Yuengling denies knowing about ‘pay-to-play’ bribes
Calls probe a problem for wholesaler and bars
Pennsylvania beer maker Yuengling, which returned to the Massachusetts market in force last year, did not know that one of its distributors was paying bribes to get Yuengling beer into a number of popular Boston bars, a top company executive said.
An investigation into illegal “pay-to-play” practices by Massachusetts alcohol regulators found that a beer distributor, Craft Brewers Guild, had paid $22,500 to two prominent restaurant chains, Briar Group and Lyons Group, to carry Yuengling in some of the 20 bars the two companies own.
At a public hearing in early September, Craft Brewers Guild admitted to state regulators that it routinely paid five major Boston restaurant groups tens of thousands of dollars to carry certain beers and exclude those of competitors. The distributor was charged with violating state laws and regulations prohibiting the practice and faces fines or even the suspension of its liquor license.
Speaking for the first time about the “pay-to-play” scandal, D. G. Yuengling & Son chief operating officer Dave Casinelli said he did not know of the distributor’s scheme to pay retailers.
“We had no knowledge of what was going to happen,” Casinelli said. “What happens between retailers and wholesalers — we’re not always privy to that. I don’t know what motivated it.”
Yuengling and the makers of other beers that the distributor paid to have placed in bars have not been implicated in the ongoing investigation by the Massachusetts Alcoholic Beverages Control Commission, or ABCC.
The Yuengling payments are detailed throughout an ABCC report on the pay-to-play practices, which included testimony from employees at Craft Brewers Guild and the restaurants. The payments Craft Brewers Guild made for Yuengling were much larger than what it paid on behalf of other beers, according to the report.
The ABCC has also charged the five restaurant companies, including Lyons Group and Briar Group, with receiving the illegal payments. Each faces a hearing on the charges in November.
Based in Pennsylvania, Yuengling withdrew from New England in the 1990s but returned to Massachusetts in March 2014. The company marketed aggressively, saying it was out to grab a 10 percent share in certain markets, and rode a wave of nostalgia and pent-up demand to get its beers served on thousands of local taps.
Casinelli said Yuengling’s average market share across Massachusetts had fallen somewhat since its debut, to about 5 percent — still a substantial slice of the crowded beer market.
Casinelli acknowledged his company’s robust entrance has made it a big target, but said Yuengling has nothing to hide.
“We can go to bed at night knowing we play the game well and that our people are open and honest,” Casinelli said.
“It’s an affront to the guys who worked hard to build the brand to insinuate that their success comes from buying the accounts. [Stuff] happens, but at the end of the day, it’s not what drives the success of the brand.”
The practice of manufacturers and distributors paying retailers to carry their products and display them in prime locations is legal and common in other retail sectors. But it’s banned in the tightly regulated alcohol industry under Prohibition-era laws and regulations that were intended to prevent larger brewers from dominating local markets.
Based in Everett, Craft Brewers Guild is one of eight Massachusetts wholesalers that sell Yuengling’s beer to bars and package stores. The other distributors have not been cited.
Among the payments the distributor made, according to the ABCC, were a $12,000 check to a shell company controlled by Lyons Group and a $10,500 check to Briar Group. The ABCC said Craft Brewers Guild salesmen told its investigators the payments were in exchange for the Boston restaurant companies stocking Yuengling.
Briar Group owns a number of Boston bars, including Gather, District Hall, M.J. O’Connor’s, and Ned Devine’s. Lyons Group owns Game On Fenway, Bill’s Bar, and Bleacher Bar, among others.
In its report, the ABCC said Craft Brewers Guild also paid Lyons, Briar, and other bar owners smaller amounts to stock other well-known brands, including Lagunitas and Magic Hat.
A spokeswoman for Lagunitas said that “pay to play is absolutely against the values we hold as a company. Lagunitas always looks to follow all applicable local laws and regulations. We will be looking into this.”
Magic Hat declined to comment.
Neither company has been implicated by regulators.
Both Yuengling and Craft Brewers Guild have said that others in the Massachusetts beer business engage in “pay-to-play” and have questioned whether the ABCC will go after other, bigger distributors.
“You pick the smallest guy in the market and start there?” Casinelli said, referring to the ABCC’s targeting of Craft Brewers Guild. “If there’s a legitimate effort going on to address [pay-to-play], don’t you open up the umbrella and look at the entire market?”
Beer industry specialists said intense competition can goad companies into making illegal payments to get their beers served ahead of others.
“There are just so many new craft brewers coming online every day, but the shelf space and the tap handles aren’t increasing at the same pace,” said Harry Schumacher, editor and publisher of the Texas-based trade publication Beer Business Daily. “When the music stops, there are always going to be people left without a chair. That’s when you get the bad behavior.”
Moreover, Schumacher said, the ABCC is a small agency with modest funding. Its staff of about 14 investigators has prioritized cracking down on practices that endanger public safety, such as underage drinking and bars that over-serve patrons.
Until this year, no Massachusetts company had ever been sanctioned for pay-to-play practices.
In its case before the ABCC, Craft Brewers Guild is seeking leniency, saying it cooperated fully with investigators and that it no longer pays bars to carry its beers. The distributor’s general manager declined to comment.
In a statement, the ABCC said only that the “investigation is still ongoing and will cover all aspects of the trade practice issue.”