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#FranchiseLaw Archives – PorchDrinking.com

Together Is Not Always Better: How Consolidation In the Middle Tier Is Impacting The Future of Craft Beer Brands

April 28, 2023 | 1

For most craft breweries, the trajectory of brand growth follows a somewhat traditional path – starting with taproom sales, progressing to selling in the wholesale channel, and then alignment with a beer wholesaler to grow the distribution footprint. Sounds simple enough on paper, but if you drill down into the nuances of selling beer wholesale, things get complicated very quickly. The US is unlike any other country in the world when it comes to the three-tier alcohol distribution system. Some states do not allow suppliers to self-distribute (sell directly) their products to licensed retail accounts, yielding asinine practices like selling beer to yourself for your own taproom. Some states are also dubbed “franchise” law states where if your brand aligns with a distributor you must endure a contractual arrangement that makes changing distributor partners harder than selling beachfront property in Arizona. And we haven’t even begun to address the large big beer elephant in the room and how many large beer distribution houses are aligned with one of two big players in the US beer market. For many craft brands that are just getting started or fall into the category of small to medium-sized producers, strategizing how to enter the wholesale channel is a formidable challenge, including contending with a host of other legislative, litigious, and anti-competitive issues in the middle tier that have surfaced over the past few decades. As if growing craft beer producers didn’t have enough to contend with these days in the form of rising costs of goods, labor shortages, inflation, and the squeeze from alternative beverage choices in the marketplace, woes like wholesaler consolidation, unfair trade practices, and antiquated beverage alcohol regulations are making the middle tier the next big battleground for craft beer brands. 

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