Beer distributors call draft bill a compromise
Companies that haul suds to bars and package stores said they have found some middle-ground on a long simmering disagreement about how the business should be regulated, but a spokesman for Bay State breweries claims the legislation contains a "poison pill."
Relationships between breweries and their distributors are partnerships where the distributor takes on the responsibility of marketing the beer, as well as selling it to restaurants and retailers, William Kelley Jr., president of the Beer Distributors of Massachusetts, told the News Service. He said distributors buy the product from the brewery and then must wait much longer to receive proceeds from retailers.
Massachusetts law dating back decades prohibits brewers from backing out of longstanding relationships with distributors except for specified reasons, such as the distributor disparaging the products, giving preference to a competitor, failing to promote the product, engaging in improper trade practices, or violating the agreement with the brewer.
As the craft brewing industry has grown, breweries have turned to the Legislature seeking more freedom to walk away from their distributors.
This session, Kelley and his members are rallying behind a bill (H 2823) filed by Rep. John Mahoney, who had a firsthand look at the industry as the former owner of Mahoney's Pub in his home city of Worcester.
"It's still there and they kept the name," said Mahoney, who said that at the pub he dealt with a "mix" of distributors and brewers who handled sales of their products themselves.
Under Mahoney's bill, brewers could pull out of deals with distribution companies as long as the brewery is owner-operated, managed by the owner and produces less than 930,000 gallons of beer annually.
"Everybody has a manager," said Dan Cence, a spokesman for the Massachusetts Brewers Guild. He said, "This is a poison pill bill."
Cence said the guild wants the bill to give more flexibility to all Massachusetts brewers, and said they are "willing to work with our counterparts, the distributors."
Distributors note that breweries can already contract with an additional distributor or sell and deliver the products on their own. The Beer Distributors of Massachusetts claim Mahoney's bill would give new options to 97 percent of all breweries in the nation, but Cence said "90 percent of the beer produced in Massachusetts would not be covered under their bill."
Cence said popular local brands Sam Adams, Harpoon, Berkshire Brewing Company, Ipswich Ale, Jack's Abby, and Wachusett Brewing would all still need to be locked into deals with distributors under the legislation.
The breweries support legislation (H 183) filed by Wellesley Rep. Alice Peisch that would allow brewers to back out of a distribution agreement as long as the brewer's products account for no more than 20 percent of the distributor's sales in the prior year.
Peisch said that under her bill, breweries pulling out of an agreement would need to follow a specified process and compensate distributors for all of their prior work to promote the product. Mahoney's bill also requires breweries to reimburse the distributor for inventory, sales and marketing materials, and the value of the business being taken away.
While Peisch is not convinced that Mahoney's bill is the right approach, she said the fact that the distributors have gotten behind a legislative solution makes her "cautiously optimistic" that a resolution will be reached this session.
"I don't want to suggest that mine is the only way to deal with this issue," Peisch told the News Service. Peisch, who has filed legislation to address brewers' complaints in prior sessions, said, "I'm not wed to the specifics of the bill as filed."
Both bills have been referred to the Committee on Consumer Protection and Professional Licensure, which has not yet scheduled a hearing on them.
Rep. John Scibak, who co-chaired that committee in the 2013-2014 session, said had hoped the issue would be resolved years ago.
"It doesn't seem to be a problem in other states," said Scibak, who is one of more than 70 co-sponsors of Mahoney's bill and one of more than 60 co-sponsors on Peisch's bill.
On Thursday, an Alcohol Task Force assembled by Treasurer Deborah Goldberg will hold the first of six public hearings, in Waltham. The task force was put together to conduct a comprehensive review of the state's alcohol laws.
Kelley, who was formerly general counsel for the Alcoholic Beverages Control Commission, said that distributors play a much larger role in a brewery's business than bringing the product from one place to another.
"All the signage that you see in a package store is probably generated in-house by a beer distributor in consultation with the brewery to promote and market the brand," Kelley said. He said there are over 130 companies licensed to distribute beer in Massachusetts.
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