STONE AND DESCHUTES: CAN SOUTH CAROLINA LAND THEM?

deschutes-brewery-logo

One of the questions that I’ve been hearing a lot lately is in regards to the potential east coast brewery locations for Stone Brewing Company and Deschutes Brewery.  The next question that generally follows is about what South Carolina is doing to lure these breweries to the Palmetto State. Well, it’s a little more complicated than that, but let’s discuss this.

Are many East Coast and Midwest cities actively recruiting these two breweries? Obviously, yes. Most cities and states (especially in the south) have warmed to the idea of craft beer as an economic boost. Is South Carolina doing something to recruit either Stone or Deschutes? The answer is yes! At least for Stone (which this post will focus on since that information is available). Unlike Stone, Deschutes hasn’t put out a formal request for proposals (RFP). Deschutes is flying a little under the radar, but it is fairly common knowledge that the brewery is interested in an east coast location to save on shipping costs.

So, what is South Carolina doing? Well, it’s doing as much as it can. State government officials have warmed to the fact that craft beer is big business and a job creator (and that is without considering the Pint Law). That North Carolina has been able to pull Oskar Blues, New Belgium, and Sierra Nevada is no fluke. And South Carolina officials have taken notice. An active recruitment effort for Stone is underway both by several cities and by the state government. South Carolina certainly has many ideas for how to accommodate a large west coast brewery, whether it be land, taxes, etc. But, there is a massive problem.

Stone-Brewing-Gargoyle1

When it comes to landing one of these breweries, South Carolina might be able to offer certain incentives, but there is something major that it cannot offer (unlike North Carolina and other states), which in the end will be a deal breaker for these big breweries: favorable laws. Like what? Let’s take a look.

In Stone’s RFP, it states:

“Our operations facility will feature a full-production brewery, packaging and distribution operations with various administrative support which will serve to produce beer to be distributed in the Midwest to East Coast Boundaries as well as for export. Our World Bistro & Gardens, retail and potential other operations will follow. . . . Once developed, the World Bistro and Gardens outside area will be beautifully landscaped where visitors will be able to enjoy craft beer, dine, and enjoy our gardens….”

Sounds great, right? Absolutely. This is exactly how Stone operates its facility in Escondido, California. And it has been a massive success. So, what’s the issue? Well, this type of operation would be illegal under South Carolina law.

How is it illegal? South Carolina is an incredibly strict three-tier state. Just briefly, the three-tier system was set up after Prohibition. How does it work? Well, brewers make beer and must then sell it to a wholesaler. The wholesaler then sells it to a retailer. The retailer then sells it to you. In its most strict form, this is how it works. No exceptions. Now, most states have carved out various exceptions. Brewpubs are an example (no wholesaler – the producer sells the beer directly to you). The Pint Law is our most recent example of an exception to this system where a brewery can sell direct to you (with limits, of course). Some states like North Carolina have exceptions such as self-distribution if a brewery produces less than 25,000 barrels of beer. As a side note, that exception would include every single South Carolina brewery because of their size. And that’s one issue. Stone wants to self-distribute. In South Carolina as it stands right now, that can’t happen.

Stone also wants to create an on-site brewpub and restaurant where their brewery sits. Do you know of any operations like this in South Carolina? No? That’s because there are none. This practice is also illegal in South Carolina. When deciding to open any type of brewing facility, the owners face a choice in South Carolina: be a brewery or a brewpub. You can’t be both. Stone’s proposal would allow it to have both. Again, under current South Carolina law, this cannot happen.

So, no self-distribution and no brewery/brewpub combination licenses. What else? How about consumption limits? For brewpubs, there is no limit (outside of dram shop laws) of what a patron can be served while on-site. Breweries, of course, are subject to the forty-eight (48) ounce limit set forth in the Pint Law. While the Pint Law was a great win for brewers in this state compared to where they have previously been, it’s nowhere close to what Stone or Deschutes would require to set up shop in South Carolina. That would also have to be changed.

In short, to land either of these breweries or to be a serious candidate for others in the future, South Carolina will need to completely overhaul its regulatory scheme (only a few examples were cited in this post). That’s not to say that South Carolina isn’t a desirable place for companies to do business. It is. Many companies are finding our state to be very hospitable. However, the point of breweries moving east is to not only make money, but also to save money. Without the laws in place that these breweries are used to operating under, it makes convincing them to locate to South Carolina an incredibly tough sell as it stands now. Of course, there is interest from many in changing the laws to allow for a Stone or Deschutes to come here. But it will take a big effort to convince the General Assembly.

The Stone RFP says that its decision will be based on:

“Our selection of a location will be based upon a number of factors, including completeness of responses, advantageous operational expenses (e.g., labor, utilities, logistics, etc.), development challenges, availability/ timing, unique attributes (e.g., redeveloped or historic properties, sustainable sites), creativity as well as a significant weighting on incentive/development packages available.”

The key is “development challenges.” The current law in South Carolina is certainly that.

NOTE: The President of Stone Brewing (Steve Wagner) will be in Greenville today for the Barley’s Most Arrogant Bash and in Charleston tomorrow for the Wine + Food Festival. If you’re at either of the events, maybe think about saying hello.

http://www.barleysgville.com/news-and-events/events/back-to-back-arrogance/

http://charlestonwineandfood.com/events/closed-for-business-craft-beer-dinner/

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4 responses to “STONE AND DESCHUTES: CAN SOUTH CAROLINA LAND THEM?

  1. Good post. Do you know if the city/state officials mentioned to be actively courting Stone are, one, aware of the legal issues and, two, part of any effort (of any size) to address those?

    • The state officials are aware. Doesn’t concern them. Proposals are being made. If anyone gets a bite, then you’ll see a mad dash to try and get the necessary changes done. But again, it’s going to be a major overhaul that is needed to even come close.

  2. I think the biggest hurdle is certainly the distribution aspect. It would be nice to see SC implement something opposite of NC and set a barrel limit that let’s only big breweries distribute. However I know the distributors in this state would lobby against it.

    The bistro aspect seems easier to fix. Essentially Stone just has to have the restaurant under a separate corporation and not physically be under the same roof. They could easily build the two side by side. What won’t make sense to them is to sell to a distributor and have that distributor deliver 10 feet away to their restaurant at a higher cost.

    All about tax dollars. Hopefully the state realizes more tax dollars come in with those companies inside our border.

  3. Pingback: THE STONE BILL: WHAT IT DOES | BEER OF SC·

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