State laws regarding beer distribution and impact on small breweries

An article in the New York Times (March 30, 2014) titled “Free Craft Beer!” describes the franchise rule in many US states that requires beer manufacturers to choose one distributor in a state to distribute their product. The absence of distributor level competition means that the more than 2,700 beer manufacturers have to use the 1,000 distributors, with a few distributors controlling large territories. The cost for small breweries to drop a distributor if suggested to be significant even if the distributor does not distribute inventory and leaves it sitting in a warehouse. Given that the historical origin of the law was to protect distributors when there were 50 brewers and 5,000 distributors, should the rules be changed under the current conditions ? Should small breweries be dropped from the rule or should the rule be scrapped altogether ? Will changes result in higher or lower costs for distribution ? Should small breweries be allowed to distribute themselves and, if so, what should the minimum volume be set at to ensure fairness ?

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About aviyer2010

Professor
This entry was posted in Operations Management, Service Operations, Supply Chain Issues and tagged , , , , , , , , , . Bookmark the permalink.

One Response to State laws regarding beer distribution and impact on small breweries

  1. Well-intentioned government laws originally designed to protect a weak down-stream member of the supply chain that is now abusive and bad for consumers…sounds like auto dealerships! Take a look at what Tesla’s distribution model is revealing in that industry, then apply that learning to beer distribution and I think we have the same conclusion: decrease regulation to benefit consumers.

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