After a decade of disagreement, craft brewers and wholesalers can finally raise a glass together to celebrate a compromise that would make it easier for brewers to divorce their distribution partners instead of being wedded for life.
The Senate Ways and Means committee is planning to vote on the long-awaited legislation this weekend, in time to tee it up for a vote on the Senate floor on Thursday.
The saga has dragged on at the State House for at least a decade. But the COVID-19 pandemic, which has hammered restaurants and breweries, helped put the issue in perspective.
“There was a realization by all parties that we’re at a moment here where the fight between who’s going to win this and who’s going to lose this needs to be recalibrated toward, let’s make sure these craft breweries have the flexibility to survive,” said Sam Hendler, president of the Massachusetts Brewers Guild. “There are craft breweries fighting for their existence right now.”
The boards of the brewers guild and the Beer Distributors of Massachusetts approved the compromise in the past several days.
Craft brewers have previously tried and failed to rewrite a nearly 50-year-old state law that makes it difficult for a brewer to walk away from a wholesaler after they’ve been together for six months. Essentially, brewers need to prove one of several specifically written causes, and they could face a protracted legal fight if they want to jump to a new wholesaler. The beer distributors have considerable clout at the State House, but craft brewers have gained political momentum as their numbers have grown across the state.
The compromise would allow any brewer that produces fewer than 250,000 barrels a year to break up with a distributor, without proving cause, with just 30 days notice. The distributor would need to be compensated for the market value of the distribution rights. The bill sets up a new arbitration process to resolve any disagreements on this valuation question.
The volume threshold has been a significant sticking point. A few years ago, the distributors proposed giving more leeway to brewers that make fewer than 30,000 barrels annually. But the Massachusetts brewers balked at that idea, even though only a handful of them were above the threshold at the time. Among those was Jack’s Abby, the Framingham brewery that Hendler co-owns.
Only one Massachusetts company, Samuel Adams brewer Boston Beer Co., is above the 250,000 barrels-per-year threshold. Boston Beer has helped fund the brewers’ efforts to reform the beer franchise law, and supports the compromise.
Boston Beer founder Jim Koch said in an e-mail that his company initiated franchise reform efforts a decade ago to level the playing field for craft brewers, which number more than 200 in the state today. He said that while the wholesalers gradually accepted more favorable terms for the craft industry, they would also only support a bill that excludes Boston Beer.
Koch said several brewers would be in danger of closing permanently during this pandemic, without the ability to move their business to another wholesaler. If brewers have to wait another two years for reform, he said, some will not survive.
Boston Beer, Koch said, ended up deciding to “sacrifice ourselves by being excluded” from the reform legislation to protect smaller craft brewers in the state.
“Now, when our economy is more fragile, this will ensure that both industries not only survive but thrive and continue to grow,” Senate President Karen Spilka said.
This issue is important for Spilka, and not just because Jack’s Abby is in her district. It’s a bit of unfinished business left from when she was chair of the Senate Ways and Means committee. Spilka had urged both sides to reach an agreement. With the Legislature’s formal sessions scheduled to end for the year on July 31, time was running out yet again.
“Massachusetts has such a rising craft brewery scene ... but their growth was jeopardized,” Spilka said. “This compromise allows the craft brewers to work through an expedited arbitration process, a way to pay their distributor fair market value, then move on to a distributor that may better suit their needs.”
Spilka said she expects her colleagues in the House will embrace this legislation, now that both sides are on board. With the pandemic hitting the industry hard, this is an important part of the Legislature’s efforts to provide some relief, she said.
Along those lines, lawmakers also just reached an agreement on allowing restaurants and distilleries to sell mixed drinks for off-premise consumption, much like a bill passed in the spring allowing restaurants to sell beer and wine to go. The new “cocktails-to-go” measure expires at the end of February 2021, or the end of the state of emergency, whichever comes later.
Hendler said breweries became even more dependent on wholesalers during the pandemic when their taprooms were forced to shut down. Jack’s Abby currently is running a beer garden and offering takeout and pickup, but its beer hall remains closed.
Joe Salois, a board member with the beer distributors group, said it was important for both sides to put this issue to rest.
Salois said he couldn’t think of any examples of when a craft brewer wanted to leave the company he runs, Atlas Distributing in Auburn. But Salois said he understood the importance of providing flexibility to craft brewers, particularly during challenging times.
He said House Speaker Robert DeLeo has also encouraged both sides to compromise on the issue.
“The world is a little crazy at this time, with COVID-19 and everything that’s going on,” Salois said. “We’re talking about beer. We’re not talking about saving lives. ... There are a lot more important issues in the world than what we’re dealing with.”