The three-tier distribution system is “under attack from all sides” and wholesalers should work to strengthen franchise laws that lock suppliers into nearly unbreakable contracts with their distributor partners. That was one of the messages from Patrick Blach, the incoming chairman of the National Beer Wholesalers, during his introductory speech Tuesday at the trade group’s 83rd Annual Convention.
Blach, a second-generation beer distributor who is the president of Elko, Nevada-based Blach Distributing Company, hailed the three-tier distribution system as “a fabulous success story” that “promotes competition and entrepreneurship” and has led to the success of numerous small businesses.
Blach, who assumed the chairmanship from Brian Gelner, EVP and CFO of Springfield, Missouri-based Heart of America Beverage Co., laid out his priorities for his one-year term as NBWA chairman. Among those priorities are a rollback of loosened regulations during the pandemic and an emphasis on tightening franchise laws.
“The expansion of e-commerce, new entrants into the alcohol market, the expansion of large chain retailers and challenges from brewers, large and small, are just a few of the issues facing our industry,” he said. “Many of these threats have intensified and accelerated due to the COVID-19 [pandemic].”
Blach pointed to states temporarily loosening alcohol regulations at the outset of the pandemic in order to help bars, restaurants and breweries that were forced to shutter on-site service. Those loosened regulations have included in some cases lifting restrictions on to-go sales and direct-to-consumer shipments and deliveries, which have proven to be lifelines for many small beer makers.
“Now some are calling for these changes to be made permanent, but it was COVID-19, not the three-tier system that harmed these businesses,” Blach said. “Over the coming year, we must work together to preserve effective state alcohol law to promote public health and safety competition and variety for consumers.”
Blach urged wholesalers to not be complacent and advocate alongside their state associations for a return to the status quo.
“Let’s work to safeguard and even strengthen our franchise laws which protect our investment in this industry,” Blach said.
“The need for these laws has become much clearer in recent months,” he continued, referring to recent terminations without cause made by Constellation Brands, Diageo and New Belgium. “As we’ve seen several suppliers terminate long-standing relationships with those that have built their brands for years. Terminations without cause, especially terminating distributors that have taken risks and are investing in these brands on behalf of their partners, raises questions of trust. And that validates the need for these laws.”
Those comments echoed ones made Monday by NBWA president and CEO Craig Purser, who said terminations without cause are a reminder that trust “takes years to build, seconds to break, and a lifetime to gain back.”
Blach added that wholesalers should also “be vigilant about federal preemption.”
“We cannot forget that the U.S. Congress or the courts can preempt any state law with the stroke of a pen or the stroke of a gavel,” he said.
The NBWA is among the most influential lobbying groups in the U.S., ranking among the top 120 organizations in contributions and top 400 in contributions in the most recent cycle, according to OpenSecrets.org.
“The strength of our association lies in an active and engaged membership,” Blach reminded members.
In addition to Blach, other NBWA officers serving for the 2020-21 term will be:
- Peter Heimark, Heimark Distributing, as vice chairman;
- Gordon Green, Capital Distributing, LLC, as treasurer;
- Jim Fabiano, Fabiano Brothers Inc., as secretary;
- Brian Gelner, Heart of America Beverage Company, as immediate past chairman.