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February 28, 2024

Brewers, wholesalers push back on craft brewery distribution reforms

Andrew Larson | Hartford Business Journal The State Capitol.

A bill that would make changes to Connecticut’s craft beer industry is facing push back from both brewers and wholesalers. 

Local breweries say the proposal doesn’t go far enough to help them at a time when the industry continues to struggle coming out of the pandemic. 

Distributors say the measure would further erode Connecticut’s three-tier alcohol distribution system.

House Bill 5149, proposed by the General Law Committee, calls for several changes. It would allow: breweries to sell and deliver beer kegs to locations within a five-mile radius of their permitted premises; package store permittees to provide fee-based spirits tastings; and Connecticut craft cafe permittees to sell additional alcoholic beverages manufactured in the state.

General Law Committee members said they drafted the bill to help the state’s craft brewing industry. But Rachel Diamond, executive director of the Connecticut Brewers Guild and head of distribution and brand development at Bethel-based craft beer maker Broken Symmetry, said the legislation doesn’t go far enough.

Diamond told the Hartford Business Journal that the guild asked legislators to allow for “dual assignment,” which would allow small breweries that make 60,000 barrels of beer a year or less to sell side-by-side with the wholesalers that distribute their products.

Diamond said the change is needed because, according to existing wholesale laws in the state, brewers give up their right to self-distribute as soon as they sign a contract with a wholesaler.

Diamond said the guild sat down with wholesalers last year to collaborate on a proposal that would tweak the existing law, but wholesalers declined to work on a compromise.

“Dual Assignment would allow these tiny breweries to sell in CT in partnership with the wholesalers,” Diamond said. “We are already granted the ability to self-distribute, across the state, with our beer manufacturing permit. But as soon as we sign with a wholesaler, that right goes away.”

Lawrence F. Cafero Jr., executive director and general counsel for the Wine and Spirit Wholesalers of CT Inc., a trade association representing 56 wholesale distributors in the state, said the bill’s language “attempts to further erode the Three Tier System of alcohol beverage manufacturer, distribution and sale.”

Generally, under the three-tier distribution system, manufacturers must sell their products to wholesalers, who in turn sell to retailers, who sell to consumers, according to the Office of Legislative Research. Connecticut, like most states, has exceptions that allow manufacturers to sell directly to consumers under certain conditions, according to OLR.

“The cornerstone of the Three Tier System is that each Tier is separate and distinct and does not encroach on the duties and responsibilities of the other tiers,” Cafero said in his written testimony. “Put another way, suppliers/manufacturers, wholesalers/distributors and ‘on’ and ‘off’ premises retailers, (restaurants and package stores) ‘stay in your lane.’”

Cafero said his organization opposes all three parts of the bill, including allowing breweries to sell kegs within a five-mile radius.

“This is not a provision that corrects a previous oversight. This provision expands an existing exception to the Three Tier System by allowing a manufacturer to distribute their product as if they were a wholesaler,” Cafero said. “These ‘breaches’ of the Three Tier System are happening more frequently in our law and, if they continue, will completely erode the very system that has worked so well to protect the Connecticut consumer with safe, reliable products over the past 90 plus years.”

An amendment to the wholesaler law would allow breweries to directly sell to some smaller-tier bars, restaurants and package stores currently ignored by wholesalers that have minimum purchase order amounts, Diamond said.

“If the small restaurant across the road or the mom-n-pop package store can’t get a delivery or meet the wholesaler minimum dollar order, we can supply a case or a log to keep the little guys going,” Diamond said. “I don’t think anyone is trying to get out of their (wholesaler) contracts. We know the market is down and we are looking for ways to stay in business. If they can’t sell our beer, we can.”

Liquor stores weigh in

Wine and Spirit Wholesalers of CT submitted testimony in opposition to all parts of House Bill 5149.

Breweries also opposed the craft cafe language of the bill because they viewed it as too limited in scope. Only a small portion of Connecticut craft breweries have that permit, something at least one brewery called “almost a defunct permit” in testimony.

A craft cafe permit allows for a business to sell food and alcoholic beverages manufactured in Connecticut for on-site consumption. 

Section two of the bill, which allows package store permittees to provide fee-based spirits tastings, saw support from Connecticut Alcohol Retailers Exchange, which represents liquor stores and alcohol retailers in the state.

“As a result of the boutique production of some spirits, namely bourbon, it is cost prohibitive to offer free samples,” the organization’s executive director Josh Hughes said in a statement. “For example, Pappy Van Winkle 23 gets the number 23 because that's how many years it is aged so it’s not like a bourbon that is distilled a few years and bottled up. Only 84,000 bottles of this rare bourbon are released each year, and we hope that package stores will be given the opportunity to charge for some unique products they wish to provide samples.”

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