In the wake of several terminations by a handful of larger beer suppliers over the last two years, a group of California beer wholesalers have launched a new association, the California Family Beer Distributors (CFBD).
The new group cements the splintering from the state’s existing beer wholesalers association, the California Beer and Beverage Distributors (CBBD), following an exodus of several independent Anheuser-Busch wholesalers over the summer.
The new organization’s stated mission is to “support the longevity and value of family-owned companies by advocating and creating a fair regulatory environment that protects consumers, distributors, retailers and the communities we serve.”
The 501 C (6) organization’s eight founding members — a mix of independent A-B and Molson Coors wholesalers — described themselves as “California-based, family-owned and independent beer distributors.” They include:
- Advance Beverage Company (A-B);
- Beauchamp Distributing Co. (Molson Coors);
- Blach Distributing Company (A-B);
- Classic Beverage of Southern California (Molson Coors);
- Donaghy Sales (A-B);
- Heimark Distributing (A-B);
- Markstein Beverage Company of Sacramento (A-B);
- Pacific Beverage Company (A-B).
“Our businesses came together out of rising concerns around monopolistic business practices, such as forced consolidation, decreased access to market for craft brewers and loss of local jobs at large,” Markstein Beverage Company CEO Hayden Markstein said in a press release.
“We look forward to sharing our localized and family-owned perspective with California legislators who all-too-often only hear from the largest, out-of-state players in the industry,” Stacee Beauchamp, president of Beauchamp Distributing Company and a founding member of the new organization, added in the release. “Our voices are critical to ensuring a fair regulatory environment.”
The formation of the new business association comes after a series of terminations that date back to 2018, when Constellation Brands terminated four wholesalers in the state in an effort to move its portfolio of Mexican beer brands to the Reyes Beer Division. Other terminations have followed in the last two years, including Diageo’s beer division and New Belgium shifting their respective portfolios to Reyes.
Such terminations without cause have been referred to as “convenience terminations” by Andy Christon, president of Ippolito Christon & Co., a firm that specializes in valuations and wholesaler transactions. In July, he cautioned that wholesalers forced to sell brand rights are likely to receive initial offers that are “equal to about half of the full and fair value of the rights.”
Speaking to Brewbound, Markstein said such terminations and subsequent consolidations have changed the marketplace in California, cutting the route to market for some small brewers and limiting the choices of products available to consumers.
Moving forward, the primary issues the organization will focus on include:
- “Protecting member companies from forced consolidation by global mega-companies.
- “Creating a fair regulatory environment that ensures access to market for brewers and beverage producers of all sizes, such as small craft brewers.
- “Protecting consumers, distributors and retailers from unfair practices due to a lack of competition.
- “Protecting the thousands of jobs that family beer distributors have created in California.”
The California Family Beer Distributors currently has an interim board made up of its founding members. The group will elect a board in early 2021 and hire an executive director to serve as the point person for the association, Markstein told Brewbound.
To further the association’s efforts at the California statehouse, the group has hired Miller, Cespedes, and Associates to lobby the statehouse on its behalf.
Markstein said recruitment of members started in earnest over the last week, and the group is open to additional members so long as they are independent and California based.
Notable founding members include Pat Blach of Blach Distributing, who advocated for strengthening franchise laws during his speech as incoming chairman of the National Beer Wholesalers Association (NBWA) during the trade association’s Annual Convention in October, and Peter Heimark of Heimark Distributing, who serves as vice chairman of the NBWA and has been caught in the wave of terminations.
Nevertheless, Markstein said the effort isn’t necessarily about enacting more strict franchise laws but achieving “a fair regulatory environment.”
“I’m not sure how we get there, and also if I did know, I couldn’t really telegraph what that is,” he said. “But when you talk about franchise, I can tell you we had a great meeting with California Craft Brewers [Association], and we are all in agreement on our perspective of what’s important for the industry going forward. So I don’t think this is specifically only about franchise. This is about the larger issue with mega corporations teaming up with mega corporations and driving small businesses out of California and moving jobs out of California and in the end, producing less variety and choice and access to market for beer for brewers and for consumers.”
In a FAQ, California Family Beer Distributors said it differs from the CBBD, which it claims “serves the interests of one or two companies owned by billionaires from out of state and are focused on mass consolidation, resulting in jobs moving out of the state.”
Without naming names, the organization was throwing shade at the Reyes Beer Division, and possibly other larger out of state wholesalers, such as Columbia Distributing.
Asked for comment on the formation of the new association, CBBD president and CEO Victoria G. Horton shared the following statement:
“Since 1947, CBBD has been the advocate for California’s beer distributors of ALL sizes. CBBD’s members have continuously expanded their workforce in California providing their employees with quality jobs and benefits. Change is constant in this dynamic industry and CBBD’s history has been to adapt to those changes to always ensure the interests of distributors from one end of the state to the other are strongly represented. We will continue our mission of leadership for beer distributors in the midst of an evolving marketplace and regulatory and legal challenges confronting our industry.”
Although past actions have driven the formation of the new association, Markstein said the group is focused on the future.
“We’re concerned that if this train keeps rolling down this direction, that’s when we’re really going to run into real lack of access to market [issues],” Markstein said.
Asked why regulators haven’t taken a more critical eye to consolidations within California’s middle tier, Markstein said the moves have happened quickly “under the dark of night.”
“I think it just moves quicker than the regulators were able to keep up with it,” he said. “So that’s why we’re doing this: To educate, not only policymakers but regulators on what’s happened and what will potentially continue to happen.”