Michigan Bill Would Grant Self-Distribution Rights to More Small Breweries

A bill introduced in the Michigan Legislature earlier this month would allow breweries producing up to 2,000 barrels annually to self-distribute their products in the state.

Currently, Michigan breweries producing up to 1,000 barrels can self-distribute. However, the cap would double if bipartisan House Bill No. 5343 passes. The legislation was introduced on January 16 by Reps. Pauline Wendzel, Matt Hall, Alex Garza and Sara Cambensy.

According to national trade group the Brewers Association, the majority of Michgian’s craft breweries produced fewer than 1,400 barrels in 2018, the last year in which data was available.

Michigan Brewers Guild executive director Scott Graham told Brewbound the legislation would create “a little bit more breathing room” for many of the state’s 357 craft breweries and help newer breweries gain exposure at a time when the wholesaler tier is shrinking.

“In general, we’ve seen the number of breweries and brands that are in the marketplace proliferate, while we’ve seen the number of distributors consolidate, so it creates a potential bottleneck at the distribution level,” he said.

“This limit allows a brewery to get out and build their brand, take advantage of a little cash flow, understand the marketplace, and then if they do get to where they’re going to cross over the 2,000 barrel threshold, they’ve got more of a brand to talk about with a distributor, who might be considering getting into a partnership with them.”

In order to self-distribute, small breweries making 2,000 barrels and under a year that already are working with a wholesaler would only be allowed to self-distribute in territories where they have not granted rights to a wholesaler. Those breweries would also be limited to using only their employees and company-owned vehicles to make deliveries.

Graham said many Michigan breweries use self-distribution to participate in festivals throughout the state or to serve a small number of retail accounts.

“It might not be a big part of their business,” he said. “They might be doing it as marketing more than sales volume.”

Under the new bill, the 2,000 barrel threshold would apply to any sister brands a brewery offers in addition to its main product lineup. However, beer sold directly to consumers at a brewery’s taproom would not count against the 2,000-barrel cap.

“My local brewers came to me and explained that they were running up against a wall,” Wendzel said in a press release. “Doubling the self-distribution limit and exempting taproom sales will allow brewers to grow their business to a point where signing a distribution contract makes sense.”

Graham said House Bill No. 5343 is the first of several “utilitarian” legislative items addressing craft brewers’ issues this year, including a bill to streamline new product registration rules.

“We operate in a heavily regulated industry, both on a federal and state level, and of course these rules and laws were put into place in the wake of Prohibition,” Graham said. “And as they evolved, they were influenced by industry stakeholders and nobody really saw our subsegment of the industry coming.

“Nobody was trying to work on things that might be our issues as small brewers, and so of course there are going to be things that we bump into that don’t make sense because the framework evolved without us having a voice at the table.”

In 2018, Michigan breweries produced 899,792 barrels in 2018, according to the BA. The state’s largest BA-defined craft brewery, Bell’s Brewery, produced 472,168 barrels that year. Other regional Michigan breweries include Short’s Brewing (45,485 barrels), New Holland Brewing (41,750 barrels) and Atwater Brewing (35,500 barrels in 2018), which struck a deal to be acquired by Molson Coors Beverage Company last week.

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