Anyone who has followed this blog in the past knows that I have a Love/Hate relationship with Beer Distributors. First of all as an unabashed believer in capitalism and free markets, the very thought of having a government imposed “Middle-Man” gets my ire, though I concede that the middle-man can (sometimes) add value.
A Beer distributor is part gangster, part Cry-baby and partly a brewer’s best friend. They exist mainly due to the structure of the states adopting post prohibition “3-Tier” mentality where brewers, bars and retailers are forbidden to occupy any two tiers of the Brewing, Distribution or Point of sale tiers. Distributors were the opportunistic interlopers that basically picked-up where the mob let-off once prohibition was reversed. I dare say in many cases they were one in the same…
Since taking a role as a legal entity, beer distributors have banded together to form strong lobbying organization that have become some of the most powerful forces in state legislatures next to labor unions. If you know anyone who is a beer distributor, it is likely they are one of the wealthiest people in your city or state. In most states, beer distribution is a cash business as set forth by law (and a very favorable one at that if you are a Beer Distributor). How many other businesses can say they run on 100% cash with zero receivables? Indeed these distributors are a protected class.
Another “protected class” aspect of beer distributors is the fact that they operate with protected geographic territories in almost all cases. They “franchise” a particular beer brand and from that point the brewer is dependent on them to bring their beer to market in that territory. What if they don’t succeed? What if they don’t want to? What if they favor another brand over yours? Tough crap for you Mr. Brewer (who made a bad decision). It’s gonna likely take you a few years and thousands of dollars paying attorneys to re-gain control of your brand.
Let’s talk about the “Cry Baby” aspect of beer distributors… A fellow homebrewing friend of mine sent me a link to a new story currently unfolding in Wisconsin. The Wisconsin Home Brewing Alliance realized that the current state law was technically precluding them from legally having beer competitions and beer tastings. Wisconsin law states that home brewed beer must not leave the brewer’s home. A bill was introduced to change the law and in typical “Cry Baby” fashion, the state’s beer wholesalers association has raised objections to the change on the basis that it would enable home brewers to sell the beer and become competition. This notion is silly on a number of levels and should have received summary judgment as being idiotic. It is illegal by both federal and state law to sell home brewed beer!
Make no mistake folks, Beer distributors do not really want to bring you more differing brands of beer. They already own 100% of the beer market so why would they want to further fragment it? They would rather have kept it simple with fewer SKU’s. For years here in WV, distributors were the strongest opponent to raising the ABV limits on beer. They were afraid of competition or just plain lazy, not wanting to take on anything new. The main reason the laws were finally changed was the fact the Anheuser-Busch wanted them to change, so the wholesalers fell in line…
So What do beer distributors do well? They carry beer from the brewer to the marketplace. They are supposed to help place it, market it, etc. but do they? I think the value added by a beer distributor is weak at best. Beer consumers would do better if beer distributors had to compete. Brewers should be allowed to choose one or more wholesale channels to market in any given territory and be able to fire them if they are not getting the job done. This change alone would make the privileged distributors step up their game.
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