It’s no secret that monstrously large, multinational beverage and brewing corporations pretty much bully around American wholesalers — and then some of those wholesalers bully around smaller, independent brewers. The three-tier distributor system (its ancient roots planted in the time of Prohibition and its repeal) is supposed to dissuade monopolies and coercive practices by separating the alcohol maker from the booze buyer, but it is not working. It apparently hasn’t been working for some time.
Yet another example comes from North Carolina and a wholesaler out of Raleigh called R.A. Jeffreys that sells products by Anheuser-Busch InBev (cue Beer Voltron theme music), Corona, Sweetwater Brewing Co. and other brands across 36 counties in the Tar Heel state. According to local craft brewers and The Charlotte Observer, a 1997 franchise agreement has been unearthed between Anheuser-Busch LLC and R.A. Jeffreys that gives AB InBev products “priority over all other products.” From the article:
The wholesaler “agrees that its primary effort will be to sell the (Anheuser-Busch) Products, that it will devote greater effort to the Products than it devotes to any other products,” according to the so-called equity agreement.
“It’s outrageous,” said John Marrino, owner of Charlotte’s Olde Mecklenburg Brewery. “This is what we’ve been trying to tell people, that the large distributors favor the big breweries over the smaller breweries.”
The agreement, disclosed in a recent lawsuit against Jeffreys and other wholesalers by Anheuser-Busch LLC, appears to reinforce the argument the so-called Craft Freedom brewers have taken first to the General Assembly and then to court.
Of course, the agreement is from 1997, and the N.C. Beer and Wine Wholesalers Association noted that style of franchise agreement is barred by an updated 2012 N.C. law (here) and that fairly flimsy consent agreement by Beer Voltron before its $107 billion acquisition of SABMiller. This all, of course, comes after a recently failed effort from N.C. craft brewers to raise their self-distribution cap from 25,000 to 200,000 barrels — a move strongly opposed by state distributors. From the article:
The brewers argue that the cap forces them into costly contracts with wholesalers, who would take over all sales and distribution rights. They say the state is impeding the free market by treating their businesses differently than others.
The wholesalers say that the current system works for brewers as well as consumers. Tim Kent, executive director of the wholesalers association, has said the law allows craft brewers to produce as much as they want as long as they’re willing to work through a distributor. Distributors, he said, can expand markets for craft beers.
Not really sure if that argument works, Tim Kent. Yet, for some reason, this doesn’t feel nearly as bad as last year’s reports that U.S. antitrust officials were investigating Anheuser-Busch for distributor incentive programs. Apparently, AB InBev wholesalers are contractually required to spend a certain amount each year to advertise AB InBev beers (also extremely shady). Under the supposed incentive plan, AB InBev would refund 75 percent of this money if its beers make up 98 percent of the distributor’s sales, according to documents provided to lawmakers.
Regardless, this 1997 franchise agreement at least shows that this shit has been going on for waaaay too long. Large investor-owned beer roll-ups continue to bully wholesalers, and then wholesalers continue to bully smaller beer makers. It’s not to say distributors don’t add value and expertise to the beverage chain. They do. They can make great partners. They understand markets, the buyers and the venues selling beer and alcohol. They are also a very reliable way for the government to collect alcohol beverage taxes, but distributors should not be allowed to control their clients, and their clients should not be allowed to control distributors. In fact, distributors are often being abused just as much as craft beers makers. Something needs to change. Something soon.