Matthew Mitchell and Christopher Koopman write,
Startups in the craft brewing industry face formidable barriers to entry in the form of federal, state, and local regulations. These barriers limit competition and innovation, reducing consumer welfare.
If this is correct, then it should open up opportunities for regulatory arbitrage. An existing craft brewery that has licenses and regulatory know-how could market the products of start-up breweries.
You’d lose the hipster cache. I started thinking about other businesses for comparison. Are there toilet paper startups that get marketed by big companies? It seems like they grab the equity and then you are just an expensive sticker on the big company’s product.
This idea of regulatory arbitrage is the key behind Marc Anderseen’s view of 50 “Silicon Valleys” driven by various locale’s various penchant for funding risk taking not through tax credits or top down visions, but by regulatory risk taking. I think the portfolio of “local regulatory risks” that could be assembled at the national level could provide the best, and largely untappd, risk-return available.
This happens quite a bit in NZ, where the laws around home-production and small scale sale of alcohol are far more sane than they are here. Economist Eric Crampton has covered this quite a bit, like this one for example: http://offsettingbehaviour.blogspot.com/2014/01/thick-markets-gunnamatta-edition.html
Stone Brewery does. It lets craft brewers use its vast facilities and, naturally, distributes the product through its own distribution arm. That pretty much covers all the intersections with regulation.
You don’t lose the hipster appeal, or at least we haven’t in NZ. Lots of contract brewers don’t bother buying plant and instead rent space in others’ facilities. Epic started out that way. Yeastie Boys still brew that way, in symbiosis with Invercargill Breweries. They do it here not because of regulatory compliance issues but just to avoid the fixed cost of stainless kit. It works out well for everybody: a brewer can invest in slightly larger kit than they otherwise would, leaving room to grow, while renting out the excess in the short term; startups get access to better plant without long term commitment. And, the brewers all then start playing off each other – great agglomeration effects.
Note too the rise of incubator kitchens in New York…