A fight brewing over beer in Wisconsin pits the growing market of craft brewers against a large, well-known brewer.
A group of craft brewers say a proposal being supported by MillerCoors, the Wisconsin Beer Distributors Association, Tavern League of Wisconsin, the Wisconsin Grocers Association and others would limit smaller brewers’ ability to expand and could limit them from getting beer to consumers in the future.
“This is all about money and restricting competition. This isn’t idle child’s play,” said Jeff Hamilton, president of the Wisconsin Brewers Guild and Sprecher Brewing Co. in Milwaukee.
Wisconsin has three tiers, like many other states, for alcohol distribution: a brewer, a wholesaler that distributes the beer and a retailer that sells it. The system was put in place at the end of Prohibition and used by brewers that made Milwaukee famous: Miller, Blatz, Schlitz and Pabst. (They’ve since moved all or most of their facilities out of the state.)
The proposal was inserted into the proposed state budget by the Legislature’s budget committee. It would combine the brewer’s permit and wholesale and retail licenses given out by municipalities into a single permit under state control. It would effectively ban brewers from purchasing wholesale distributors — something craft brewers say they might need in the future to avoid getting squeezed out of the market by large corporate brewers.
The proposed changes would also keep brewers from selling other brands and keep them from starting a series of breweries that sell the beer with its name.
Tim Roby, spokesman for the Wisconsin Beer Distributors Association, said the proposal keeps the historical three-tier system intact and keeps the likes of Anheuser Busch from buying a wholesale distributor and only selling its own beer to retailers. The St. Louis-based company won a court challenge last year over an Illinois law that barred out of state brewers from owning beer wholesalers, while exempting local craft brewers.
Roby said the change is needed so Wisconsin doesn’t encounter a similar court challenge. He said brewers can still self-distribute their beer. In fact, the proposal raises the amount they can self-distribute from 50,000 barrels a year to 300,000.
“We are just going to have to agree to disagree,” he said. “We believe it does protect our home-grown, family-owned brewers and it also protects our homegrown and family owned retailers.”
MillerCoors has started a Facebook page, titled “Support 3-Tier Wisconsin,” which notes the legislation was never about limiting rights of smaller brewers but to limit the rights of big brewers to own wholesalers in the state.
“We’ve long supported the three-tier system” said MillerCoors spokesman Julian Green. “We think it’s good for the beer industry.”
In a statement Friday, Anheuser-Busch Inc. said brewer-owned distributorships support rather than threaten beer distributors or the three-tier system.
The company said the ownership helps support wholesalers who might otherwise not have the experience or capital to enter the industry or expand their operations, like when Anheuser-Busch Inc. became minority owner of Wisconsin Distributors in Appleton and Sun Prairie in 2006. Of the approximately 530 Anheuser-Busch distributors across the country, Anheuser-Busch owns 12 and invests in another four, the company said.
“Brewer-owned distributors increase competition and provide valuable insights into middle-tier competitive and customer issues, as well as access to markets that can be difficult for independent distributors to operate in,” it said.
The Wisconsin Brewers Guild, which represents about half of Wisconsin’s 66 craft brewers, is talking with lawmakers, rallying members and craft beer drinkers to write and call lawmakers, hanging posters and using social media to get their word out. The Wisconsin Positive Business Alliance held a protest rally outside the Capitol last week.
Hamilton, the guild’s president, said the big guys are also trying to limit growth of craft brewers. Craft brewers had 11 percent increase in sales in 2010, compared to larger brewers that had only 1 percent, according to the Brewers Association, based in Colorado.
He said in 1994 there were 82 wholesalers in Wisconsin and today there are only 42, even though the number of brands being carried by them has doubled. That means small brewers will eventually be forced to get together to regionally open wholesalers for craft breweries, he said.
If the proposal becomes law, the prices for Wisconsin craft beer will likely go up because there will be less options for brewers to get their products out, he said.
“They are probably going to be much more limited down the road on what they will be able to get for Wisconsin beer,” he said.
Hamilton also said not being able to sell other brewers’ beer or able to sell a branch that sells the beer, like in a franchising situation, takes away a viable business model for growth.
Deb Carey, a co-founder of New Glarus Brewing Co., called the proposal ridiculous and wondered why supporters didn’t go through the regular process for law changes, with public input, rather than just getting it inserted into the budget. The government shouldn’t step into contractual issues with brewers, she said.
“I think it’s a free market economy and we all are business people and we can discuss our contractual issues face to face on a one-on-one basis. There’s really no reason to have it done through the legislation and certainly not the state budget process,” she said.