Brewers Association (BA) government affairs leaders Marc Sorini and Katie Marisic laid out the state of play at the state and federal level earlier this week during the Craft Brewers Conference in Nashville.
On the state level, the BA is working in conjunction with guilds on several issues, including beer franchise law reform, direct-to-consumer sales privileges, self-distributing and differentiation of liquor and beer.
“All of this is going to have to be a long, multi-decade process,” Sorini said. “We’re talking about legislating in dozens and dozens of states. In most cases, we’re talking about laws that have been on the books for decades, usually are going to be vigorously defended by some segments of the industry. And so not having an enormous amount of success in a given year shouldn’t discourage the process.”
Sorini, who has served as the BA’s general counsel since 2020, broke down the status of each area.
Beer Franchise Law Reform
The BA is advocating for a change to beer franchise laws in several states. Franchise laws, many enacted in the 1970s and 1980s to protect wholesalers from mega brewers terminating them on a whim, lock brewers into nearly unbreakable contracts with their wholesaler partners. The BA says these laws need to be updated to reflect the increased number of small breweries in the U.S. and provide exemptions for them.
Sorini noted the BA is working with wholesalers in Massachusetts to overturn a trial judge’s ruling that the franchise law reform reached in the Bay State in January 2021 was unconstitutional. Sorini added that the Massachusetts Attorney General recently intervened on behalf of the brewers in the case
Direct-to-Consumer Sales
The BA believes that the market needs to evolve “toward a reasonable direct-to-consumer interstate shipping model,” as consumers seek more variety and distribution channels consolidate.
“There’s just no way that our distributor partners, who are terrific for larger brands, can effectively handle teeny, tiny brands,” Sorini said. “With 9,000 breweries, 8,900 of them are going to be very small brands, probably not very attractive to the mainstream distributor.”
Sorini pointed to wineries, which have built their business through DTC shipping and own-premise sales.
The recent settlement in Oregon of a federal lawsuit filed by Washington breweries to allow out-of-state breweries to ship to the Beaver State “shows the power of litigation,” Sorini said.
There are active bills in Illinois and Texas, and Sorini encouraged brewers in any state seeking added DTC privileges to stick with those efforts.
“This is a tough lift. Not surprisingly, there are entrenched industry members in other tiers that are not particularly happy with seeing this happen,” he said.
“You’re not going to win Year One or Year Two, but it took wine 25 years to get from a place where there were only 10 states that allowed interstate DTC to now there’s 47 states,” he continued.
Self-Distribution
The BA believes it’s time to go “back to the future” to the 1930s and allow small brewers to self-distribute, as many states already do, Sorini said. The change in the holdout states is necessary due to the proliferation of breweries and wholesaler consolidation.
Differentiation of Beer and Liquor
Since the inception of the U.S., beer and liquor have been taxed and regulated differently. The rise of canned cocktails has led to efforts by the spirits industry in many states to lower taxes on those products and gain broader market access. The BA argues that canned cocktails are being used as a recruiting tool for higher ABV spirits.
“We’ve we’re batting 1.000 this year, right now,” Sorini said. However, California lawmakers are considering legislation to give greater market access to canned cocktails.
“This is going to be a long struggle because the liquor folks want what we have, which is lower taxes and higher availability,” he said.
Playing Defense on the Federal Level
Looking at the 118th Congress, BA senior director of federal government affairs Katie Marisic conceded that “it’s going to be hard to get a lot of things accomplished in 2023” and 2024 is a presidential election year “so it’s gonna be a fun one.”
Although the BA doesn’t expect much activity, Marisic said the trade group will continue pushing its priorities. Those include defending the permanent tax cuts received in the Craft Beverage Modernization and Tax Reform Act.
“Once you get a tax recalibration or a tax reduction, you then have the joy of fighting to defend it for the rest of your life,” Marisic said.
Another focus area is advocating for the passage of the U.S. Postal Service Shipping Equity Act, which would allow the USPS to ship alcohol in states where DTC shipping is legal, expanding beyond private carriers, such as UPS and FedEx, which don’t serve all areas. Marisic added that allowing the USPS to ship alcohol would generate $180 million in revenue for the USPS in the first year of implementation.
Also on the agenda are:
- Appropriations legislation to ensure the BA’s agricultural partners and the TTB have the necessary funding;
- The Farm Bill, working with hops and barley growth to ensure their priorities are met;
- And COVID relief program, making sure businesses that qualified for but didn’t receive Restaurant Revitalization Fund tax credits get them.
Other issues the BA is working on at a federal level include ensuring there is a strong supply chain of food and beverage grade CO2, repealing the 232 tariffs on aluminum and steel, gaining a research-and-development tax credit, passing legislation to ensure uniform and consistent ADA regulations for websites, and advocating for legislation that would create competition in processing credit card transactions.