The Next Draft

Raise a glass to accord between breweries, distributors

MATTHEW TOTA “ S ay we have a brewery, call it Sully-Tota Brewing Co., and signed a deal with a distributor in January, but now that wholesaler wants to move away from craft beer into more wine and spirits, we can’t just leave.”

Keith Sullivan, co-founder of Medusa Brewing and the vice president of the Massachusetts Brews Guild, was explaining the crux of his industry’s decade-long dispute with wholesalers over distributions rights.

Although I was disappointed Sullivan didn’t choose a cooler name for our fantasy brewery, I did not miss his point: The current law locks breweries into lifetime contracts with wholesalers after a mere six months of doing business. They can only end the relationship if they show “good cause,” which is a tiny list of difficult-to-prove conditions, such as a distributor disparaging their products or showing preferential treatment to a competing brand.

Distributors, meanwhile, wield all the power. They can woefully underserve a brewery, to the point of doing the bare minimum to market its beer, and can even buy and sell the brand to other distributors without permission. Trapped in a failing marriage without the possibility of divorce, the brewer has had no choice but to take it.

Change, though, has arrived in the form of a compromise. Breweries and wholesalers have ended their dispute — as old as Wormtown Brewery — and finally agree on the best way to part ways. The proposal allows breweries producing fewer than 250,000 barrels (about 3.4 million cases) a year to end their relationship with a distributor as long as they give 30 days’ notice and pay “fair market value” for their brand rights.

With the legislative session closing Friday, the two sides worked with lawmakers to quickly get a bill to the State House, which the Senate approved last week. The House expects to vote Thursday (depending on when you read this column, the vote may have already taken place). Assuming the bill passes the House and Gov. Charlie Baker signs it, the new law would take effect immediately.

As craft beer consumers, we should applaud this accord. We should urge our local representatives in the House to approve the changes to this archaic law; you can do so online at the Massachusetts Brewers Guild Take Action page. And if by the time you see this, the bill has already passed, send them a letter of thanks and offer to buy them a beer at their taproom of choice, or mail them a four-pack of their favorite brew.

The new law matters because it will benefit the state’s smallest breweries the most. They are fearful of signing a contract with a wholesaler because of how the current law works or already trapped in a deteriorating relationship with one. Indeed, Jack’s Abby co-founder Jack Hendler once described choosing a bad distributor as “the kiss of death” for a small brewer.

“That relationship between brewer and wholesaler is very important. And a lot of breweries have been afraid to get into it,” Sullivan said.

With the pandemic closing their taprooms for months, breweries have had to rely more on their relationship with their wholesalers. Breweries lost that crucial on-premise market and are only just getting it back. In the interim they turned to curbside and to-go sales, and for many of them, wide distribution was not an option.

Some have been waiting for a change like this to jump to distribution or move from self-distribution to a wholesaler, according to Sullivan.

“What you’ll see in terms of activity will be more breweries seeking a new partnership, because they’re tired of self-distributing or business is drying up because of COVID,” he said. “I know of breweries that have been waiting for this. They’ve got a distributor in mind, and as soon as this bill passes, they will start those discussions.”

The 250,000-barrel cap included in the bill applies to 99% of the state’s breweries, including what I’d consider larger operations like Harpoon Brewery and Wachusett Brewing

Co.

The notable exception is Boston Beer Co., which brewed more than 5 million barrels of brands like Samuel Adams and Truly Hard Seltzer

last year. A big reason the deal got done was Boston Beer founder Jim Koch opting to step down from the negotiations. The number of barrels a brewery must produce annually had proven the main sticking point. The MBG historically has pushed for 6 million barrels a year, which meets the Brewers Association’s definition of small and independent brewers.

“You’ll have the Harpoons of the world, the Wachusetts, the Jack’s Abbys and the Night Shifts, all breweries well under the cap that still have the flexibility and autonomy to make the right decisions concerning distribution for their businesses,” said Joe Salois, president of Auburn’s Atlas Distributing Inc.

It also protects Atlas from a brewer on the scale of Boston Beer leaving, which would be devastating for the company.

When the law changes, though, Salois doesn’t see breweries suddenly cutting ties with their distributors en masse. “It absolutely could happen; the law gives the brewers the right to leave if they choose to. But I don’t see that happening,” he said. “I only see

FILE PHOTO/MATT WRIGHT

the relationships we have with our brewer partners. We wake up every day and try to provide great service and build relationships for our brewers. When they’re successful, we can be, too.”

If anything, the law will put distributors on notice: Make sure you’re treating your breweries well and working as hard you can to promote their brand, or they’ll take their talents elsewhere.

“The wholesalers will have to adapt a little bit to having even more brands to represent. You may even see more wholesalers pop up — especially smaller models that focus on smaller breweries,” Sullivan said. “It also puts the pressure on the distributors to perform.”

And I welcome a flood of new beer on the shelves. In some ways, breweries do, too, Sullivan said. It’s good competition.

“You’re going to have a lot more breweries willing to go wholesale, so the beer is going be even better,” he said. “The distributors are going to get even pickier. Competition will increase in a positive way for everyone involved.”