for Our Beer

January 12, 2022

by Mark Franke

The Apocalypse is at hand. And it was Covid which brought it about.

No, I’m not speaking of the endless riots and protests in the major cities. Neither am I speaking of the lust for power exhibited by governmental officials at every level as they shut down businesses, schools and everything but their favorite resort spots. I’m not even referring to the cultural war that has sprung from the grassroots to demand accountability on what our children are being taught.

I am speaking of something much more pertinent to my quotidian existence. According to the Wall Street Journal, Covid has initiated a “take no prisoners” war between beer brewers and spirit distillers over who gets how much of American consumers’ hard-earned disposable income.

This does not portend well for my retirement lifestyle.

I’m of German heritage, so beer is the closest thing to a secular sacramental drink there is. I like all flavors and styles, except India Pale Ales and fruity semi-beers. My taste changes with the season, moving into porters and darker ales in the bleak mid-winter and moving back to lighter ales and pilsners in the summer. My garage beer refrigerator is stocked with at least a dozen options at all times.

Add to that the fact that my taste for bourbon reawakened about 10 years ago, a taste I had in college but sensibly repressed when I got married as an undergraduate and had to move expeditiously toward graduation. While my demand curve for bourbon is rather price-inelastic, I have found several bourbons quite reasonably priced to justify keeping them to hand in my liquor cabinet.

Now one would think that this economic battle is an opportunity for the free enterprise system to work its wonders. Brewers and distillers would compete with new and better product offerings by lowering prices to gain market share and by having their advertising agencies up their game with clever and humorous commercials. 

That’s how it would work in Adam Smith’s world; not so in the crony capitalism environment of Washington D.C.and the 50 state capitol buildings such as that impressive edifice in downtown Indianapolis.

To my point, see this quote from the Wall Street Journal article by the owner of the Samuel Adams brewery: “If [the distillers] succeed in changing state regulations, the beer industry . . . would face virtually permanent declines in volume, revenues and profits.”  Needless to say, he expects those lost revenues and profits to find their way onto the distillers’ financial statements.

There are so many things wrong with that statement that I will point out only two.

First, it is obvious that Jim Koch, the brewer interviewed, sees the battle for consumer market share being waged at the governmental and not the retail level. It’s not about putting out a better product at a lower price but about corralling powerful elected officials and career bureaucrats. 

I have written in the past about the lunacy of liquor taxes at both the federal and state levels. Suffice it to say there are a lot of taxes at confusingly high rates collected all along the product pathway to the consumer. Is it fair that distilled spirits are taxed at approximately two- and one-half times that imposed on beer?  Not if you are a distiller.

It’s not just the taxes on hard liquor. Remember Indiana’s Beer Baron law that created monopoly sales districts for beer distributors? How about the state’s law that regulated what retailers could sell cold beer on an exclusive basis, benefiting liquor stores over groceries?  

The inconvenient truth is that no tax is truly fair. The government picks winners and losers every time it passes a law or promulgates a regulation. All those lobbyists in Washington and Indianapolis are there for a reason.

The second issue I take with Mr. Koch’s statement is that he sees all this as a zero-sum game. His revenues and profits will simply cross a metaphorical street and jump into the pockets of some demon-rum producer. I would charge Mr. Koch with economic ignorance if it weren’t for the fact that he clearly understands the economics of American statist capitalism. Business success all too often is earned in the hallways of government, not the open marketplace.

Seriously though, I really don’t believe that the most dangerous threat to our societal well-being is the marketing war between alcohol-producing behemoths. Lawless central cities, authoritarian politicians and cultural barbarians all present much more serious threats to our liberty and our progeny’s welfare. It is all overwhelming when one dwells on it for any extended period of time. A sense of futility and helplessness is the inevitable outcome of such musings.

So a sense of humor is essential, especially in these near-apocalyptic times. It sure beats crying yourself to sleep at night. And a couple fingers of bourbon will help as well.

Mark Franke, M.B.A., an adjunct scholar of the Indiana Policy Review and its book reviewer, is formerly an associate vice-chancellor at Indiana University-Purdue University Fort Wayne.


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