In advance of the upcoming launch of the Kurtz Beer Distribution Law website in early September, we thought we would touch on a topic that is relevant to brewers, beer distributors and beer drinkers alike: the sale of beer through the Internet!
Beer distribution relationships are highly regulated by all states, and many states have passed relationship laws to provide protections to beer distributors similar to the way that some states, such as California, have passed franchise relationship laws to extend protections to franchisees. (For brewers, think franchisors, for beer distributors, think franchisees). As part of these protections, all states require brewers to distribute beer through a state licensed beer distributor once the brewer produces a certain amount of beer each year. Finding a distributor willing to distribute can be difficult for small brewers. So, most states exempt craft brewers, aka micro breweries, from this requirement and allow them to self-distribute.
Craft brewers are looking to the Internet to market their products with hopes of direct shipping their beers to customers both inside and outside of their home state. At first blush, this alternate channel of distribution sounds promising. The problem is, that while 39 states and Washington D.C. allow producers to direct ship wine to customers in their states, only 9 states currently allow beer to be shipped into their states to anyone other than a licensed distributor. Many of the states that do allow this have burdensome restrictions. For example, Arizona requires all shipments to go through a licensed wholesaler or retailer. Hawaii requires customers to obtain a state issued permit in advance of delivery. On the other hand, Virginia allows licensed brewers or retailers to direct ship up to two cases of beer per month to a customer's home for personal consumption. To further complicate the process, it is illegal to ship alcoholic beverages through the US Postal Service (USPS).
To mix metaphors: the tide is turning and the winds of change are blowing. States are becoming more receptive to the idea of allowing the direct shipment of beer. Vermont just passed Senate Bill 61 in June 2013 allowing licensed brewers to directly ship up to 36 gallons of beer per year to Vermont residents, despite strong opposition and lobbying efforts from large brewers and beer distributors. Other states will likely follow suit. This month the US Postmaster General endorsed an idea being circulated in Congress to change the 1909 law banning the USPS from shipping alcohol. Doing so, he said, has the potential of providing $50 million in additional revenue annually for the ailing post office. All-in-all it is clear that Internet marketing and the direct shipment of beer hold promise for craft brewers looking for ways to distribute their brands until they become large enough to contract with beer distributors. But, until more states take action, craft brewers must proceed with caution.