The Alabama Alcoholic Beverage Control Board is considering a proposal to adopt Rule No. 20-X-8-.13, addressing requirements for assignment of sales territories for alcoholic beverage brands and brand extensions. The Alabama Brewers Guild opposes the proposal and has sent a letter to the ABC Board urging them to reject it. The ABC Board is expected to decide on the proposal in December.
Alcoholic beverages are a highly-regulated product, and businesses entering into this industry accept that. However, the Alabama Guild believes this is not a regulation to benefit the public. If accepted, it would use the police power of the state to benefit one class of business at the expense of another.
Under current law, a brewery must sign an exclusive territorial agreement with an independent, licensed wholesaler for each of its brands. This is an aspect of the three-tier system, which the guild respects as a valid means of regulating alcohol in Alabama.
Also under current law, the state severely restricts a brewery’s ability to terminate an existing territorial agreement with its wholesaler. This greatly diminishes the negotiating power of the brewer in its business relations with their wholesalers.
The proposed rule would extend these “lifetime territorial agreements” to not only include the specified brand, but also all “extensions” of the original brand. The term “brand extension” is vaguely defined and could easily be construed to include the entire portfolio of most breweries. While it is a common practice for a brewery to use a single wholesaler for their entire portfolio, the Guild opposes the use of the police power of the state to enforce this type of relationship.
The Guild does not believe the proposal is supported by most wholesalers. Dan Roberts, executive director of the Alabama Brewers Guild, stated, “We have a developing relationship with the wholesalers in Alabama, and they are not pushing for this as a group. We feel confident the ABC will reject the Proposed Rule for the reasons we outlined in our letter.”
The Guild’s opposition is available online here.