Under the specter of Constellation Brands potentially forcing additional sales of its distribution rights in California, leaders from the National Beer Wholesalers Association stressed the importance of protecting state franchise laws to thousands of wholesalers and industry professionals attending the trade association’s annual convention in San Diego.
NBWA chairman Jim Matesich, without naming Constellation Brands, pointed to trade press headlines from June when the beverage alcohol company forced Markstein Beverage Co. to sell its distribution rights in northern San Diego County to Reyes Beverage Group.
“Terminations without cause, particularly of distributors that took risks and helped build those brands create distrust in trading partners,” he said.
NBWA president and CEO Craig Purser added that beer companies that terminate “highly performing distributors without cause” lead to “distrust and hurt the entire beer category.”
“Supplier terminations negatively impact the industry and call into question the mutual loyalty that’s been generated by years of investment in each other,” he said. “These type of supplier actions take focus away from building beer brands and investing in the category.”
Matesich also alluded to a story, published by Beer Business Daily earlier this month, that cited an unnamed source with knowledge of a possible distribution shakeup in three Southern California territories. According to the source, Constellation Brands is in the process of severing its contracts with Ace Beverage, Triangle Distributing and Beauchamp Distributing Co., and attempting to force those companies to sell the rights to distribute Constellation Brands’ beer products to Reyes.
“Ladies and gentleman, if you’ve read any news about our industry this month, you’ll understand exactly why franchise laws matter,” he said.
In order to protect franchise laws — which brewers have long-claimed lock their companies into nearly unbreakable relationships with distributors in some states — Matesich said wholesalers must stay active in their state trade associations. Additionally, he said the NBWA, which boasts one of the most well-funded and powerful political action committees in the nation, would continue to support state associations’ efforts to fight back against franchise law reform efforts.
Contentious battles over franchise laws continue to play out in statehouses across the country, including Massachusetts, Maryland, Vermont and other states. Protecting those laws and other regulations are “more important than ever,” Purser said.
“They promote competition by allowing independent distributors to take risks and invest in new products, but these laws are under attack in the statehouse and the courthouse,” he said.
According to Matesich, another threat to the three-tier distribution system is the growth of brewery taprooms. Last year, 2.7 million barrels of beer were sold directly to consumers, according to data from the Brewers Association.
Matesich said he wasn’t speaking of tasting rooms but brewery-owned taprooms that act as “standalone bars” with “little or no brewing capacity.”
“These retail outlets hurt our traditional on-premise accounts and are creating a modern day tied house,” he said.