Beverage Dynamics is the largest national business magazine devoted exclusively to the needs of off-premise beverage alcohol retailers, from single liquor stores to big box chains, through coverage of the latest trends in wine, beer and spirits.
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award-winning Goose Island Brewing Co. to Anheuser-Busch. A-B picks up one of most cre- ative craft breweries in the country. Goose Island joins the nation's most sophisticated dis- tribution network, but it loses it's "craft" status, due to the strict definitions of the Brewers Association, and may also lose the support of some craft-only supporters. " Other small brewers are hoping to extend their reach—and, probably, their financing— without losing their souls. For example, in 2010, Rochester, NY-based North American Breweries purchased Independent Brewers United, owners of Magic Hat and Pyramid, two of the largest craft brands, plus the MacTarnahan beers. The Three Tiers Interact J ust as the large brewing and importing companies have broadened their portfolios to respond to chang- ing consumer needs, the nation's wholesalers have adapted, as well. Not only do they have to manage a greater range of products from a single brewery; many of them deal with a number of breweries, large and small, to supply a local market. Three years ago, Craig Purser, NBWA president, predicted at his association's annual meeting that wholesalers would soon be "transitioning from being brand-dependent beer wholesalers to that of brand- building beverage distribution companies." He explains, "For years, there was an absolute dependence, almost exclusive, on a distributor's primary beer brand. These member distributors, 20 years ago, whether they were exclusive or not, sold 96% of their volume with their primary brewer. That's a very differ- ent scenario from most members today." That transition has changed somewhat the rela- tionship between producers and distributors, but it is a relationship that is always adjusting. The most contentious issue dividing the producing and distributing tiers is the reintroduction of the CARE Act, which is supported by wholesalers and opposed by brewers. First introduced in 2010 and revived this year, the legislation is a response to court cases, especially the Granholm v Heald decision in 2005, which ruled that states could not restrict out-of-state shipping of bever- age alcohol and allow in-state shipping. The CARE Act seeks to make the Commerce Clause of the Constitution secondary to the 21st Amendment, which in effect gave states the right to regulate alcohol. In appeals to the public, supporters of the CARE Act stress the importance of local decision-making to safeguard how alcohol is sold in the community. Back then [1990], we lost 60,000 jobs in brewing, distributing, retailing, tourism and related industries when that price jumped up.We feel that the excise tax on beer remains regressive at the federal level." —Joe McClain, president, Beer Institute Opponents of the act point to the limitations on con- sumer choice if states can restrict direct shipment. However, at the root of the conflict are state regulations that could benefit beer wholesalers and inhibit the actions of brewers—and possibly retailers. Joe McClain, the new president of the Beer Institute, the trade association for large breweries, restates the Beer Institute's support of states rights under the 21th Amendment, but adds, "We think things are working fairly well, the courts work they way they're supposed to work, and challenges to the three-tier sys- tem are handled. Frankly, we think the CARE Act is a solution in search of a problem, and that problem does not exist." On other issues, the two tiers—and their two pow- erful advocacy organizations—are in accord. Specifically, both groups are pushing once again for pas- sage of the BEER Act, which would repeal of the 1990 doubling of the excise tax on beer. Looking at the con- sequences of that action, McClain says "Back then [1990], we lost 60,000 jobs in brewing, distributing, retailing, tourism and related industries when that price jumped up. We feel that the excise tax on beer remains regressive at the federal level." NBWA president Craig Purser is determinedly upbeat. "The industry has a great story to tell," he says. "We have a system that is successful not in spite of itself, but because of itself. Regardless of occasional disagreements, the fact is that this is a successful sys- tem that allows tremendous access to market, it allows new entrants to get established and grow. When we look back at it, that's what brings a smile to your face." It's tempting to focus, as industry executives must, on year-to-year fluctuations in reported sales. But despite a difficult couple of years, and economic con- ditions that have taken their toll on beer's most dependable consumers, millions of people still find a place for beer in their lives. s Beverage Dynamics • www.beveragedynamics.com • September/October 2011 • 45