Main Street retailers and beer distributors face many challenges. One challenge that may seem unique to distributors also has real, negative consequences for independent retailers.
There has been a great deal of industry discussion recently about brand compensation requirements, franchise laws and other state regulations that provide guidance to trading partners and work to level the playing field between brewers and distributors. These laws and regulations work to ensure that each segment of the beer industry remains independent, which benefits all marketplace participants but, more importantly, also benefits the American consumer.
An editorial published this spring by the St. Louis Post-Dispatch explained the benefits of an independent three-tier distribution system stating: “It works like this: The companies that make the beer, wine, rum or vodka make deals with wholesalers to distribute their booze in the state. Those wholesalers, in turn, sell to retail outlets. The added layer of middlemen assures that one player can’t prevent its wholesaler from carrying competing products, for instance, making it next to impossible for a craft beer company such as Schlafly to get its product to market.”
The editorial also states, “That system, creating separate state-based roles and responsibilities for suppliers … wholesalers … and retailers …. protects consumers from one player in the liquor business exercising too much control over price or competition.”
Simply put – everybody wins with an open and independent distribution system.
St. James Winery CEO Peter Hofherr also put it well when he said, “The franchise law creates a buffer between wholesaler and multinational suppliers and creates an environment where the middle-tier is healthy and can invest in local brands that don’t have more pocket power.”
Three-tier, tied-house, beer franchise and other state laws that work to preserve an independent and diverse distribution system are more important and relevant today than at any other time in recent history. The U.S. beer industry has undergone dramatic changes. Consolidation is occurring at the brewer and retail tier at a rapid pace. And marketplace pressures from global retailers continue to challenge state laws that provide a level playing field for the nation’s independent retailers. The effort to squeeze out local distributors also threatens the current alcohol regulatory system, which depends upon the viability, accountability and amenability to enforcement of many local distribution and retail businesses like NBWA and American Beverage Licensees (ABL) members. These local businesses are highly responsive to the host communities they serve.
Franchise laws provide beer distributors with independence and work to prevent chain accounts from dictating terms, often at the expense of small retailers. State laws, including franchise, allow independent distributors to better serve independent retailers.
Thanks to state alcohol laws that promote competition and help beer distributors remain independent by allowing them to take on and invest in growing new brands, there are more than 2,400 breweries in operation across America today – and more are opening every day!
A strong, independent three-tier system is a primary reason for this growth.
We have great, American brands that haven’t even been around for 20 years – brands that will no doubt become iconic soon because of this great system. And while our system can always be improved, much of this growth is because of the independent distribution system and a state-based regulatory system that supports it, not in spite of it.
Independent beer distributors are proud to work with brewers to provide the infrastructure they need to reach a wide network of retailers, and distributors are proud to partner with independent retailers to help introduce new beer brands and thousands of labels of beer to markets across the country for consumers to enjoy.
NBWA looks forward to working with you to continue to educate policymakers, the media and the public about the economic, commercial and regulatory benefits of the independent distribution system that has proven to work so well for so many.
National Beer Wholesalers Association President & CEO Craig Purser provides industry commentary each quarter for ABL Insider, a publication of American Beverage Licensees (ABL), a national trade association for retail alcohol beverage license holders across the United States. Each column provides insight on issues of concern to beer distributors, their retail partners and others in the alcohol beverage industry. To learn more about ABL Insider, please visit http://ablusa.org/news/abl-insider.