Drunk on power: Booze distributors ply statehouses to keep profits flowing
Rhinegeist Brewery invested $250,000 in trucks and employees to bring its beers into Kentucky, just a few miles from its fledgling brewery in downtown Cincinnati.
Sales boomed in the “thirsty” Kentucky market, said brewery co-founder Bryant Goulding.
But in March, just three months after the deliveries began, the legislature there voted to make Rhinegeist’s distribution business illegal.
Related: Alcohol industry’s 2014 political giving in the states
“We were crestfallen, heartbroken, disappointed, really frustrated by the political process,” Goulding said. “We felt like we really didn’t have genuine access or really didn’t get genuine consideration from a lot of the politicians.”
Rhinegeist had run into a little-known but powerful political force at play in nearly every state: alcohol distributors. They don’t brew the beer, and they don’t serve it. But as wholesalers who function as the legally mandated middlemen between alcohol makers and retailers, they have a wide-ranging influence on the booze Americans drink, marking up prices and controlling the growth of craft brewers and small wineries.
Alcohol distribution is a $135 billion industry in the U.S. that has made many rich, including Cindy McCain, head of her family’s beer distributing company and wife of Sen. John McCain, R-Ariz. To protect the post-Prohibition regulations that guarantee their business, wholesalers bankroll scores of lobbyists and give millions of dollars in contributions in election seasons. And because wholesalers are often local, family-run, American-owned businesses, they are popular with politicians.
Related: Legislative efforts to dismantle alcohol middlemen’s power in 2015
“The beer wholesalers are a lot like the teachers unions,” said John Conlin, a Colorado management consultant who works with beverage companies. “The teachers unions have incredible clout, too, and the reason is there are teachers in every congressional district out there… And historically that was the same with beer wholesalers.”
But recently two economic forces have encroached on wholesalers’ power and territory, putting them on defense: big multinational brewer Anheuser-Busch InBev, which boasts $47 billion in annual revenue; and the burgeoning craft beer industry that wants more freedom to distribute its own beer, offer tastings in new places or sell to-go containers called growlers.
At least 22 states had bills in 2015 seeking to allow alcohol makers to circumvent distributors and sell their products directly to customers, according to the National Conference of State Legislatures.
Related: Something that was legal a few months ago
They faced firm opposition this year because state alcohol wholesaler alliances had at least 315 registered lobbyists spread across every state and the District of Columbia, except Wyoming, according to a Center for Public Integrity analysis of state records.
And alcohol distributors are by far the most involved in state politics out of those in the booze business. They gave roughly $14.6 million to state candidates, parties and ballot issue groups in the 2014 elections, while alcohol manufacturers gave about $5.3 million and retailers gave roughly $2 million, according to data from the National Institute on Money in State Politics.
They are politically active on the federal level, too, but because alcohol is largely regulated at the state and local level, wholesalers aim most of their political firepower at statehouses. Their giving in 2014 state races was more than double the approximately $5.9 million that they gave for congressional contests.
Related: Key findings from the Center's distribution investigation
“As local businesses representing Main Street America, beer distributors take pride in participating in the political process and support a wide range of candidates,” the National Beer Wholesalers Association’s spokeswoman Kathleen Joyce said in an email.
Using that political firepower, wholesalers defended their economic turf this year in several states, including Kentucky, Georgia and North Carolina, by advocating for the exclusive right to distribute alcohol. And now wholesalers are also trying to expand their turf by going after the legal recreational marijuana market proposed in Nevada.
Fighting a beer giant
There’s more to this story. Click here to read the rest at the Center for Public Integrity.
This story is part of Who’s Calling the Shots in State Politics?. The Center exposes the powerful special interests that drive elections and policy in the states. Click here to read more stories in this blog.
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Copyright 2015 The Center for Public Integrity. This story was published by The Center for Public Integrity, a nonprofit, nonpartisan investigative news organization in Washington, D.C.
