Massachusetts Brewers and Distributors Agree Over Franchise Law Reform

Many craft breweries have made their way into the beer aisle in recent years. For some Massachusetts craft brewers, however, there were many barriers to emerging in this competitive market. Now, new franchise law changes mean Massachusetts brewers can better reap the benefits of a growing industry.

After more than a decade of disagreement between wholesalers and brewers, new legislation titled “An Act Relative to Craft Brewers” grants craft breweries more leverage to negotiate at the distribution level.

A Decade of Debate Between Brewers and Distributors

Previously, a Massachusetts brewery was locked into a contract after six months of working with a distributor, provided no conditions were violated by the distributor.  This meant that after a six month period, a craft beer company lost all its leverage regarding how its brand was managed and distributed to retail locations.

New microbreweries claimed these policies hurt their chances to grow, since distributors had no incentive to prioritize their brands in advertising or placement. As such, some distributors focused their efforts on larger companies without providing any attention to small brewers.

These Massachusetts franchise laws were created in 1971, when there were only 78 breweries in America. Today, there are more than 200 breweries in Massachusetts alone. Realizing the incredible growth of this industry, the Boston Beer Company began this franchise law battle about a decade ago.

The Legislation for Franchise Law Reform

The new agreement provides a brewery that annually produces less than 250,000 barrels (or just over 3.4 million cases) rights to end a business relationship with a distributor without cause. Instead, brewers simply must give the distributor a 30-day notice of their intentions. Additionally, the brewer would need to provide fair compensation for any inventory costs and marketing investments.

The 250,000 barrel threshold is notable because it protects all but one Massachusetts craft brewery. Despite initiating this reform discussion, the Boston Beer Company accepted its exclusion to the new protections in order to help smaller struggling breweries.

This size stipulation is included so that major beer market players like Boston Beer Company and even-larger brands like Anheuser-Busch or Molson Coors cannot abuse the legislation and shatter a distributor’s business.

What this Means for Franchise Law

For many, this legislation mostly affects what you can expect in the beer aisle. But for breweries and distributors, this law could change the dynamics of franchise law in the alcoholic beverage sector.

To help explain the implications, Attorney Jonathan Barber puts the issue in a broader context.

“These laws were established when craft brewing was just getting its start and are just now being updated after their emergence in 2020,” said Attorney Jason Power of Franchise.Law. “Now, Massachusetts craft breweries have more rights and leverage to compete in a crowded marketplace. People should expect other breweries to fight for similar rights in their home states.”

Overall, this new legislation represents a landmark victory for craft breweries stuck in an antiquated system. Particularly during a difficult time like the COVID-19 pandemic, these new protections could have ripple effects in other states’ product distribution policy.

Moving forward, it will be interesting to see how distributors and brewers alike see success after stringent social distancing orders are weakened. When considering a previously-booming industry and a historic pandemic, the implications of this new legislation may not be seen for years to come.

Paul Petersen