Your favorite craft brewery is getting hosed, and that means less great beer for us to enjoy.
This state of affairs is why we started Vacationland Distributors, and is why we feel craft brewers deserve better options than what's currently available.
Here's as quick a history lesson as I can offer on the US beer and wine distribution system:
Back in the 1970's, there were basically four or five breweries in the United States, with tons of mom-and-pop distributors in each state who brought the major labels' beer to stores, bars, and restaurants. In this era, it was possible for one of these small distributors to paint all their trucks with brewer logos, then find out the next week that a distributor down the street had offered $0.25 more per keg and taken the brewer's business.
In response to this situation, laws were passed which were intended to protect the distributors against such practices. It became legal for distributors to make breweries sign distribution agreements lasting forever. In order for a distributor to get out of a distribution agreement, they now have to provide as little as 60 days' notice to the brewery - with no reason or cause for the cancelation. If breweries want to get out of these agreements, they need to buy themselves out. The buyout price is often three years' worth of revenue.
In other words, there's often no way for today's craft brewers to get out of distribution agreements, which means craft breweries are hesitant to enter into them in the first place.
Maine's craft beer explosion is the result of Maine law allowing craft breweries and wineries to self-distribute if they produce fewer than 50,000 gallons of beer or less. We think self-distribution is awesome, and encourage more states to adopt this strategy. The problem arises when a growing craft brewery begins to approach the 50,000 gallon mark. Some choose to cap production so that they don't have to sign one of these infinite-length agreements. This means there's less of the beer for the public to enjoy, and small business growth is stifled.
What are we going to do about it? We've decided to go in a completely different direction - one that rebalances the power in the brewer/distributor relationship, and that demonstrates respect for craft breweries. We at Vacationland Distributors will be signing exclusively fixed-length distribution agreements with the breweries we represent.
Yes, the law allows us to sign indefinite-length agreements. Yes, this model is much riskier for us. We feel that nobody should be forced into (or to stay in) a business relationship that doesn't meet their needs, and we're willing to prove that through our business model.
All of our distribution agreements will be for a fixed length of time - as short as three years, and as long as five. At the end of our agreements, the brewers will be free to sign with us again, or to move on to distributors the breweries feel are better suited for them. Of course, we'd prefer to have our brewer partners sign with us again and again, and we'll work hard every day to make sure we continue to earn their business.
Thanks for your support of and interest in Vacationland Distributors. We feel we can offer your favorite brewers an ethical distribution option, and will work to prove ourselves every day. Click here to check out our press release to read more about what we're trying to do.
Jim O'Brien, President