Written by Charlie Papizian
Americaâ€™s small brewers need beer distributors to get their beer to beer drinkers. But getting beer to beer drinkers is often threatened with thumb-squashed state based beer distribution laws.
In the beer business they call these laws â€œfranchise laws.â€ Some who feel anger refer to these laws as â€œmonopoly laws.â€
Issues arise when distributors holding contractual rights to distribute their beers coupled with perceived onerous state â€œfranchiseâ€ laws cannot leave to go from one distributor to another at any reasonable price.
Beer brands locked in for life
In some states, extreme laws have been passed that set â€œfranchiseâ€ rights in a manner that effectively make it impossible to move a brand from one business to another â€“ forever. Thatâ€™s a long time and that is still the trend in new legislation. There is no reasonable recourse even if the distributor doesnâ€™t live up to their end of the bargain. Of course there are always two sides of every conflict. Itâ€™s important to take the situation into perspective. For the most part, small brewers and beer distributors get along and enjoy the benefits of their relationship.
Why are there â€œfranchiseâ€ laws?
Many decades ago most distributors were small, family run businesses. Brewing was dominated by many very large and powerful brewing companies. Distributors organized and helped legislate protective franchise laws preventing large brewing companyâ€™s from unreasonably pulling out of a distributorship and quickly collapse a family-run business.
Itâ€™s 2010. Distributorships are consolidating and may still be family run businesses, but some are billion dollar companies many others are hundreds of million dollar businesses. They continue to grow and effectively exert influence on both federal and state legislation. Meanwhile there are 1,500 small American breweries that are state regulated by franchise laws enacted in a bygone era.
Asking for a break
Small brewers strongly believe that they should get a break. Their state by state fights to get small brewerâ€™s â€œexemptionâ€ from franchise laws have met with mixed support, long on political baggage. While many forward thinking distributors understand that the threat of a small brewer pulling out of a distribution agreement and paying the distributor for moving out is not at all a threat to their livelihood or the health of their business. There are others who simply want to maintain the status quo. Itâ€™s a value cost to small brewers and threatens to diminish choice for beer drinkers.
In Massachusetts small brewers are proposing exemptions to new and more onerous franchise legislation. But according to a report in the Patriot Star Ledger,Â the Beer Distributors of Massachusetts essentially say, donâ€™t worry, letâ€™s get this passed and weâ€™ll fix it later. Small brewers are saying â€œno,â€ having heard that before.
Itâ€™s essentially a â€œkiller of a dealâ€ for both small brewers and distributors. Unfortunately itâ€™s sweet for distributors and very sour for small brewers. Patriot Star Ledger story, Small brewers seek exemption in beer wholesalers’ rights bill quotes Rob Martin, owner of Mercury Brewing Co. in Ipswich, saying getting out of a bad distribution contract isnâ€™t easy for a small brewer. â€œIf you find that the wholesaler isnâ€™t in fact doing a good job, in order to get out of it, typically it goes to litigation that we canâ€™t afford.â€
In an Op-Ed piece in the Worcester Telegram, Crafting fairer rules about beer Dan Kenary president and co-founder of Harpoon Brewery and Martin Roper, president of The Boston Beer Company express their views.
Here are a few excerpts:
“A little-noticed piece of legislation currently on Beacon Hill would weaken craft brewersâ€™ ability to achieve fair distribution. It threatens the 30-plus Massachusetts-based small brewers, as well as small brewers from around the country
Massachusetts wholesalers have legitimate concerns about recent consolidations among the global brewers…
Their reaction has been to seek additional legislation, in the form of House Bill 4743. The bill would further tighten already restrictive franchise laws, making it even more difficult and expensive for any brewer â€” large or small â€” to change wholesalers, even if the wholesaler fails to perform and is not living up to contractual obligations. This bill could help wholesalers from being unfairly pushed around by the mega-brewers, but it is damaging to small brewers, from whom such protection is not needed…
If H.4743 is passed without the amendment proposed by the Brewers Guild, it will almost certainly decrease the variety of craft beers on store shelves that beer drinkers desire.”
For the full commentary go to Crafting fairer rules about beer
In short Americaâ€™s small brewers are asking for a legitimate break. Small brewers are not threatening beer distributors with failure. The tables seem to be turned as distributors in their unending effort to tighten state â€œfranchseâ€ laws want to control the growth and destiny of Americaâ€™s small brewers.
Itâ€™s time to reconsider the tide and beer drinkers future access to beer from Americaâ€™s small brewers â€“ Re-orient small brewers fair and effective partnerships with beer distributors.
The clock is ticking in Massachusetts and small brewers are on the short end. Ultimately itâ€™s the beer drinker who getâ€™s ticked.
Chasing the golden goose for the golden egg only to end up with a dead duck.Â Photo from motif at The George, London pub. photo by Charlie Papazian