BREWING SUCCESS: Southern Craft Brewing co-founder Joe Picou says “the biggest positive impact on the craft beer industry” in Louisiana would be eliminating the law requiring the state’s 35-plus craft breweries to sign exclusive contracts with distribution companies. (Photo by Don Kadair)
Joe Picou and Wes Hedges—engineers by day, amateur beer brewers by night—entered their first National Homebrew Competition in 2011. Their Red Stick Rye, named for their Baton Rouge hometown, took second place in San Diego that year among some 7,000 entries.
Picou and Hedges saw that West Coast success as a business opportunity here in Louisiana where, despite being one of the nation’s most beer-loving states, there were few breweries. So they launched Southern Craft Brewing in 2016, joining Tin Roof as Baton Rouge’s only craft beer breweries.
Sitting in the small tap room adjacent to Southern Craft’s 15-barrels-at-a-time brewhouse, Picou talks about his commitment to using regional ingredients like Louisiana cane sugar, local wildflower honey, and Cafeciteaux Coffee from the brewery’s Airline Highway business park neighbors. Thanks in part to a 2012 state law allowing breweries to sell their creations directly to drinkers in on-site tap rooms, there are now more than 35 breweries in Louisiana and more than 15 being planned, according to the Louisiana Craft Brewers Guild.
But there’s another tool Picou and other small brewers would love to have in their brew kits: the ability to sell their beers directly to stores, bypassing the legally-mandated middleman.
“I think that would have the biggest positive impact on the craft beer industry in Louisiana,” Picou says.
After Prohibition, the American beer industry was divided into three tiers: manufacturers, distributors and retailers. Louisiana brewers must sign an exclusive contract with a distributor to get their beer into a given market.
In Baton Rouge, the dominant wholesalers are Crescent Crown, whose best-known brands are made by MillerCoors, and Mockler Beverage, which distributes Budweiser. While distributors want all of their brands to succeed, the large Budweiser logo on the front of Mockler’s Reiger Road headquarters leaves a distinct impression about the company’s priorities.
For many years Mockler only sold Budweiser products, but over the past decade has worked with many local breweries. Mockler General Manager Chris Davis says the company works hard to market, sell and deliver their beers, leaving brewers to focus on what they do best.
Contracts with brewers are hard to break, something Davis argues is necessary since distributors put “blood, sweat and tears” into building those brands. He’s had a few breakups, he says, but the decisions usually are mutual.
“No ugly divorces,” is how co-owner Patrick Mockler describes it. “They have expectations of us, and we have expectations of them. The system works very well.”
But the power relationship between a distributor and small brewer is far from even. Most Louisiana breweries are exclusively with “the Bud network” or “the MillerCoors network,” says Karlos Knott, president of Bayou Teche Brewing in Arnaudville.
Louisiana’s beer franchise law requires a dissatisfied brewer to give 30 days notice before attempting to terminate a contract. The distributor then gets 90 days to create and implement a plan to fix the problem, at which point other issues may crop up—starting the cycle over again. The protracted process, say those who want the law changed, is problematic for craft beer industry that’s largely seasonal, and trends among beer aficionados change quickly.
Knott, president of the Louisiana Craft Beer Guild, stresses he has good relationships with his distributors, but acknowledges some are better than others. The real concern, he says, is if a distributor gets mad at you, then they may not want to sell your beer at all.
“The distributor has most of the cards,” Knott says. “They can determine what gets into the market, and what doesn’t get into the market. They can determine what gets delivered and how it gets delivered, or not.”
Cary Koch is the first-ever executive director of the Louisiana Craft Brewers Guild, which was established in 2011. Despite the three-tiered system, he says, 39 other states have figured out ways to let craft brewers sell directly to retailers. In Texas, for example, breweries can self-distribute up to 40,000 barrels a year, far beyond the production of any Louisiana brewer except Abita.
Self-distribution allows small breweries to play in the minor leagues for a while, Koch suggests, keeping all of their sales revenue until they grow to the point of needing a distributor. The distributor gets a more established brand, while the brewer is more likely to be a priority for the wholesaler.
Koch would also like to see the state’s franchise laws updated, forcing distributors to address complaints more quickly and making it easier for brewers to exit their contracts. Perhaps if existing brewers weren’t locked into nearly ironclad exclusive agreements, more distributors would move in and create competition among wholesalers.
Distributors have economic and political clout, so for now craft brewers are treading lightly. In this year’s regular session, the Craft Beer Guild is only asking legislators to define a brewery’s “premise” for the purposes of outdoor service or events, which has been open to interpretation.
Distributors say the regulations that maintain the three-tiered system ensure a competitive market. Unlike, say, soda companies, large beer makers can’t pay for extra shelf space, says John Williams, executive director of the Beer Industry League of Louisiana, which primarily represents distributors.
While craft beers made up just 4.5% of the sales in Louisiana last year, they occupied some 18% of the retail shelf space and more than half the taps at bars and restaurants, says Williams, arguing small brewers have every opportunity to compete under the current system. By “craft beer,” he means domestic beer that isn’t produced by Yuengling or Boston Beer Company (makers of Samuel Adams) or one of the many brands owned by Anheuser-Busch InBev (makers of Budweiser) or MillerCoors.
“This is a consumer-driven industry,” Williams says.
On the importance of consumers, at least, Williams and Southern Craft’s Picou agree. Southern Craft is working on a new beer, a New England-style IPA, that acknowledges the consumer right in the name. They call it Fourth Tier.