State alcohol laws are barrier to commerce, lawmakers told

By 
Colleen Quinn, State House News Service
Nov. 12, 2013

When it comes to beer, wine and liquor licenses, the Legislature is being asked to step aside and relinquish some control.

Lawmakers on Tuesday heard from craft beer brewers who want changes to a law they say "handcuffs" them in their ability to compete because of unbreakable ties to wholesalers. Municipal officials appealed to remove control of liquor licenses from the state and give it to local officials. And wine drinkers want to lift a ban on direct wine sale shipments to consumers.

Advocates for each of the three bills called alcohol-related laws outdated, and failing to reflect the times.

In 1971, when the Legislature passed laws governing relationships between breweries and wholesalers it was to protect the local distributors from the whims of national beer makers, according to Rob Martin, founder of Ipswich Ale Brewery and president of the Massachusetts Brewers Guild. The law provided enormous protection to "mom and pop" wholesalers from the national brewers, he said during a hearing.

The industry dynamics have shifted in four decades, Martin argued. Small craft brewers fight for wholesalers' attention to get on store shelves and in restaurant taps. If the wholesaler ignores the brewer, they are locked in to the partnership with no way out because of a 1971 law, Martin and other brewers testified. Brewers are pushing for a bill (H 267) to make it easier for them to opt out of contracts with wholesalers, filed by Rep. Alice Peisch (D-Wellesley).

Dennis Bates, the brew master of Opa Opa Brewing Co. in Southampton, said his business was growing steadily from 2004 to 2006, with the brand selling 30,000 cases. They invested in a larger brewery and hired more employees. A few years later, after signing on with a distributor, their growth had stopped, he said.

The distributor told them their beer represented less than 1 percent of the wholesaler's businesses, "and that is how much sales attention we would get," Bates said.

"We had realized our biggest competitor had become our own distributor," he said.

The company appealed to the state Alcoholic Beverages Control Commission, where disputes between distributors and wholesalers are handled. The ABCC stated the brewer must continue to do business with the distributor, Bates said. The brewery's sales slipped, and the company is racking up legal fees without a resolution, he said.

Distributors argued that the law does not need to be changed, and there are plenty of examples where brewers are able to break ties with wholesalers by going before the ABCC.

Bill Kelly, president of the Beer Distributors of Massachusetts, said wholesalers would be open to termination "for no reason at all." Under current law, beer makers can choose which distributor they want to sign on with, and can work with them for six months before they have any responsibility to the distributor, Kelly said.

Distributors need the protections, Kelly argued, because they spend money on marketing and sales for the beers, and make long-term investments in warehouses and employees to deliver on commitments to brewers.

As an example, Kelly pointed to a wholesaler in Everett who invested millions of dollars in a new 100,000 square foot warehouse that caters to small craft brewers. If the proposed changes moved forward, it would jeopardize those jobs, he said.

Chris Tkach, founder of Idle Hands Craft Ales, a small growing brewery in Everett, said he currently distributes his beer locally, but hesitates to sign on with a distributor to get sales further afield.

"This marriage for life with our distributor is a huge risk that gives me great pause on whether I want to move forward," Tkach said.

Jim Cook, founder of Samuel Adams Brewing Co., said he began brewing beer at his kitchen table in Massachusetts nearly 30 years ago. He said he hopes fellow craft brewers can follow in his footsteps, but fears the ties to wholesalers will hold them back. Today, Sam Adams has 1 percent of the market share of beer in the U.S.

"When I started brewing Sam Adams, I realized something very surprising here in Massachusetts - once I sold my beer to a distributor they held the rights to my beer forever. Not my lifetime, or my children's lifetime, my grandchildren's lifetime - forever," he said.

The system served a purpose 40 years ago, but is now an unnecessary hindrance to brewers and their ability to grow jobs, Cook said.

Another bill before the committee would give control of liquor licenses to municipalities.

At-Large Boston City Councilor Ayanna Pressley urged lawmakers to overturn the state's "antiquated" liquor license law by lifting caps and wrestling control away from the state to give it to local communities.

Pressley told lawmakers a 1933 law that gives the state authority over liquor license caps hurts small restaurant owners who are unable to find an available license, and deprives neighborhoods of needed economic development.

Often the only way to get a license is to buy one that someone else is holding - a task that some say is nearly impossible or extremely expensive.

Pressley was advocating for a home-rule petition before the Legislature, as well as legislation filed by Sen. James Eldridge (S 93) that would provide for local control of liquor licenses. The home rule petition is awaiting a vote in the City Council.

There is a disparity between neighborhoods, Pressley said, pointing out that the North End has 99 liquor licenses while Mattapan has nine. Roxbury has 26 licenses, 17 of which are for package stores, according to Pressley.

"This is an issue that is hurting our entire commonwealth," Pressley said.

Pressley said she hopes changes to the law will encourage the growth of more restaurants, which bring economic vitality to a neighborhood. "We must reduce the barriers that make it harder for businesses to thrive," she said.

Rep. Theodore Speliotis (D-Danvers) urged his colleagues to end the ban on out-of-state shipments of wine sent direct to consumers (H 294). Speliotis said it is a reasonable proposal that would allow residents to belong to online wine clubs where they can buy unique vintages from around the world. Consumers in 40 other states have that ability, he said.

In March, former Patriots football quarterback Drew Bledsoe - now a vintner - met with House Speaker Robert DeLeo and Speliotis to encourage legalizing direct wine shipping.

Opponents argue it would make it easier for minors to access alcohol. Speliotis told lawmakers Tuesday that technology is so advanced it would be easy for sellers to identify the buyers.

Similar proposals have failed to win approval in the Legislature in the past.