Got Whiskey? Evaluating the Effects of Alcoholic Beverage Control Systems on Domestic Liquor Producers

Abstract

In this thesis, the author explores the effect of different alcoholic beverage control systems on domestic liquor producers. The hypothesis being tested is that control systems- where the government operates a monopoly over the retail and distribution of liquor- have a negative effect on manufacturers, and therefore those states have experienced less growth in the number of their distilleries over time. The author initially details the history of alcohol regulation in the United States from colonial times until the end of the prohibition era and explains how our modern regulatory structure evolved out of that period. Next, the report examines the criteria used in each system to stock products, utilizing interviews conducted with various ABC boards, and hypothesizes about what those criteria mean for suppliers. The thesis examines existing scholarly research on alcoholic beverage control systems and applies it to a discussion about distilleries. Regressions were conducted to determine whether there was a relationship between the existence of license systems and growth in the number of distilleries. When there was no significant relationship, states with franchise laws were removed from the dataset, yielding a significant result with a positive coefficient. Through comparing these quantitative results and the testimony of various distilleries, the report concludes that license systems without franchise laws are the most optimal system for liquor producers.