Beer wars in Massachusetts

Not sure if I get the point here. Which ABInbev distributors in MA carry "craft" brands that would be affected by this? Or is this really a fight against current distributors that carry "craft" brands that are not ABInbev distributors? The Bud distributor we deal with for our fests in Boston carry the Craft Brewers Alliance brands, Goose Island, etc and I don't see them messing around with those brands for obvious reasons.

 

How does the brewer-wholesaler relationship under Massachusetts law compare to the arrangement in other states? What state would be held up as a model by brewers or wholesalers?

If the Globe is going to be publish op-eds on topics like this, they need to publish a companion story that explains the conflict from a neutral point of view. It's ok to assume that people are up to speed on national politics. It's not ok to assume they're familiar with the intricacies of the state law governing brewer-wholesaler contracts.

 

Sent a tweet to @paul_mcmorrow about the distributors that carry "craft" brands that are not tied to ABInev ... I can only assume most of the distributors in MA are behind not changing the laws and it is not just another ABInev tactic.

 

I would have liked to see a reference to the:
"A bill in the State House would grant small brewers the right to move between wholesalers, after paying a breakup fee."
If there is something I could call my rep or senator on to ask them to "Help Massachusetts Small Businesses compete". I probably would. they love hearing from me about beer and brewing issues...

 

I think what he is saying is a new tactic by AB, even within their own 'house'. Some of the 'info' leaking from ABs annual meetings/new strategies is that within their own house [whether or not actually within the house or sister distributor], craft beer sales folks have been warned against 'stealing' AB taps [which would include CBA beers]. Word is that if caught, you would go down the discipline road...letter to file and eventually something really bad.

So what they are encouraging within their own company is to not let craft sales folks do what they are paid to do. Everyone has seen the push of GI beers into new market...like my state of CT. AB using their muscle to buy or just keep lines in smaller places has always pissed me off. Now they are actually telling their employees that they cannot try and get other beers on...they want 'their' lines. And we all know how they do it...the illegal way...free kegs or whatever program they are running. Obviously it is the less educated/savvy bar owner that falls prey to this but it still sucks for many out there at their local watering hole with a few craft taps.

 

Same issues in NY and other states I assume.

 

AB self distributes in greater Boston. There is a network of AB distributors outside of 128 that carry craft brands such as Magic Hat, Sierra Nevada, Harpoon, etc as well as the Sheehan distributors on the South Shore and North shore that are AB houses but carry many smaller crafts such as Brooklyn, Oskar Blues, Lagunitas, Green Flash, etc. AB's clout could inhibit these distributors from focusing on smaller craft brands.

 

The way the current relationship works is that you basically have to sue the distributor to move your brand which can take years and countless dollars to accomplish all the while the brand languishes and is still controlled by the distributor. I don't think it takes a rocket scientist to figure out who holds all the power in that arrangement.

However, the argument that distributors have been making is that there already is a provision to allow for the brand to be moved so there is no need to change anything... but they are referring to what I wrote above which is completely lopsided in their favor.

The current legislation would allow for the brewer and distributor to go through binding arbitration and within 90 days a fair market value of the brand would be determined which the brewer would then pay to the distributor to "extract" the brand from their portfolio. And there are provisions in it to protect the distributor from the ABInBevs of the world so that they can't destroy the distributors business (I think there is a 25% of business cutoff).

So its really about making the market fair for small brewers to compete. There is no other industry that I can think of where a relationship between the manufacturer and the distributor is absolute and for all intents is an unbreakable marriage. If your distributor is under performing you (as a manufacturer) should have a right to find another one that will perform up to your expectations without having to go to court to accomplish it.

 

Do you have a bill number/title/link so we can see the text? Also, is the new legislation analogous to that of another state? I think the "this is how they do it in [state X] and dogs and cats aren't living together there" argument is often pretty effective.

 

I heard a little inside scoop recently that could apply to this. A person very high up in the local Bud distro got a little tipsy at a get together and began telling some people from Inbev that craft is where the money is. Since, they are now the subjects of code sweeps in all their accounts and they haven't been getting hardly any Bud Platinum, while the other distros in the state have had no inventory problems.

 

I haven't had the time to investigate the franchise laws (that's what they are called) in other states so I can't comment on what other states are doing but I can tell you that that argument holds very little water w/ MA legislatures (painting a broad stroke here)... they tend to think of MA as being unique with their own set of unique circumstances.

What I can tell you is that there is no other industry in this state where a manufacturer is married to their distributor in such a manner as beer (and all alcohol, I assume).

The text of the bill can be found here;
http://www.malegislature.gov/Bills/187/House/H01897

 

Tweets from @paul_mcmorrow

"A-B, MillerCoors and Wine/Spirits Wholesalers also spent heavily lobbying Beacon Hill in 11 None fans of the bill"

"Burke and L Knife are on board of MA Beer Distributors, which spent $130k lobbying in '11. Burke chairs the board"

 

Of course they do. Because why learn from history when you can just repeat it?

Thanks for the link. Looks reasonable to my uneducated eyes, though the arbitration process looks like a royal pain.

 

Just wanted to point out there is another industry that has a similar arrangement - car manufacturers and dealerships. Most state laws are such that it's virtually impossible for a manufacturer to fire their dealership, and for the same reason - the dealership owners are politically connected locally, do lots of fundraising, and get legislators to write laws that are favorable to them. http://www.thetruthaboutcars.com/2009/02/the-truth-about-car-dealer-franchise-laws/

I'm not really sure what the incentive is for legislators to pass this law, except that it'd be better for pretty much everyone except themselves and the incumbent distributors.

 

I was just going to mention the same thing. And lets not forget all the Miller/Coors based distributors all over the state.

Furthermore there is evidence that suggests that ABInbev has a stake in Craft Brewers Guild, probably the largest craft beer distributor in the state when combined with their sister company Seaboard Products.

In fact, of the 19 beer distributors listed in the MA Beverage Journal only 5 do not list any ABInbev or Coors/Miller products, and 2 of those carry only a small selection of beer.

High and Mighty brewery just switched tactics entirely. This could be a model for other local brewers. They somehow altered their contract with their distributor who still has distribution rights, but High and Mighty does 100% of the promotion and order taking which means they get a higher percentage of the sale price AND they don't have to worry about their distributor favoring other brands. All shipping and billing goes through the distributor allowing them to concentrate solely on brewing and promotion.