The following is a student article written for my last craft beer law class at McGeorge.  The student author is Katie Green, and as a “reward” for receiving the highest grade in the class, here is her article for your reading pleasure.  Ms. Green makes an interesting argument about why craft beer needs to explore PACs instead of relying on grassroots movements.  And with all the whisperings I keep hearing about craft beer PACs, maybe she isn’t off the mark.  Enjoy, and congrats Katie.

Politics and Pale Ales: How Grassroots Activism, Lobbying, and Legislation Impacts the Craft Beer Industry.

Introduction

    Visit any one of the many independent breweries in downtown Sacramento, and you’ll likely find lobbyists, Capitol staffers, and even a politician or two, talking shop over their favorite locally crafted beer. This subset of patrons, many of whom may have been unaware of Craft Beer much before five years ago, also have a hand in the success and expansion of the industry. Craft Beer, both in California and in the nation as a whole, has exploded over the last decade. The Golden State is home to more breweries than any other state in the country, and the state’s market of craft breweries continues to grow at an astonishing rate. Most Californians live less than ten miles from one of the nine hundred independent breweries.[1] These local breweries employ more than fifty-five thousand full-time employees and produce over seven billion (yes, with a ‘B’) dollars in revenue every year.[2] In 2016 alone, California’s independent craft breweries contributed almost one and a half billion dollars in tax revenue.[3]

The vast expansion of Craft Beer is almost unbelievable at a time where monopolies dominate many economically viable industries.[4] Indeed, just six years ago, ninety percent of the beer industry was controlled by a rather infamous duopoly – Anheuser-Busch InBev and Miller Coors.[5] Interestingly, at the same time that shipments from five of the biggest brewers in the country have dwindled, beer has also become America’s most popular alcoholic beverage.[6] Some have reasoned that Americans are simply drawn to better-tasting beer. Other perhaps more romantically inclined theorists have likened the shift to a heightened awareness of cultural and social differences between Craft Beer communities and Big Beer companies. “Craft breweries are the living room, the town hall and the gathering place” for communities across California, says Tom McCormick, the executive director for the California Craft Brewers Association (CCBA).[7]

As the Craft Beer community continues to grow at such staggering rates, the need for a united front when it comes to lobbying for and against legislation has become a must. The industry, which prides itself on its grassroots culture, is hesitant to formally induce California brewers into joining together as part of a Political Action Committee (PAC), as Big Beer brands have done for years.[8] Whether this reluctance is sustainable for the long term is doubtful at best. Even some of the most philosophically committed Craft Beer loyalists admit that where legislation is concerned, big (beer) money talks, and walks, and creates bills that hurt smaller breweries. Leaders in the community seem hesitantly resigned to the idea that at some point in the not-so-distant future, Craft Beer will need to play in the same league as that of Big Beer. The endgame is almost certain, especially in big markets such as California – the Craft Beer community must join together, not only as one political voice but as one politically driven financial contributor.[9] The fear that Craft Beer will lose its soul if politics is involved is perhaps misguided; a PAC is merely a stone that David can use to defeat Goliath. Craft Beer doesn’t have to join Big Beer to beat it, but it does have to be willing to play the same game.

Democracy is the Ethos of Craft Beer.

   In 1978 President Jimmy Carter deregulated home brewing, which had been banned since Prohibition in the 1920s.[10] President Carter is often credited with saving the Craft Beer industry, but he isn’t the only modern president to appreciate homebrew.[11] During his presidency, Barack Obama became the first Commander in Chief to brew beer at the White House.[12] President Obama and his staff, none of whom had any experience with brewing before creating the now famous honey ale, are said to have been inspired by craft brewers across the nation.[13] Indeed, independent brewers inspired the country’s leader to try his hand at their craft.

Craft brewers are entrepreneurs first, but they have also become community organizers. Of course, as small business owners, brewers must be active in providing for their employees and patrons, but their activism often goes much further. Breweries have hosted meetings promoting Planned Parenthood, HIV testing, and climate change awareness.[14] Hundreds of brewers from California participate in an annual “Hill Climb” at the U.S. Capitol in Washington D.C. to educate legislative staff on issues affecting the industry.[15] During the 2016 election, over four thousand breweries sold beers that were branded in reaction to Donald Trump’s candidacy – “Dumb Donald.”[16] Meanwhile, Pete Coors hosted a Trump fundraiser.[17]

Despite Coors’ high profile, high price, fundraiser, the 2016 election solidified craft breweries as a must have community in any politician’s campaign stop repertoire. The candidates, most likely in an attempt to be elected the person that voters would most like to have a beer with, made brewery visits the new “political troupe,” in a “proverbial toast to the economy and to local businesses.”[18] Craft breweries and their employees became a voice for America during the last election, and they have continued to be pervasively socially conscious in the wake of the country’s political unrest.

Just one example of Craft Beer’s commitment to more than their product is the People Power Beer initiative. More than fifty breweries across the U.S., including five in California, have pledged to take part in the social initiative that promises to donate a portion of its proceeds to ACLU.[19] The pledge states that the initiative supports championing equal voting rights, and is concerned with “civil rights threats in our culture.”[20] Notably, the bottom of the People Power Beer website states, “This site was created by a federation of brewers who care about our country.”[21]

Democracy is part of the genetic makeup of Craft Beer. The “keep your politics out of my beer” folks are a minority that is losing ground and that, quite frankly, seem to fit more appropriately in the Big Beer crowd (even if Big Beer is quietly shelling out millions to politicians).[22] While leadership at CCBA and the Brewers Association may be concerned that politically driven breweries may alienate patrons, leadership in the community must also recognize that Craft Beer has never been more popular and that a significant portion of the industry’s patronage may be in favor of Craft Beer’s community-oriented values and love for diverse groups of people.

The First Amendment, The Supreme Court, and Dark Sudsy Money.

            Over one hundred years ago, Congress passed the first-ever legislation intended to prohibit corporations from influencing election campaigns through financial contributions.[23] Wealthy alcohol manufacturers, who were fearful of Prohibition, were some of the first to challenge the new law by arguing that their cash contributions to local and federal political candidates were a protected right under the First Amendment’s free speech protection.[24] Courts and legislatures of the time saw these contributions very differently, which led the Brewers Association to bring a suit in federal court.[25] The Association was rebuked by the Court which reasoned that corporations were in fact not “citizens of the United States.”[26]

Almost a century later, the Supreme Court reversed that reasoning and found that corporations were indeed afforded free speech rights, and that campaign finance laws placed undue restrictions on corporations’ abilities to exercise them.[27] Citizens United gave industries, including Big Beer, the ability to spend millions of dollars in “dark money” donations to political groups that finance candidates, only then to withhold the details of their spending.[28] Unsurprisingly, laws in California and across the country have and continue to favor Big Beer, and have often directly attacked small, independent breweries.[29]

  1. Big Beer Financial Contributions and Subsequent Legislation.

The philosophical divergence between Craft Beer and its bigger and less community-oriented competitors is striking. There is a certain amount of nobility that comes with Craft Beer leadership’s reluctance to conduct pay-for-play type lobbying in favor of more grassroots, boots-on-the-ground political advocacy. However, Craft Beer must come to terms with the current rules of the political game. When it comes to favorable legislation, campaign finance can sway even the most well-intentioned of politicians.[30]

Though it might be naïve to hold on so tightly to its grassroots beginnings, California’s Craft Beer community refuses to use any of its billions of dollars in annual revenue to combat the reasonably apparent kickbacks that Big Beer receives from contributing to both state and national political campaigns.[31] According to Bob Pease, the chief operating officer for the Brewer’s Association, Craft Beer is still “adjusting to the political scene.”[32] Further, Pease notes that because they don’t feel particularly challenged by significant producers, craft breweries aren’t in any major rush to create a PAC.[33] Tom McCormick has offered similar sentiments about creating a PAC for the CCBA.[34] Both nationally and in California, Craft Beer leadership isn’t saying that the community won’t eventually need a Political Action Committee, but merely that they aren’t seriously considering making one yet. It begs the question: What exactly is Craft Beer waiting for?

While the industry continues to waver between not having the fiscal resources and not believing that Big Beer threatens independent brewers’ livelihoods, Big Beer is spending big and winning big both federally, and in states such as California.[35] Molson Coors Brewing has given over 1.7 million dollars to federal-level (mostly Republican) candidates and campaigns.[36] Constellation Brands, which owns Corona beer, is also another top alcohol driven political contributor.[37] Employees affiliated with that company joined its PAC and gave almost two-hundred thousand dollars to federal-level candidates (sixty-nine percent Democrats) during the 2010 cycle.[38] AB InBev spread the “love” evenly, giving to both Democrats and Republicans during the past two decades.[39] The Boston Beer Company, maker of Sam Adams, contributed nearly 32,000 dollars to federal-level Democratic candidates (none of Sam Adams’ money went to Republicans).[40] Donations from these beer-filled cash cows pay dividends in favorable legislation.

In 2010, the California Beer and Beverage Distributors (CBBD) donated ten thousand dollars to oppose California’s Proposition 19, which would have legalized marijuana (which was later legalized in California by voter initiative in 2017).[41] Backlash from independent breweries, Sierra Nevada and Stone Brewing, was swift. Both publicly asked to be disassociated with the CBBD and its political decisions.[42] The CCBA was also quick to announce that it had no knowledge of, or involvement in, the decision to contribute to the campaign to defeat Prop. 19.[43] Noticeably, brands such as Heineken and AB InBev, which are also represented by the CBBD, did not comment on the trade association’s apparent opposition to the legalization of marijuana.

One particularly recent example of legislation that was pushed by, and favorable to, Big Beer is California’s Assembly Bill 2573, otherwise known as “California’s Glassware Bill.”[44] The bill will allow a licensed beer manufacturer to give up to five cases of retail advertising glassware to an on-sale retail licensee per year, and will also permit an on-sale retail licensee to accept up to ten cases of retail advertising glassware per location for every calendar year for use at the licensed location from beer manufacturers.[45] The legislation, which has gone through several amendments and just passed the Assembly last month, was authored by Evan Low.[46] Anheuser-Busch happens to be one of Assemblymember Low’s top contributors.[47]

Mobilization of brewers and Craft Beer supporters is no longer enough to successfully combat Big Beer. Craft Beer, over the past decade, has shown that it has staying power. This threatens Big Beer. AB InBev, Coors, and other Big Beer brands are becoming more reliant on the loosened restrictions that Citizens United provided for them.[48] What they lack in taste and moral values, they make up for in monetary hubris and a willingness to pay for political favoritism. Particularly in big markets such as California, lobbying cannot come in a purely grassroots form if craft breweries want to sustain their growing impact.

2.  California Craft Brewers Association’s Route to Favorable Public Policy.

The California Craft Brewers Association is a 501(c)6 non-profit trade association that represents craft brewers across the state.[49] The CCBA monitors legislative activity, primarily at the state Capitol, and responds on behalf of the almost one thousand breweries in California.[50] In addition to supporting brewers in bringing Californian’s quality brews rather than soap water, the CCBA sometimes acts as a watch and attack dog when Big Beer pushes legislation that hurts smaller independent breweries. But with California’s breweries producing billions of dollars every year, in addition to Big Beer’s relentless legislative attack on small brewers, using every tool CCBA can muster is crucial. Pitting Craft Beer’s purely grassroots movement against Big Beer’s cash contributing machine is a little like asking a t-ball player to go up to bat against Madison Bumgarner.

The good news is that trade associations such as the California Craft Brewers Association aren’t prohibited from using Political Action Committees to donate to legislators in order to influence policy.[51] While the Federal Election Campaign Act places strict limits on how not-for-profit organizations may contribute to political campaigns, trade associations may create a PAC in the form of a subsidiary, which then allows the association to solicit contributions to the PAC from its members.[52] Creating such an entity would allow California’s brewers through CCBA’s PAC to donate to political campaigns that are socially responsible and align with the Association’s values. Of course, CCBA could and should still use its talent for grassroots mobilization to influence policy and social awareness, as it always has. A Political Action Committee is merely a tool that shouldn’t replace the soul of Craft Beer. Nevertheless, the time has come for Craft Beer to show Big Beer that It isn’t afraid to play their game when necessary. Craft Beer and the patrons who love and support it deserve leadership that is willing to fight fiercely to protect the community that craft brewers have built.

Conclusion

   Lobbying efforts on the ground can only combat the money given by Big Beer to a certain extent, but it cannot cure the problem. Stalling the inevitable when the Craft Beer industry in California makes billions of dollars annually, doesn’t make much sense anymore. Craft beer doesn’t have to sink to the levels of Big Beer, and it shouldn’t. The industry can keep its morals intact while simultaneously playing the political game that, at least for the half-decade, every major industry has had to play. Yes, Craft Beer is different in that community values are integral to a craft brewery’s success. While modern Craft Beer highly values the First Amendment, it certainly didn’t ask for the Citizens United decision.[53] The reality is that for many craft brewers, their businesses are much more passion projects and labors of love than they are traditional companies. Nevertheless, the political reality is that Craft Beer must use every opportunity to solidify its place in modern history as America’s anti-Big Beer. By using Political Action Committees, Craft Beer trade associations, such as the CCBA, can better protect Craft Beer’s legacy.

[1] “Craft Beer Statistics.” California Craft Beer, 15 Dec. 2017, www.californiacraftbeer.com/ca-craft-beer/craft-beer-statistics/.

[2] AmericanCraftBeer.com. “Record-Breaking Number Of Craft Breweries In California.” American Craft Beer, 13 Dec. 2017, www.americancraftbeer.com/record-breaking-number-craft-breweries-california/.

[3] Id.

[4] Lynn, Barry C. “America’s Monopolies Are Holding Back the Economy.” The Atlantic, Atlantic Media Company, 24 Feb. 2017, www.theatlantic.com/business/archive/2017/02/antimonopoly-big-business/514358/.

[5] Lynn, Barry C. “Big Beer, A Moral Market, and Innovation.” Harvard Business Review, 7 Aug. 2014, hbr.org/2012/12/big-beer-a-moral-market-and-in.

[6] Thompson, Derek. “Craft Beer Is the Strangest, Happiest Economic Story in America.” The Atlantic, Atlantic Media Company, 19 Jan. 2018, www.theatlantic.com/business/archive/2018/01/craft-beer-industry/550850/; Gallup, Inc. “Beer Remains the Preferred Alcoholic Beverage in the U.S.” Gallup.com, 19 July 2017, news.gallup.com/poll/214229/beer-remains-preferred-alcoholic-beverage.aspx.

[7] “Record-Breaking Number Of Craft Breweries In California,” supra note 3.

[8] Cooper, Jonathan. “Like Craft Beer? Big Beer’s Leading Lobbyist Says You’re A Chucklehead.” Medium, Augmenting Humanity, 12 Feb. 2015, https://medium.com/@jemersoncooper/like-craft-beer-big-beers-leading-lobbyist-says-youre-a-chucklehead-6d7842c83386

[9] “Record-Breaking Number Of Craft Breweries In California,” supra note 3.

[10] Murphy, Libby. “The Day Homebrewing Was Legalized.” Craft Beer & Brewing Magazine, 2016, beerandbrewing.com/the-day-homebrewing-was-legalized/.

[11] Id.

[12] Smithsonian.com. “How Barack Obama Became the First President to Brew Beer at the White House.” Smithsonian.com, Smithsonian Institution, 12 July 2017, www.smithsonianmag.com/smithsonian-institution/how-barack-obama-became-first-president-brew-beer-white-house-180964016/.

[13] Id.

[14] Bernot, Kate. “Where Politics Stand in the Taproom in 2017.” DRAFT Magazine, 2 Feb. 2018, draftmag.com/politics-breweries-taprooms/.

[15] Holtog, Laurie. “California Craft Brewers Visit the US State Capitol!” California Craft Beer, 12 June 2018, www.californiacraftbeer.com/california-craft-brewers-visit-the-us-state-capitol/.

[16] Gill, Andrew. “Craft Beer Has Become a Potent Protest Symbol in the Age of Trump.” The Takeout, Thetakeout.com, 20 Jan. 2017, thetakeout.com/craft-beer-has-become-a-potent-protest-symbol-in-the-ag-1798256545.

[17] MCCASKILL, NOLAN D., et al. “Report: Coors, Shanahan to Host Trump Colorado Fundraiser.” POLITICO, 27 June 2016, www.politico.com/story/2016/06/mike-shanahan-peter-coors-trump-fundraiser-224847.

[18] “Is 2016 the Craft Beer Election?” Food & Wine, 9 May 2016, www.foodandwine.com/blogs/2016-craft-beer-election.

[19] “People Power Pledge.” People Power Beer, www.peoplepowerbeer.com/.

[20] Id.

[21] Id.

[22] Murphy, supra note 11.

[23] “Important Dates: Federal Campaign Finance Legislation.” Center for Public Integrity, 19 May 2014, www.publicintegrity.org/2004/03/25/5852/important-dates-federal-campaign-finance-legislation; “Anheuser-Busch: Summary.” OpenSecrets, www.opensecrets.org/orgs/summary.php?id=D000042510.

[24] Id.

[25] Id.

[26] Phillips-Fein, Kim. “Company Men.” The New Republic, 29 Mar. 2018, newrepublic.com/article/147374/company-men-legal-struggle-citizens-united-corporations-rights-people.

[27] Citizens United v. FEC, 558 U.S. 310, 316 (2010).

[28] Id. at 327.

[29] Thompson, supra note 7.

[30] Brusoe, Peter. “That Time George Washington Bought an Election with 160 Gallons of Booze (and Other Presidents’ Day Stories).” Bloomberg Government, 12 Feb. 2016, about.bgov.com/blog/that-time-george-washington-bought-an-election-with-160-gallons-of-booze-and-other-presidents-day-stories/.

[31] Mackinder, Evan. “Politics on Tap: Alcohol Producers Pour Out Campaign Cash for Parties – OpenSecrets Blog.” OpenSecrets, 23 Mar. 2011, www.opensecrets.org/news/2011/03/politics-on-tap/.

[32] Id.

[33] Id.

[34] Swindell, Bill. “California Brewers Assess Political, Business Challenges (w/Video).” Santa Rosa Press Democrat, 15 Nov. 2014, www.pressdemocrat.com/business/3059182-181/california-brewers-assess-political-business.

[35] Phillips-Fein, supra note 26.

[36] Id.

[37] Id.

[38] Id.

[39] Steinberg, Brian. “This Presidential Debate Is Brought to You by Budweiser.” Variety, Variety, 7 Oct. 2016, variety.com/2016/tv/news/presidential-debate-anheuser-busch-budweiser-trump-clinton-1201881568/.

[40] Phillips-Fein, supra note 26.

[41] Grim, Ryan. “This Bud’s Not For You: Beer Industry Battling California Pot Initiative.” The Huffington Post, TheHuffingtonPost.com, 25 May 2011, www.huffingtonpost.com/2010/09/21/this-buds-not-for-you-bee_n_732901.html.

[42] Id.

[43] Coolican, J. Patrick. “Beer Lobby Gives $10,000 To ‘No’ On Proposition 19 Pot Legalization.” L.A. Weekly, 21 Sept. 2010, www.laweekly.com/news/beer-lobby-gives-10-000-to-no-on-proposition-19-pot-legalization-2385120.

[44] Bill Text – AB-2573 Beer: Premiums, Gifts, and Free Goods., 26 May 2018, leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201720180AB2573.

[45] “California Glassware Bill Passes Assembly.” Brewers Association, 11 June 2018, www.brewersassociation.org/current-issues/california-glassware-bill-passes-assembly/.

[46] Supra note 44.

[47] “Evan Low’s Campaign Finances.” Vote Smart, https://votesmart.org/candidate/campaign-finance/70415/evan-low#.WzcCEMaZPzV

[48] Notte, Jason. “Partisan Politics Is Even Infecting the Craft Beer Industry.” MarketWatch, MarketWatch, 30 Mar. 2017, www.marketwatch.com/story/partisan-politics-is-even-infecting-the-craft-beer-industry-2017-03-30.

[49] “BreweryDB.com Guild: California Craft Brewers Association.” Base Camp Brewing Company : Beers : BreweryDB.com, www.brewerydb.com/guild/huKquc.

[50] “CCBA in Your Neighborhood.” California Craft Beer, 10 June 2016, www.californiacraftbeer.com/ccba-in-your-neighborhood/.

[51] Miller, Barbara. “Trade Associations and Political Activities – Is a PAC Right for You?” ORBA, 15 May 2015, www.orba.com/trade-associations-and-political-activities-is-a-pac-right-for-you/.

[52] Id.

[53] Croxall, Daniel. “More Tied-House Laws (Probably) Bite the First Amendment Dust: Independent Brewers Should Pay Attention.” Craft Beer Law Prof, 3 Feb. 2017, www.craftbeerprofessor.com/2017/02/tied-house-laws-probably-bite-first-amendment-dust-independent-brewers-pay-attention/; “Flying Dog Brewery Establishes Non-Profit To Advocate For First Amendment Rights.” Brew Studs, 11 May 2016, wearebrewstuds.com/stories/news/craft-beer-flying-dog-brewery-establishes-non-profit-advocate-first-amendment-rights/.

 

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