By Dustin Waters

Many South Carolina breweries are seeing revenue streams run dry under the global health crisis as statewide restrictions limit their ability to connect with customers. 

Under South Carolina’s three-tier system, brewers sell to wholesalers who sell to retailers, such as bars and restaurants, who then distribute the product to customers. Unlike wine, beer cannot be shipped directly to customers in South Carolina. While this process allows for plenty of oversight and ensures that the S.C. Department of Revenue collects its share of taxes, these restrictions are hobbling the state’s craft brewing industry during the COVID-19 pandemic. 

“In South Carolina specifically, our mandatory three-tier system and the administrative rules put in place and enforced by the Department of Revenue certainly limit our ability to be nimble and to do what we can to provide new or self-sufficient revenue streams to keep us going,” says Pearce Fleming, proprietor of Commonhouse Aleworks in North Charleston. “Home delivery is a consideration I would very much appreciate legislators pushing the Department of Revenue to allow right now. That allows for us to do two things: it allows for us to keep people employed because we can pay them to deliver, while also allowing us to earn revenue.”

Fleming has experienced a 92 percent drop in revenue on the heels of the coronavirus pandemic. This massive decline is due to Commonhouse Aleworks’ taphouse being closed to all but pick-up orders and a decrease in draft orders from wholesalers, as restaurants and bars cease draft sales. While orders for canned beer continue, the profit margins on these packaged products is much smaller than keg sales. 

“The wholesalers we work with are incredibly valuable business partners to us from a distribution and logistics perspective when we are moving our product at regular times to a large number of retailers. I don’t want to be a logistics or trucking company,” says Fleming. “But as a small-business person who especially now is struggling, anything I can do for myself, I’d like to be allowed to do. Being able to deliver to people’s homes or to self-distribute to stores would be tremendously helpful to us right now in terms of protecting revenue streams, staying in business, and keeping people employed.”

And Commonhouse isn’t alone. Speaking on behalf of South Carolina’s 92 breweries, which employ around 5,000 workers, the South Carolina Brewers Guild has called on the state Department of Revenue to follow in the footsteps of 25 other states and the District of Columbia and ease restrictions on breweries during the current crisis. Guild Executive Director Brook Bristow has even gone as far as drafting a proposal for delivery guidelines to address concerns over potential underage sales and the collection of retail and excise taxes. 

“I don’t think we’ll get direct shipments. Delivery is more of something we can talk about at least because in the last year or so it has been raised in the legislature. It’s something DOR is looking into,” says Bristow, who cites that South Carolina has no direct laws banning the home delivery or direct shipment of beer. “Typically how DOR works when we do laws and regulations and that type of thing, they want to see something specific that says that you can do something versus the hospitality industry where we tend to think, ‘Well, the law doesn’t say I can’t do it.’”

But while brewers across South Carolina appeal to state regulators for relief, these small-business owners are finding themselves burdened by restrictions and unable to quickly pivot their business models like those in other industries. Although officials in South Carolina often tout the state’s hospitality toward small businesses, these entrepreneurs see no opportunity to adapt. 

“South Carolina has not been able to find a balance where distributors and brewers can work together. Our three-tier system heavily favors the distributors. That’s not anybody’s fault. The industry is still new here. We’re still growing,” says Terry Horner of Liability Brewing Co. in downtown Greenville. “This is a capital-intensive business, even more so than restaurants. The industry is so new in South Carolina. All these breweries, including mine, are two to three years old, and we have half a million to $2 million put into our facilities. Then this crisis happens and we’re not able to be innovative. We’re not able to be scrappy and respond on the fly. Our hands are tied, and it makes it difficult to see the other side of this.”