Last night I was at a supper when I got an urgent email from Art DeCelle, acting president of the Beer Institute, to call him ASAP. Art said that the BI had an important statement that they were willing to give me, but they "strongly encouraged" me to run it in its entirety this morning. I agreed to this because, well, it's the Beer Institute. But mainly I agreed because Art DeCelle asked me to do it, a man whom I admire and trust. So here is that statement in its entirety, such as it is:
Joint Statement of Beer Institute Board of Directors
March 11, 2010
For nearly a year, the Beer Institute Board of Directors has worked in good faith with the NBWA Executive Committee to help co-author federal legislation to further protect the three-tier system from recent legal challenges.
Throughout this process, the BI has clearly indicated its support for a bill that would confirm the pre-eminence of state law concerning alcohol, restrict retailer-to-retailer sales, require retailers to buy from a licensed wholesaler, protect exclusive distribution territories, require out-of-state sellers to obtain special permits, ban central warehousing, uphold cash laws or limits on extension of credit to retailers, prohibit or limit direct shipping, uphold come-to-rest requirements, and place the burden of proof on the parties who seek to challenge these state alcohol laws. The brewers and importers remain vigorously supportive of the three-tier system.
In addition, BI members consistently have sought NBWA support for protecting existing federal jurisdiction over advertising and marketing, product composition and labeling, non-discrimination in state regulation and taxation, and consistent treatment of imports.
Representatives of the NBWA have rejected numerous legislative drafts and reasonable compromises from the BI that sought to strike a balance on these matters that best served the interests of the entire beer industry. In addition, the NBWA has initiated a unilateral legislative strategy that brewers and importers believe to be detrimental to the interests of all those who brew, distribute or sell beer.
As a result, the BI Board of Directors has decided that discussions with the NBWA Executive Committee on these matters have run their course and that we will take the actions we believe are necessary to protect the interests of the entire beer industry.
End of Statement
When I read it on my phone, I actually exclaimed "chingar", which raised eyebrows at the table. It made me very melancholy, because obviously brewer-distributor relations have reached a new low. What has caused this sudden change in heart, particularly after we heard that constructive meetings were held in Phoenix in dark rooms at our Beer Summit last week? Well, from what we can ascertain, it was a series of unfortunate events that occurred in rapid sequence.
Let's take a ride on the BBD Time Machine and recount how we got to this sad state of affairs. Last year, MillerCoors took much of the heat from distributors as they rolled out their new distributor agreement and sought to spur consolidation while A-B was the good cop. Today, as A-B fights Illinois over the right to own 100% of a very large distributor in the important Chicago market -- and using winery direct shipper-type legal arguments, MillerCoors is wearing the white hat. It's topsy turvy out there. Craft brewers, always seemingly caught in the middle, are now wondering about their own access-to-market issues if self-distribution carve-outs get whacked by the courts and/or brewer branches start becoming more common.
Meanwhile, the NBWA has taken a more independent demeanor as they consider seeking federal legislation that would insulate state alcohol laws from Commerce Clause scrutiny and help clarify that state alcohol laws have the presumption of validity and that plaintiffs, not states, should have the burden of proof when it comes to alcohol regulation. NBWA first became clear about addressing these distributor issues going back to their convention and following BI's letter to distributors about the inability to reach an agreement ("We agree to disagree", they said). The latest Illinois development in the form of a lawsuit throws spice in the stew. There are lots of wheels turning, and teams aren't exactly clearly delineated. Proof of that was the strange bedfellows found aligned against A-B in Illinois -- you don't normally see distributors, MillerCoors, Southern Wine and Spirits, and Rocky Wirtz on the same side.
But here is the kicker: Now we have the news that a sub-committee of the House Judiciary Committee is scheduling a hearing next week to discuss US regulation of bev-alc, particularly as it differs beneficially from that of the UK. The brewers are peeved because they are drawing a connection between the sub-committee's hearing, NBWA's federal advocacy efforts, and the timing of that hearing with the Anheuser-Busch lawsuit against the Illinois Liquor Control Committee.
Plus, brewers say they were caught unawares of the hearing until this week, even as the Beer Institute, Brewers Association, and NBWA leaders met last week at the Beer Summit. Nothing was mentioned about a hearing.
But one source close to the NBWA Board says that the groundwork for this hearing was being laid as far back as last Fall, and the timing with A-B's troubles buying Soave is a complete coincidence. "You can't get the ball rolling on something like this overnight," says our source.
Regardless of the timing, A-B's Commerce Clause challenge to Illinois has raised eyebrows with many distributors BBD has spoken with, and is serving to galvanize their resolve to get something done on a federal level and work to solidify their states' regulations. "Harry, I don't have a beef with the brewers, I really don't," writes one prominent distributor in an email. "The last thing I want to do is be at odds with them. We need unity now more than ever....But we pay a lot of dues to NBWA to protect us and the state system, not to do nothing....I don't think it's asking too much to have a federal legislative tool help stop federal judges from ripping the system apart from the bench."
But that email was before this tough statement from the Beer Institute, which is a low water mark in regards to how relations are going between big brewers and distributors. The mark of trust between the two have plunged, no doubt. But your editor believes that it is always darkest before the dawn. Now we know where ground zero is. I truly hope we can pull ourselves up from this hard deck.
IMPORTS JUMP 20% IN JANUARY
One month does not a trend make, but it's sure better than a stick in the eye. Import shipments were up a big 20.4% in January, estimates Lester Jones of the Beer Institute, ending months of losses. But IRI scans don't show a jump of near that much, so some of these shipments are likely just increases in system inventory, and easy compls. Still, IRI scans are showing improvements in import performance among the Big Two, HUSA and Crown, so perhaps the worst is behind us.
Until tomorrow, Harry
"The roots of education are bitter, but the fruit is sweet."
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