Beer Distribution Quandary: Illinois Craft Brewers Lobby for Distribution Rights

After Prohibition ended, the US setup a strange 3-tier system designed to keep beer and liquor producers from interfacing directly with the public. Beer companies have to sell their product to a distributor. The distributor then sells the product to a retailer. However, some companies (notably InBev), are trying to circumvent that imposition by purchasing a distribution company (many already own shares in the companies they use). In Illinois, this action has incited some legal problems.

Illinois allows craft beer producers and nano breweries to distribute their beer directly, without having to go through a distribution company. InBev wanted to take advantage of this, but when denied, claimed prejudice against out of state brewers. The situation rapidly degenerated and the legal system became involved. An Illinois judge actually agreed with the point, and offered two alternatives – either all breweries (regardless of size or location) should be allowed to sell directly to retailers, or none of them should.

Obviously, small breweries like Chicago's Revolution Brewing, Metropolitan Brewing and Finch's Beer Co. cannot afford to do this. It's simply not economically feasible. The ultimate ruling came in the form of nullification – that is, all brewers have to sell to a distributor. However, the judge making the ruling actually gave the state legislature a chance to step in. Currently, there is a movement that might actually offer some benefits to beleaguered Illinois craft brewers, while keeping greedy mega-corporations at bay.

Lobbyists like Guys Drinking Beer, have drafted a proposal that allows those who produce fewer than 60,000 barrels of beer per year to distribute freely by purchasing their own distributor's license. For those who produce more than this (and there are some Illinois craft breweries that produce more than 100,000 barrels per year), the new regulations would enforce that they have to sell to a different distributor. 

This seems to offer the best solution for everyone. It even provides a means for brewpubs to act as distributors, helping to bolster the entire craft beer industry. However, the matter is far from settled. Both House Bill 205 and Senate Bill 88 remain open. Still, Illinois residents do have a chance to contact their legislators and urge them to vote in favor of these bills. The only other option is either nullification or open distribution, neither of which is particularly palatable for all parties in this quagmire. Hopefully cooler heads will prevail.

Posted on March 10, 2011 and filed under Facts & History, The Business of Beer.