Changing Laws that Affect Brewers

Changing Brewery LawsThere’s a push to place control of liquor licenses at the local rather than the state level, and craft brewers are speaking up to change the laws that affect them.

In addition to switching liquor license control from the state to local jurisdictions in Massachusetts, there was also a push to change laws regarding the relationship of brewers to wholesales and to lift a ban on direct wine sale shipments to consumers, according to EagleTribune.com’s “Lawmakers eye ‘outdated’ brewing, license laws.”

Craft Brewers and Wholesalers

A law passed in 1971 was designed to protect local distributors from the national brewers. However, over four decades have passed, and the dynamics have changed. That same law is now having an adverse effect on craft brewers. According to Rob Martin, founder of Ipswich Ale Brewing and president of the Massachusetts Brewers Guild, small brewers have to fight to get the attention of wholesalers to get shelf and tap placement.

Brewers want a bill that allows them easier opt outs of contracts with wholesalers, claiming the current law handcuffs them to wholesalers and limits their ability to compete in the marketplace. Opa Opa Brewing Co. brew master, Dennis Bates, claimed his business was growing steadily, so they invested in a larger facility and expanded staff. A few years after signing with a distributor, growth stopped. Bates said the distributor told them their beer represented one percent of the distributor’s business, and he felt that’s how much sales attention Opa Opa Brewing received as a result.

On the other hand, Bill Kelly, president of the Beer Distributors of Massachusetts, explained that under current law, brewers can choose a distributor and work with them for six months before they have a responsibility to that distributor. He claims distributors also need protection because of their own investments in marketing and sales for beers along with financial investments including warehouses and delivery.

And to flip the coin once again, Jim Koch, Sam Adams Brewing Co. founder (whose company now claims one percent of the total beer market in the U.S.), said, “When I started brewing Sam Adams, I realized something very surprising here in Massachusetts – once I sold my beer to a distributor they held the rights to my beer forever. Not my lifetime, or my children’s lifetime, my grandchildren’s lifetime — forever.”

Beer Woes in Indiana

Complaints about antiquated laws regarding beer sales aren’t limited to Massachusetts. Last month, cold beer went on trial in Indiana. Convenience and grocery stores wanted the right to sell cold beer, which has been restricted to package stores and to the breweries themselves. Reiser Legal’s The Brewery Law Blog notes (in Cold Beer Sales Disputes Goes to Trial in Indiana Federal Court) that Indiana Petroleum Marketers and Convenience Store Association filed a federal lawsuit claiming Indiana’s laws were unconstitutional.

Executive director of that organization, Scot Imus, is quoted in The Purdue Exponent’s City: Convenience stores contest law that prohibits sale of cold beer” saying,  “Regardless of how the preliminary injunction will turn out, the court case will then continue on. We feel pretty good about the two days in the hearing. We presented a strong case; we laid out the reasons why we think the law is irrational and unconstitutional, and (we’re) optimistic that the judge will rule in our favor.”

On the other hand, Reiser Legal anticipates that the court will probably uphold the Indiana law because “The convenience stores essentially have the difficult task of persuading the court that the cold beer laws are wholly unrelated in any rational way to a legitimate state interest. The trouble is, the law seems to meet this low threshold, at least from a federal perspective. Limiting access to alcohol by structuring the alcohol market, and even completely prohibiting in-state sales of alcohol, are all within a state’s core concerns and protections under the 21st Amendment. Even absent the additional insulation the 21st Amendment gives states, it’s hard to say that eliminating sales of readily drinkable beer at gas stations—sold directly to drivers—is not rationally related to the state’s legitimate interest in keeping intoxicated drivers off the roads.”