BOSTON — Massachusetts is the birthplace of the craft beer revolution and now boasts more than 60 microbreweries.

But, craft beer purveyors say they're still fighting for independence from an inflexible system set in place by a 43-year-old state law that binds them to distribution agreements and strangles their industry.

"There's absolutely just no justification for keeping this law on the books," said Jeremy Goldberg, owner of Cape Ann Brewing in Gloucester and a member of the Massachusetts Brewers Guild, which represents craft brewers. "We're one of the few growing manufacturing industries in the state, and this law does nothing but harm."

Under the state's three-tier distribution system, beer funnels from supplier through wholesaler to package store shelves. Brewers who want to sever a relationship with their wholesaler must appeal to the state Alcoholic Beverages Control Commission and show "good cause."

Goldberg and other craft brewers are backing a proposal to establish what they say is a "fairer process" of resolving disputes with distributors.

The bill's sponsor, Rep. Alice Peisch, D-Wellesley, said the law now makes it virtually impossible for small craft brewers to shake loose from contracts with distributors if they aren't getting results and want to switch distributors or try to go it alone.

The state doesn't require brewers to use a distributor.

"They want the ability to change distributors in the way you could with any other business, if you’re not happy with the attention you're getting," she said. "Right now, it's a cumbersome and lengthy process that often ends up in a courtroom, where the larger wholesalers have more resources to fight it."

Peisch's bill allows brewers to switch to another wholesaler without showing cause as long as the wholesaler is compensated "fair-market value" for the lost business. Instead of the state commission, an independent arbitrator would hear disputes.

Her proposal is supported by at least 85 lawmakers including Sens. Bruce Tarr, R-Gloucester, and Kathleen O'Connor-Ives, D-Newburyport, as well as Reps. Linda Campbell, D-Methuen and James Kelcourse, R-Amesbury. But it's opposed by distributors who say it will hurt - not help - the craft beer industry.

"The current law allows brewers to fire their distributors if they're not doing their job," said William Kelley, president of the Beer Distributors of Massachusetts. "This legislation would essentially pull up the ladder of opportunity that has led to the success of small breweries not only in the state, but across the country and world."

Distributors invest money and resources into promoting craft brews, Kelley said, and they would face significant risk if a supplier could walk away at any time.

Also, he added, brewers have plenty of choice among the state's dozen regional distributors.

"They have the freedom to select one, negotiate and enter into a contract," he said. "The brewers gain efficient access to the market, and the distributors receive financial compensation for the financial risks taken and the time, effort and manpower they invest in getting the brand on shelves in the stores."

Goldberg said the state's franchise law was intended to protect dozens of small beer distributors who were grappling for a piece of the industry, which then served Budweiser, Coors and other major brands.

But as beer selections have grown, the opposite has happened among wholesalers, who've consolidated into a dozen regional outlets, he said.

The law, he said, plays to their benefit.

"Instead of a law that protects mom-and-pop distributors, it's giving these big companies an unfair hold on small breweries," he said. "Once they sign a contract, there's virtually no way out of it."

Goldberg said most of the state's craft brewers,  including his Gloucester-based company,  are content with their distributors. But the proposal gives flexibility for those who want out.

Lobbyists outspend craft brewers

In the battle for support on Beacon Hill, craft brewers have been outspent by beer distribution companies that have poured hundreds of thousands of dollars into lobbying efforts.

Kelley's firm alone spent $150,000 in 2014 to lobby Beacon Hill, according to the secretary of state's office. His clients include the Merrimack Valley Distributing Co. and 11 others.

Last May, Kelley's firm spent nearly $4,500 wining and dining lawmakers, legislative aides and distributors at a party at the tony Carrie Nation restaurant on Beacon Hill, according to his lobbyist disclosures.

The craft industry relies mostly on the guild to advocate for them on Beacon Hill, with its representatives meeting with lawmakers to make their case.

Lobbying efforts appear to have paid off for the distribution companies. Peisch's proposal languished in committee last year and died before it was brought up for a formal vote in the House and Senate. She re-filed the bill in the current legislative session, which got underway in January.

Steve Sanderson, owner of Riverwalk Brewing in Newburyport, distributes his own craft beers to bars and package stores across the state but said he will eventually enter into a partnership with a distributor.

He said the current distribution rules are vexing for many start-up breweries.

"We just want a fair shake," he said. "We want to enter into business relationships on an equal footing and if there are issues, to be able to move on without having to go through a protracted legal process."

 

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