Reform on Tap Task Force: Protectionism Breeds Growth for Some at the Expense of Others (5th Meeting)

Editor’s Note: In full disclosure, I am a member of the Reform on Tap task force and not a third-party observer. If you’re new to the story, get caught up on the first, second, third and fourth task force meetings, as well as the origin of this task force and House Bill 1283

After the fourth meeting of the Reform on Tap task force at Jailbreak Brewing Company (Laurel) on July 20, I wrote that I was concerned.

Up to that point, retailers and distributors had been doing a great job of showing up — both literally and figuratively — meeting after meeting, whereas the brewers were still struggling to break their own silence, with only a handful of notable exceptions.

As I said in that recap, I am not a brewer myself, so I acknowledge I can only go so far in my understanding of the challenges they face while sitting across the table from their distributors. Still, the circumstances did not matter — their silence had become deafening.

That’s why the rhythm of the fifth meeting held on August 15 at Peabody Heights Brewery (Baltimore) was a breath of fresh air.

Brewers spoke up, and they pushed back when they might have previously remained silent.

Above is a full recording of the meeting, which I would encourage you to watch. As with the fourth meeting, today’s summary will focus more on the larger takeaways of the afternoon, as opposed to a blow-by-blow of the proceedings. The reason being that five meetings into the task force, a clear narrative is emerging.

But first, a little context.

With a few discussion questions provided in advance, the backdrop for the majority of the conversation focused on franchise law — which governs the relationships (and contracts) brewers have with their distributors. More specifically, self-distribution.

When it comes to self-distribution — quite literally the ability for brewers to distribute their own product, without the assistance of a distributor — Maryland once again lags behind its neighbors, with the exception of Delaware.

While Maryland, Virginia, Washington, D.C., and Pennsylvania all find common ground in allowing self-distribution, the Free State deviates when it comes to limitations. Of the four, we are the only one to place limitations on brewers for how much they can self-distribute.

In previous meetings, the larger “forest for the trees” motive behind this saga has often been obfuscated by time spent quibbling over details — and I’ll readily admit I was an active participant.

“Right now Maryland distributors require 180 days termination notice from their brewers. What about 90? What about 60? What about carve outs? What about this? What about that? What if? What if? What if?

This meeting not only marked the first time I felt like brewers really showed up together, as a team, it was also the first time that we started clearly addressing the elephant in the room, even though it was within the context of a niche issue.

The debate we’re having this year about Maryland beer — and, let’s be honest, probably for years to come — boils down to one thing: protectionism. 

Who Is Scared? And of What?

Since I prefer to let those who are much smarter than myself to make my brilliant points for me, I want to highlight a portion of my interview from the first episode of the Naptown Pintcast podcast, with fellow task force member Salisbury Mayor Jake Day:

“Protectionism comes from fear. And I think the way that those in maybe the retail and distribution businesses approach this is they fear what could be and what could go wrong. And I think you’ve gotta grant them that ability to be a little fearful of the unknown.”

While there are have been allusions made to how enabling growth in the way that’s requested for and by brewers “erodes” the foundation of the three-tier system — which is an entirely different problematic assertion that will be saved another day — the vast majority of arguments by distributors and other affiliated parties have often explicitly called for the protection of their business at the expense of others.

Or, at the very least, it is implied through the delineation of their contributions to local communities and the state economy that such preservation is necessary.

For example, “If all of my craft brewers were to get up and leave today, I would be out of business,” is a common refrain that’s been mentioned across multiple meetings.

Or, how do distributors effectively plan if there are no self-distribution limits in place?

Of course, it would be an act of willful ignorance not to acknowledge the fact that the craft beer industry has drastically changed in the past decade at a breakneck pace. Nationally, we have more open breweries than we’ve ever had at any point in our history — even prior to Prohibition. 

Maryland, while not exactly a model of pro-brewery legislation, has also mirrored that growth to some degree…

Source: Brewers Association

…and even this data from 2016 is now out of date, given that Maryland is at or above the 80-brewery mark.

That’s why, to Day’s point, their fear is understandable. And, across the country, brewers, distributors, retailers and legislators are all navigating through uncharted territory.

But a fear of the unknown should not clear the way for legislative acts that clearly favor the protection of one or two segments of the industry at the expense of those who are actually manufacturing the product that has created such opportunity for them.

And, as Carly Ogden of Attaboy Beer (Frederick) said at Jailbreak in response to the hypothetical of a distributor going out of business due to an exodus of their craft brewers, well… maybe they should be focusing on better distributors, so their brewers will want to stay. Regardless of the circumstances.

Salt in the Wound of Stifled Growth

There have been two moments — one during the August task force meeting and one today — that got under my skin, regarding the protectionism via legislation avenue.

First, when distributors were pressed for an example of how they would react if they were subject to similar restrictions Maryland brewers face currently — either already in place or those brought on unexpectedly through new laws — the example provided by Eric Best of Bob Hall, LLC (a Maryland distributor) was that of a “down beer market,” in which they would “get creative” with their team to remain profitable and successful.

Unfortunately, that’s not quite the same thing.

Best’s example cited external, unforeseen forces of the craft beer market not fairing as well as expected. This is not within anyone’s control — least of all, a state legislature’s. Absent the waxing and waning of craft beer in the eyes of consumers, they’re free to grow their business and flourish, as they see fit.

In reality, brewers are facing limitations that are imposed upon them and are not a result of unexpected downturns. Not only that, they are often arbitrary limits of uncertain origin that place a rigid production and distribution barriers over the heads of all brewers. And they must uniformly comply with those limits, regardless of their size, business plan or proposed growth model.

So, where distributors can be agile and adapt in the face of change, brewers are trapped in a tiny box. And some might say they should be thankful that they have that box at all.

This alone is enough to annoy me, but articles like the one published today by CBS Baltimore are what push me over the edge…

In an article titled, “In Maryland, The Craft Beer Business Is Booming,” we only hear all about the successes of distributors. Maryland brewers — who are making all of the beer that enables the distributor and retailer growth featured in this story — are conveniently left out of the narrative of economic contribution.

In fact, they’re talking about the future potential of their own businesses, if the number of local craft breweries continues to grow.

This kind of excitement is hard to stomach given the backstabbing that occurred last session, when brewers dared to toe outside the lines. Or when I read posts like this…

E. Randolph Marriner and his family own Manor Hill Brewing (Ellicott City), a farm brewery. His entire statement reads as follows:

“To my friends who work in Annapolis and create the laws that govern our dear State. Please read the attached article with open minds and hearts.

Remember the ‘Virginia is for Lovers’ tourism campaign that kicked our butts. Well, they’re at it again. This time, it’s ‘Virginia is for BEER Lovers’.

As many of you know, Manor Hill Brewing is Maryland’s largest (by production) Farm Brewery. In order for us to grow, we need your help to modernize Maryland’s liquor laws and regulations.

MARYLAND IS OPEN FOR BUSINESS should apply to beer manufacturers too!

Please help us compete in this most dynamic and exploding industry.

To my Maryland beer loving friends, please reach out to your elected officials and share our story.”

While some try to downplay Virginia’s pro-craft beer reputation with subtle asides during task force meetings that Virginia “isn’t that great for brewers,” it’s just patently untrue.

Does Virginia have its own quirks? Yes.

But is the Commonwealth also leaps and bounds ahead of the competition, to the point where Bob Pease, who heads up the national Brewers Association, has publicly called upon other state governors to follow in the footsteps of Virginia Gov. Terry McAuliffe? Absolutely.

That’s why I’m infuriated.

Fear in the face of swift change in a shaky economy is understandable. But to engage in backdoor legislative dealings because you’re afraid of change and then to later brag about how great things are going for your side of the fence is offensive.

Marriner shouldn’t have to convince local legislators that Maryland brewers should be allowed to “compete” or be part of the message of Maryland being “open for business.”

That’s where I’m left going into tomorrow’s sixth task force meeting — again, at Jailbreak Brewing Company.

I have said time and again that there’s no denying what distributors and retailers do for communities — and I know I shouldn’t “throw the baby out with the bathwater” because of a few bad apples. (There are more than a few on the retailing and distribution side that I respect and am lucky enough to call friends.)

But right now, I struggle to muster up much sympathy, given their overall track record of safeguarding their success on the backs of those who made it possible in the first place. Especially in recent years.