One Beer Article You Need To Read And Why, 11/30/16

I love it when the article I want to write about is sitting in my inbox right at the top.  No wading through different Google Alerts or sifting through Twitter to find an article to highlight.  I open the Google Alert email and there it is.

One of the first articles in my Google Alert this morning is this one from the Boston Globe.  Shelton Brothers, beer and wine importer, is suing Craft Brewers Guild, major craft beer distributor, for what Shelton claims are unfair practices.  Primarily, overpricing their beer and intentionally not selling it to bars and retailers in favor of products from other suppliers through highly aggressive tactics including “pay for play.”

Now, Craft Brewers Guild was found guilty of pay for play last year by the state of Massachusetts.  In fact, Craft Brewers Guild isn’t contesting the findings of the state regulators they are contesting the fine. They just don’t want to pay the $2.2 million to the state.  Yet, those same regulators must now decide if Craft Brewers Guild is violating their contract with Shelton Brothers by failing to “exercise best efforts in promoting its brands.”

All this highlights the hoops importers and brewers must go through to get out of distribution contracts under franchise laws across the country.  A simple solution for a case like this would be to add an amendment to the franchise law that states if a distributor is found to have used illegal practices by state regulators, such as pay for play, all their distribution contracts can be terminated by the other parties.  So, in this case not only would Craft Brewers Guild have to pay a fine, but more importantly they would be faced with the loss of its whole portfolio.

I know it has seemed over the last few weeks, I don’ like distributors.  Is not that.  Trust me.  Over the last few days, I can tell you distributors and breweries that self-distribute both have advantages and disadvantages for a retailer.

I’ve seen self-distribution that works great and I’ve seen brewer/distributor relationships that are like hand in glove.  I’ve also seen self-distribution be a pain in the ass and distributors who have reps that don’t know their craft portfolio and simply act as order takers.  Selling craft beer requires a little more of a proactive approach then selling Bud/Miller/Coors to a grocery store does.

The deeper in this I go, the less clear it is what the Brewers Association and the state guilds should concentrate on legislatively.  I guess excise tax reform is the first thing.  That effects all brewers and distributors regardless of size.  A close second should be franchise and distribution law reform.  Bottom line:  Cut taxes and allow brewers the freedom to decide if they want to use a distributor and make it easier for them to escape a bad distributor fit.

An issue I see arising is a growing difference between larger more regional breweries (15000 bbls/year and up) and smaller breweries.  In North Carolina, the needs and wants of the larger breweries are slowing shifting away from the needs and the wants of the majority of the breweries who fall in that smaller brewery category.  I believe that will be a bigger issue going forward in the state and nationally.