United States: Speedy Delivery! A Recent Innovation May Lead To Greater Profits Through Self-Distribution For Maryland Craft Brewers

Last Updated: May 23 2017
Article by Henry M. Abromson

If you hold a class 5 manufacturer's license, a class 7 micro-brewery license, or a class 8 farm brewery license in Maryland, then you are likely already aware that with a Class 7 limited beer wholesaler's license, you have the right to self-distribute up to 3,000 barrels of your own beer each year.

However, self-distributing beer and making a profit doing it has been quite difficult for most small craft breweries to accomplish until now. That is because, until now, self-distributing beer has involved a great investment of time, money, and resources; many small brewers, especially, are already challenged in all three of those areas. Self-distributing beer, in any meaningful quantity, requires a large financial investment to purchase the vehicles to transport the beer, to hire and pay additional personnel to drive those vehicles (or pull your existing labor force away from important tasks to now deliver the beer), to fuel and maintain the vehicles, and to dedicate sufficient resources to manage the logistics involved with getting the beer from point A to point B in a relatively efficient manner. As a result, largely, until now, the juice that can potentially be realized from pursuing this additional revenue stream has not been worth the squeeze.

But that equation may soon be changing with the advent of businesses focused solely on the delivery of beer for small, craft breweries. It appears that such a delivery service will begin its operations in Maryland within the second calendar quarter this year. For a weekly fee, this company will pick up a brewer's product at the brewer's facility and deliver the product to point B (i.e., the retailer), sparing brewers the burden, expense, and headache over logistics otherwise involved with self-distributing beer. In other words, use of the delivery company will potentially allow small brewers in Maryland to finally realize the juice of self-distributing while relieving those brewers of much of the hassle and expense involved with the squeeze.

The significance of this innovation, which will finally allow small brewers to easily and affordably self-distribute their own beer in Maryland, cannot be overstated. Historically, brewers were not able to transport their beer directly to retailers. Shortly after the end of Prohibition, a three-tier distribution model was established by most states to regulate the consumption of alcohol. The three-tier distribution model, which is largely still intact in most states, including Maryland, requires brewers to sell and deliver their product to retailers through wholesale distributors, pursuant to wholesale distribution laws. Typically, small breweries are at a significant disadvantage under the wholesale distribution laws as most states' laws, including Maryland's laws, were drafted to protect the distributor rather than the brewer. As a result, many terms of a distribution agreement—an agreement made between the brewer and wholesale distributor for the delivery and sale of the brewer's product—which are mandated by law, can be on the verge of oppressive for small brewers. In 2014, Maryland legislators sought to help small brewers on this front by permitting them to self-distribute limited quantities of their beer with a class 7 limited beer wholesaler's license.

Although it may seem like hiring a craft beverage delivery service to deliver beer would mean returning to the three-tier distribution model and the disadvantageous laws in connection therewith, make no mistake, this new craft beverage delivery service model will enable the breweries that enjoy the right to self-distribute their product to avoid much of the hassle and expense of self-distribution as well was the greatest drawbacks of the three-tier distribution system. These businesses are simply delivery services, which operate on the brewer's behalf, under the brewer's self-distribution license, not traditional wholesale distributors. That means, among other things, they can deliver the beer on behalf of the brewer without requiring the brewer to enter into a largely one-sided distribution agreement.

With this new service being offered in the marketplace, not only do the brewers stand to gain, but so do consumers, who may now see more of their favorite craft beer products in the stores and bars they frequent. Additionally, retail outlets will see efficient, consolidated, professional deliveries from multiple craft breweries from one delivery provider. Finally, it seems, there is an avenue for small Maryland brewers to profit from this well-intended change in the law.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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