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Despite obstacles, craft beer industry growing

Beer legislation supporters are cautiously optimistic

Can you name a new manufacturing sector in Mississippi that had an economic impact of more than $9 million last year and is expected to increase 139 percent in the next five years?

The answer is the fledgling craft beer industry, which is growing in spite of a late start and legal hurdles that some think are holding brewers back.

Small craft breweries have operated on the West Coast for decades, and markets on the East Coast are expanding aggressively. Mississippi got into the game just a dozen years, putting it behind the national curve.

“The craft beer industry nationally has been growing by double digits for a considerable period of time,” said Matthew McLaughlin, an attorney at Baker Donelson in Jackson who represents five of the state’s breweries and breweries in planning as well as breweries and alcohol manufacturers in other states. “The mega beer producers of the more traditional products like Bud, Coors and Miller still have the vast majority of the market share but their growth is stagnate to negative.”

McLaughlin’s first client was Lazy Magnolia Brewing Co., which owners Mark and Leslie Henderson opened in 2003 in Kiln. It was the first brewery in the state to open since Prohibition. Now, there are six production breweries in Mississippi, one brewpub and two brewing companies that contract brew. More are in the planning stages and some are under construction.

McLaughlin said the growing popularity of craft beer products reflects a shift in how consumers shop. “We are purchasing more local goods and services and unique products,” he said. “People are enchanted in the story behind the brand. It’s not a story you get with big beer like Anheuser-Busch.”

But the state’s breweries have a long way to go. Mississippians consumed 2.3 million barrels of beer in 2013 but less than 1 percent was made in the state, according to the Mississippi Brewers Guild, the brewing industry trade group.

Backers say that Mississippi’s craft beer industry continues to be stymied by state laws that are outdated and restrictive.

McLaughlin has written that in 2012, when the Legislature increased the alcohol by volume for beer in the state, there was a 1 percent drop in beer sales but sales tax increased by 17 percent, showing that drinkers were buying the more expensive craft beers.

Current restrictions on onsite sales at the breweries are costly to owners, McLaughlin said. The rules prevent breweries from selling beer to visitors either to drink in onsite tap rooms or take with them.

“Some states are carving out exceptions to provide limited opportunities to sell their products onsite in a tap room where you can buy a pint or two and then buy a six-pack after a brewery tour. That’s not allowed in Mississippi right now.”

There have been a couple of recent wins for brewers. The Legislature raised the alcohol by volume of beer sold in Mississippi and also allowed breweries to offer six six-ounce tastings as part of their public tours.

Brewers say the current sales restrictions are costly and put them at a competitive disadvantage.

McLaughlin found that the average U.S. craft breweries make $350 to $600 a barrel. Mississippi breweries’ average revenue is around $250 a barrel. In the case of Lazy Magnolia, which sold around 20,000 barrels in last year, the state did not get an estimated $2 million in taxes.

Legislators aren’t expected to take up any brewery-related business during the current election-year session, McLaughlin said. Instead of lobbying in Jackson, the Mississippi Brewers Guild and its members will spend 2015 considering various policy initiatives and trying to educate residents on industry operations and the hurdles it faces.

“It’s a good, compelling story and not everyone who may enjoy these products knows how it gets to the bar or grocery store,” he said. “It’s about job creation and adding dollars to the local tax base. It needs to be an economic development and tourism issue in Mississippi.”

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