Wisconsin beer deal

Small brewers, wholesalers compromise on distribution rules

Nov 8, 2005 - Wisconsin's beer wholesalers and small brewers have reached a compromise on legislation the brewers had initially opposed.


The bill still would require brewers to grant exclusive distribution territories to wholesalers, something the wholesalers want. Wholesalers buy beer from brewers and then sell it to taverns, liquor stores and other retailers.

Most wholesalers already have exclusive contracts with brewers. But the small brewers said a state mandate could hamper their ability to sell beer without using wholesalers, which they said could reduce competition, restrict their access to retailers, raise their costs and force price increases.

Led by Deb Carey, president of New Glarus Brewing, the brewers bitterly fought the bill.

Under the compromise, a small brewer could bypass wholesalers to make direct deliveries to retailers in certain situations. That provision would apply when a wholesaler faces a business interruption that breaks the distribution link between breweries and retailers.

Also, brewers could make direct deliveries to festivals, as well as emergency shipments to retailers running short on beer. The compromise also would ease proposed restrictions on other direct deliveries by brewers to retailers.

"It's a good thing for us," said Russ Klisch, president of Lakefront Brewery in Milwaukee. "It gives us a little more flexibility."

Carey agreed. The original proposal, she said, "was just killing us."

Under the original proposal, brewers would have been forced to maintain separate warehouses - one major sticking point for small brewers - if they ship beer directly to retailers. Brewers would have been exempt from that provision if they produce fewer than 100,000 barrels of beer yearly or sell fewer than 30,000 barrels directly to retailers.

Wisconsin law currently allows in-state brewers to ship beer directly to retailers. But the law requires brewers outside Wisconsin to maintain a separate warehouse if they ship directly. That amounts to different treatment for out-of-state brewers and - as a result of a recent Supreme Court ruling related to direct sales of wine - leaves the law vulnerable to a legal challenge, the distributors said.

Most of Wisconsin's small brewers produce far less than 100,000 barrels, according to the distributors, which said the original proposal would not harm small brewers. But some small brewers are growing rapidly, and they feared that the original legislation would eventually apply to them.