To the individual beer wholesalers of Alabama,
As you may know, Senator Paul Sanford of Huntsville recently introduced SB128 to amend the beer franchise law in Alabama. We fully endorse this legislation and ask you to join us to bring freedom of contract to Alabama’s beer industry and support an independent three-tier system. Like you, our members are independent Alabama businesses. Each one is licensed and fully accountable to the Alcoholic Beverage Control Board, the Department of Revenue, and multiple law enforcement agencies.
Alabama’s beer franchise law, found in Title 28, Chapter 9 of the Alabama Code, was passed in 1988 due to the increasing consolidation of brewers and the need to hold large out-of-state brewers accountable. A major aspect of this law is that it severely restricts a beer manufacturer’s ability to enter into an enforceable contract with its chosen distributor. It does this by nullifying normal commercial contract terms and making it virtually impossible for a manufacturer to terminate, cancel, or fail to renew an exclusive distribution agreement in a given territory. This special protection is unfair to Alabama brewers who already lack equal bargaining power with wholesalers in contract negotiations.
Regardless of any contract terms, Alabama’s beer manufacturers are effectively locked into a given distributor. This undermines free market principals and criminalizes fair business competition.
While this is obviously bad for the manufacturer, it is also detrimental to those distribution companies that provide superior service to their suppliers and retail customers. Because our brands are locked, business efficiencies and good customer service are not rewarded. Wholesalers who do great work for Alabama brewers cannot “beat the competition” by acquiring brands sold by poorly performing competitors. The franchise law often prevents Alabama brewers from assigning distribution rights to the beers we produce to another wholesaler–even if the brewer is willing to pay!
Agreements and investments with a brand should be protected by an enforceable contract, not by statutory law. SB128 will hold both parties accountable to the terms of a distribution agreement and provides for fair compensation and arbitration when a contract does not exist.
The franchise law may have protected distributor independence during the high point of brewery consolidation. As craft beer continues to gain market share, however, competition should be allowed to return. SB128 accommodates a transition period by maintaining franchise law provisions for suppliers that constitute a significant share of a distributor’s portfolio.
Again, we urge you to support franchise reform. I look forward to hearing your thoughts on this matter.