Beer battle brewing in Mass.

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January 23, 2013, 8:15 pm
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(NECN: Peter Howe, Boston/Everett, Mass.) - Even 80 years after the repeal of Prohibition, much about how beer and alcohol sales are regulated in Massachusetts and other states remains rooted in the aftermath of the 18th and 21st Amendments: A system that relies on intermediaries, or distributors, between alcohol sellers and alcohol suppliers.

In the Bay State, it’s been 30 years since the last significant change in the brewer-distributor-retailer arrangement. Back in 1971, Massachusetts still had dozens of small distributors handling beer produced by a handful of large multi-state breweries, with the only significant brewer operating in the state Carling Black Label on Route 9 in Natick.

Now, with a craft-beer explosion –- 44 breweries in Massachusetts alone today are employing 1,300 people, and growing –- many say the situation has flipped, to dozens of microbreweries and "nanobreweries" selling through a consolidated base of larger distributors. So they are pushing for state laws to be overhauled to reflect the new dynamic in the brewer-distributor balance of power.

Night Shift Brewing in Everett, north of Boston, is one leading example.

Started by three men with day jobs who experimented with brewing beer after work -- thus the name -- it got launched commercially just 11 months ago in an old World War II munitions plant off Route 99. But with a lively menu of unique brews sporting ingredients such as vanilla beans, pink peppercorns, rose hips and honey, and a unique selling approach similar to local farms selling "community-supported agriculture" shares of a crop for an up-front payment by beer subscribers, it’s tapped into enough fine-beer lovers that the three co-founders already have five part-time employees. And they’re looking to grow and expand more.

For now, co-founder Michael Oxton gets in the car one or two days a week to drive beer to about two dozen Boston-area shops that sell Night Shift’s beers and ales. But to get much bigger, under state law, Night Shift would have to sign up with a distributor, and that’s something Oxton has some anxiety about.

"It’s something that's on the horizon at some point, and our biggest concern is getting locked into something that you can't change for the rest of your brewery's lifespan," Oxton said. He and many brewers complain existing law makes it too hard for brewers to get out of distribution deals that go bad, and gives distributors too much power to lock small breweries into distribution deals that can take years of haggling and exorbitant legal bills to escape. "I’ve heard it’s really hard and it’s really expensive, those are the two big things, so you have to prove a lot and it takes forever" to escape a distribution contract that’s not delivering, Oxton said. "This is huge, not just for us, but for anyone who's trying to look to a distributor or currently has one."

Ipswich Ale owner Rob Martin, who now heads the Massachusetts Brewers Guild, said he had an experience like that with a distributor he won’t name, who he said made too little effort to promote and sell a small brand he was producing, so that by the time Martin could finally escape the deal, the brand had no value left.

"Once we sell into a distributor, they own our rights for life," Martin said. "We can't move from distributor to distributor. We can't find one that best suits our needs as our business develops."

Martin’s guild and dozens of Massachusetts legislators are lining up behind a new bill, H. 999, that would overhaul the brewer-distributor relationship to make it easier for a brewer to break a contract, while assuring that disputes would go to binding arbitration so distributors would be financially compensated for money they’d invested in promoting and securing distribution for smaller beer brands.

John Stasiowsky, president of the Beer Distributors of Massachusetts, a trade association, says the small brewers’ concerns are overblown.

"I think in Massachusetts, at least, it's really a solution in search of a problem. I think the distribution system in Massachusetts has worked very well for all suppliers, craft and other-sized brewers," Stasiowsky said. "There is plenty of beer choice nowadays in the marketplace for consumers … What other consumer product out there has so many different brands and packages and products?"

Stasiowsky says it's just not true brewers can't fire distributors who they think aren't promoting their beer well enough.

"If a supplier wants to change distributors, he can do so by having ‘good cause’ as defined in the [regulatory] act," he said, which can include failing to make enough effort to promote and sell the beer or "disparaging" the brand to store owners. "A supplier can terminate the wholesaler if the wholesaler is not doing the job that the contract requires them to do."

Stasiowsky also says the new bill would, as his group reads it, actually make it way too easy for brewers to dump distributors who may have spent big money promoting their microbrews, and even let big international beer brands suddenly fire a distributor who may have millions of dollars invested in delivering its product to hundreds of package stores and restaurants. If the legislation is enacted, Stasiowsky said, distributors could be "terminated at the whim of the supplier, without any reason or recourse whatsoever. It's an 'oh-never-mind' kind of approach."

While there clearly are fundamental disagreements over the merits and need for the law, Representative Alice Peisch (D-Wellesley), who is the lead sponsor of the legislation and who counts the founder of Mayflower Brewing in Plymouth, Drew Brosseau, as a constituent, said more and more legislators now recognize breweries as important local businesses in their districts and brewery workers as constituents and voters.

"There's a lot of support for helping this industry grow, and an appreciation for the jobs that are being created," Peisch said. The debate she and local brewers hope rises to the top of the House and Senate agenda this year: Is H. 999, or some compromise version of it, the best way to make sure a booming small-brewery movement continues its rapid growth?

With videographer Scott Wholley.

Tags: massachusetts, Peter Howe, lawmakers, regulations, craft breweries, craft brewing, beer distributors
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