Question re 3 tier in DC

[denver brewhoo]

I have read here the general statement that "DC is a three tier municipality"......but this language from the alcohol board re a Class B Manufacturers license (brewery) seems to contradict that:

The license authorizes the licensee to operate a brewery in the District of Columbia. The licensee may sell the beer manufactured at the brewery to another DC license holder for resale, to a dealer licensed under the State or US territorial law for resale, or directly to a consumer. However, when sold to a consumer, the beer must be sold in barrels, kegs, or sealed bottles and, after sale may not be opened or consumed on the brewery premises. Fee is $5,000.

This is not strict "3 Tier" if I understand correctly because it allows the brewer to sell directly to retailers (i.e. "another DC license holder for resale")...and that would seem to this tourist to include tavern licenses, restaurant licenses, etc

Just thought the Human Head crew might be interested in that, or that if I'm misunderstanding, somebody might straighten me out.

[denver brewhoo]

PS, note that this appears prohibit CANNED beer sales direct to consumers, by exclusion.....or rather that you might need to get Council to change the law if you wanted to do this.

FWIW.......

[Jim Dorsch]

This would appear to be an exception to allow sales from the brewery only.

I believe it's also legal for a retail establishment to purchase directly from a producer if the product isn't wholesaled in DC.

A brewery outside the District can pay a fee to the DC government to import its product, i.e., to drive the beer into DC and deliver to retail licensees. A wholesaler can do the same. It's kind of a pain, involving paying for each instance in person.

This is all stuff I've surmised over the years, not solid fact, as I'm no expert.

[MeridianFC]

I think that's how Dominion came up with their plan to deliver directly and avoid having to deal with Premium Distributing. That said I'm not sure if they're still doing this our not. Dominion products are not has prevelent in DC as one would assume.

[Jim Dorsch]

I believe Dominion is still self-distributing some of its brands in DC.

It appears to me that as distributors consolidate (nationwide), we're seeing more problems of selective distribution, i.e., a wholesaler decides not to distribute all a brewery's products. In VA, for example, we have a franchise law that grants exclusive territories on a brewery basis. This means that in a given area, one wholesaler has the rights to all products of a specific brewery, and that wholesaler is not required to distribute all its products, while at the same time no one else can distribute that brewery's beer. So, everyone loses except the wholesaler. Examples in NoVA include Anchor (Porter) and Sierra Nevada (Stout).

Unfortunately, franchise laws are becoming more common all the time.

Here are some interesting links on the Wisconsin wholesalers' attempts to take away the right of self-distribution, the justification being that the supreme court ruling on direct shipping requires equal treatment of all suppliers.

http://www.journaltimes.com/nucleus/index.php?itemid=2569

http://www.jsonline.com/bym/news/nov05/368757.asp

[MeridianFC]

It could just be ingnorance and predjudice on my part, but it seems in most cases the wholesalers/distributors are not on our side. Us being the consumers and the brewers.

I've never had a good response when contacting a local distributor trying to find where they might sell a particular product they're supposed to carry.

Some, not naming names, but if they were responsible for direct retailing, would be out of business by now.

[Jim Dorsch]

Like all special interests, it appears to me that beer wholesalers want no change in their game, unless it's to tighten their hold. As they consolidate, they change from small, family businesses to large outfits that care only about the bottom line. When you throw in such protectionist measures as franchise laws, it puts all the power in the wholesalers' hands, and I would say some go so far as to view their customers as an inconvenience, and customer service as something to be engaged in grudgingly, and as little as possible.

That said, there are some very friendly, responsive wholesalers out there, but I fear they are a dying breed.

I hope the various court cases, foremost the Costco case in Washington state, will someday result in the wholesalers operating in a free, open market like everyone else, but I fear it won't happen soon.

[D0nc0smic]

part of the reason that wholesalers can be so callous is that they are practically idiot proof businesses, each one basically hold a monopoly on the brands that they distribute within a certain area, so the only comptetition is from maybe one or two other wholesalers who carry a completely different lineup of brands. Just look at the lawsuit between the Maris family and A-B, the reason its such a big deal is a licensed A-B distributorship is a goldmine, with a total monopoly on everything they make plus a few things they have agreements with.

[Jim Dorsch]

How true!

Incidentally, there is some good material on the wholesale tier in the recently released book, Beer School, by Hindy and Potter of the Brooklyn Brewery. Amazing how things can get messy in a regulated environment.

Originally posted by D0nc0smic
part of the reason that wholesalers can be so callous is that they are practically idiot proof businesses, each one basically hold a monopoly on the brands that they distribute within a certain area, so the only comptetition is from maybe one or two other wholesalers who carry a completely different lineup of brands. Just look at the lawsuit between the Maris family and A-B, the reason its such a big deal is a licensed A-B distributorship is a goldmine, with a total monopoly on everything they make plus a few things they have agreements with.

[chazwicke]

I remember working with MASB and Bud Hensgen back in the early 90s to try to get the laws changed in Virginia to allow brewers to be able to sell their products directly to the public especially at tastings, festivals and events. The wine industry in VA had these privileges but at one time the brewers did not. We lobbied and were successful in having this law changed. I remember working a reception for lawmakers at Richbrau in Richmond. That is why you can buy growlers, bottles and kegs from Virginia Brewers. I wonder why no DC brewer has pushed the envelope by selling growlers.

The three-tier system is not friendly to smaller brewers. The bulk of most of these distributers business comes from the macros and competition for shelf space is tough. I often see St. Georges Brewing beers relegated to the bottom shelf and thus passed over by the non-discriminating consumer. I also believe that competition for shelf space was a major factor in the Potomac River Brewing Company’s failure to become a player in Northern VA. Maybe Derek can fill us in on this.
.

[Jim Dorsch]

Franchise laws that protect wholesalers from termination by a brewery are particularly unkind to small brewers. By putting a price on a brand, these laws also make it hard for entrepreneurs to start new distribution businesses, since they will likely have to buy their brands.

[denver brewhoo]

Originally posted by chazwicke
I wonder why no DC brewer has pushed the envelope by selling growlers.



Really? Nobody?

Refresh my recollection---we're talking Chop House, Gordon Biersch, Cap City x2, John Harvard's, and that's basically all, I mean all w/in city limits. This doesn't sound right, who am I leaving out?

So you can only consume any of these folks' beer, on premises?

Do any of these sell growlers in their other locations, outside DC? The statute seems to say a holder of a brewery license can sell in bottles and kegs. A growler is a bottle. Maybe they have space restrictions that make this unworkable?

[chazwicke]

I have asked at John Harvards before and was told they were not allowed. It was a couple of years ago. Other John Harvard locations might sell growlers though. Chophouse is part of the Rock Bottom Chain and I know Rock Bottom Ballston sells growlers.

I agree that a growler seems like a bottle to me or at least a sealed container.

Most of the Virginia and Baltimore brewpubs sell Growlers.