Beer Buzz: Barriers to Business

Aug 19, 2014

August is Craft Beer Month in Virginia, and this week we’re going to be looking at the commonwealth’s growing industry. 

Nationwide, the number of craft breweries now tops 3,000 - with more opening up every day - and a new Gallup poll analyzing alcohol consumption finds that 11 million more Americans chose beer as their beverage of choice this year than last.

Beer is a booming industry - and Virginia is no exception to the national trend.

There are more than  80 craft breweries in the commonwealth - ranking it 15th in the country…..and last year, some 130,000 barrels of beer were born in the state.  Virginia is considered an up-and-coming beer haven with   local and regional brewers winning national awards for their hopped-up concoctions - pitted against beer from around the world.

But just as every new entrepreneur can get tangled in red tape while establishing a business - opening a small brewery in Virginia is no easy feat.

In fact, George Mason University’s Mercatus Center found it’s a demanding process, involving many steps, according to researcher Matthew Mitchell.  

“You add them all up and it’s a lot of different regulations at the federal, state, and local level. It’s actually 12 different, distinct procedures - which, when you look at international comparisons of what it takes to start a business in other countries, this is comparable to starting a small business in China or Venezuela - two countries that are sort of notorious for having a number of barriers into business.”

Mitchell says these regulations aren’t universally taxing -  the little guys may have to work hard to keep up, as existing large and incumbent firms find it easier to move their products.  

“Because the regulations are burdensome and because compliance costs tend to fall, the larger you are - that is, the bigger your company is - it’s easier to hire compliance officers and it’s easier to deal with these regulations the longer you’ve dealt with them. They tend to be advocates for maintaining these rules on the books.”    

Taking a cue from their brethren in the wine industry, Virginia craft brewers are also known for working together-instead of against-each other, fermenting friendships and raising the profile of the product as a whole.