In previous blogs, one could find a number of stories about beer wholesalers who have violated federal and state beer laws and regulations. Even some who violated standards by going outside the parameters of their franchise agreements with suppliers. These narratives ended with the wholesaler being penalized in some form or other, and, in every case, the end result was that the wholesaler lost their company.
It did not matter if the wholesaler was larger or small. Whether it was the Schlitz wholesaler in Pennsylvania who refilled Schlitz kegs with Old Milwaukee beer and then resold them as Schlitz, or the multiple Coors wholesalers who transshipped beer back east or even out of the country during the 70s and 80 and were caught doing so, all who violated the laws paid a price. Even the sad situation of Murray Brothers in Denver has a similar ending. Cases of Pabst were sold as 3.2 beer, when in fact, the Pabst was actually strong beer and the owner had instructed the warehouse to erase the strong beer markings and had it resold as 3.2. The state discovered what Murray Brothers had done and suspended their licenses, resulting in a number of vendors terminating their agreement the wholesaler. What was left of the wholesaler was sold to a competitor.
Just this past week, the industry has learned that the Sheehan’s company, Craft Brewers Guild of Massachusetts, has been found guilty of paying retail outlets to ensure their brands were on tap. According to the state, CBG was paying between one and two thousand dollars per handle. At this time the penalty for Craft Brewers is to suspend their state licenses for 90 days.
If this suspension does come to fruition, what would it mean to the vendors represented by CBG? The vendors could transfer their business to other wholesalers without paying for their brands due to contractual violations by CBG. What if the vendor, however, is doing business with the Sheehan’s in other states? How would that play out for both companies? In one word: awkward! The state of Massachusetts is constantly investigating retailers who are involved in this illegal activity. The outcome in many scenarios could become very messy.
What has not been determined is the role of the vendors involved. Should the industry assume that the vendors, whose beer was on tap, did not directly or even indirectly know anything about possible illegal activity?
Buying accounts, or the pay-to-play game in the industry has been going on for years, but recently, with the rise of the craft beers, and the pressure to get volume and customers, an environment has been created at the retail level which makes this pay-to-play game more common. The vendor’s named, or those involved, need to be held accountable, too. Maybe they will.
The craft beer industry has, and will, continue to change the laws to fit their business needs and models. Many of these changes are welcomed and long overdue. It is safe to say that a number of other regulations also need to be modified or eliminated to meet today’s industry needs in providing access to the market at all levels. But buying the business at retail will only damage the beer industry.
What is happening in Massachusetts with the Craft Brewers Guild is just the beginning. You cannot lose if you do not play…..