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US. Small brewers back bill to change state distribution rules

Massachusetts brewers are pushing for a new law they say will level the playing field and allow them to move between distribution companies with fewer restrictions.

Brewers say the current law is archaic and is disadvantageous to small brewers who run the risk of signing on with a distribution company that may not operate with the brewers’ best interests in mind.

Since the repeal of Prohibition, alcohol has been distributed in the U.S. through a three-tier system: Brewers sell their product to distribution companies, who in turn market the product to retailers.

The system includes protections to keep large brewers from arbitrarily breaking contracts with mom-and-pop distributors.

In the last few decades, however, the proliferation of small breweries in Massachusetts and across the country has turned the tables, brewers say. Now, breweries say they have no real options to change wholesalers, although wholesalers argue that brewers’ complaints are overblown.

Rob Martin, president of the Massachusetts Brewers Guild and Ipswich Ale, said in a meeting with Daily News editors and reporters this week that brewers roll the dice when they enter an agreement with a distributor.

He said once a brewer makes an agreement with a distribution company, the wholesaler essentially owns the brand in its designated territory and it is extremely difficult to break that bond, even if a distributor is doing nothing to market the brand.

“There is some very, very limited recourse and that is not enough,” Martin said. “This is really a marriage.”

Unless a distributor is defaming a product, he said, it can be nearly impossible to break off the relationship.

Martin said a side project of his was derailed by a distributor in Massachusetts.

Martin said he had started brewing Stone Cat Ale and released it to one of the same distributors he uses for Ipswich Ale. The distributor didn’t do much with the product but refused to release it back to him, forcing him to discontinue that brew, resulting in people losing their jobs.

Meanwhile, he said, distributors can trade brands with little input from brewers.

The legislation, now in the House, aims to give brewers an out when they feel a distributor is not holding up its end of the bargain.

A bill now in the Committee on Consumer Affairs, would allow brewers to buy out their brands from a distributor — based on an agreed-upon fair market value — and take their business elsewhere.

If the two sides could not reach an agreement within 90 days, an outside arbitrator would be brought in.

The measure would only be available for brewers that produce fewer than six million barrels of beer a year or represent less than 20 percent of a distributor’s total business.

There are no brewers in Massachusetts that exceed the six-million barrel limit, said Martin. The only brewers that do are large companies including Anheuser-Busch and MillerCoors, he said.

The chief sponsor of the bill is Rep. Alice Peisch, D-Wellesley.

“I think it’s a question of fairness and allowing the small brewers to have a level playing field,” she said yesterday. “The mechanism for changing distributors is overburdensome, expensive and difficult.”

On the other side of the coin, distributors say the complaints from brewers are invalid.

“We think (the legislation) is a solution chasing a problem,” said John Stasiowski, president of the Beer Distributors of Massachusetts.

Stasiowski said there are remedies in place for brewers unhappy with their distributors and he believes the bill is discriminatory toward large brewers.

Stasiowski also pointed to the success of up-and-coming breweries across the state, seemingly represented by devoted distributors.

“There isn’t a problem there, at least in Massachusetts,” he said.

Jack Hendler, who founded Jack’s Abby Brewing in Framingham, said that in the world of small craft brewing, choosing a bad distributor can be the kiss of death.

“You’re married to this without the potential for divorce,” he said.

Jack’s Abbey, which is going to be doing its first bottling run shortly, just contracted with a small, new distributing outfit that Hendler is confident will do all it can to sell the brand.

23 Feb. 2012

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