To someone unfamiliar with three-tier system practices throughout the United States, self-distribution may seem like a far-fetched idea destined to destroy the framework of alcohol regulation.
It’s not. Self-distribution is an extremely common practice, particularly for small start-up breweries. As shown in our proposal document to the Alabama Alcoholic Beverage Study Commission, nearly three-quarters of states allow some form of self-distribution.
Self-Distribution is especially important in a state with a strict beer franchise law like Alabama
Alabama has a strict beer franchise law. To put it briefly, it is very difficult for a brewery to terminate its relationship with a distributor, regardless of contract terms. This means that a start-up brewer must lock itself into a relationship with a distributor, the most important partnership for a distributing brewery, before they sell their first beer in the market.
Allowing self-distribution for start-up small breweries would give the new business the option to develop their identity, build their brand, and learn the business before signing away their distribution rights in a mandatory franchise agreement.
Limited self-distribution is beneficial for both brewers and distributors
We all love to see new breweries, but they are hard to predict. Can they consistently make good beer? Are they dedicated enough to build their business into more than a nanobrewery? Are they savvy about marketing and brand-building? Allowing limited self-distribution would give a new brewery the ability to build their own brand and test the market before selling or giving away their exclusive distribution rights to a licensed beer distributor.
For the distributor that is potentially signing the start-up brewery, there is high risk. Tens of thousands of dollars or more worth of support is usually needed to invest in a new supplier before they can be expected to be profitable. Allowing self-distribution would give potential distributors the ability to evaluate the brand to determine if makes sense in their portfolio.