washington beer distribution laws

Hugs from the City for Russian River and Three Floyds

Reiser Legal Leave a comment
Given the seismic success of the Pliny, which only seems to grow, we project a scene like this down at Russian River's doorstep before too long.
Given the seismic success of the Pliny, we project a scene like this down at Russian River’s doorstep before too long.

How do you know you’ve made it as a brewer? How about when, in conjunction with your latest beer release, the city foots the bill for port-a-johns? Or, when the city also offers to throw you a party, coordinating live music and food trucks for the release, and you’re in the position to politely decline? Such is the case for the good folks down at Russian River Brewing Company, whose Pliny the Younger release in Santa Rosa is akin to a national craft beer holiday. In the past, we’ve detailed the brewery’s decision to pull out of Washington distribution due to the state’s unfavorable laws, and we can’t blame them. Glad to see they’re still enjoying so much deserved success. Look out, Dark Lord Day!

Speaking of Dark Lord, in another tidbit of notable news this past week, we heard that Dark Lord’s papa, Three Floyds Brewing Company in Munster, IN, is undertaking a massive expansion. Craft distilling is in their future, thanks to recent changes to Indiana law. What’s more, the city is in their corner, too, with a sizable property tax abatement in the works. The $7.5 million expansion nearly doubles the facility from 30,000 square feet to 56,000, and includes a new bottling and packaging line, storage areas, tasting room upgrades and, get this, an exercise room for employees (to help work off reminders of Dark Lord Day, no doubt).

It’s encouraging to see cities wrap their arms around their breweries and get behind this booming, job-producing industry. Still, other cities are not as quick to give local brewers the warm and fuzzy embrace. ( See: Brimfield, MA. Say it ain’t so!)

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Don’t Blame Pliny: Out of State Brewers Have Big Issues With Washington Distribution Laws

Doug Reiser Leave a comment
True.
True.

By now, many of you Washingtonians have probably cried your last tears into your Pliny bottle. That’s right, Pliny and the rest of the Russian River gang have bid ado to the Washington market.

The reason for the departure was put forth in a short letter, well-written by Russian River Matriarch, Natalie Cilurzo. The letter is attached as the image to this post; it’s words are true though a bit cryptic. I have personally visited the Russian River brewpub in Santa Rosa, California. It is a mad house – and it is also a cash cow. The Cilurzos are doing the smart thing for their business by ensuring that their brewpub (where they see the highest profit margin) is fueled with ample beer for the maddening crowds of beer-obsessed fans. The brewery taproom is a vital component of brewery success and Russian River has stated that 50% of their revenue is sourced there.

Russian River is investor-driven (20 deep) and cannot ignore the most profitable component of its business. So finding a way to infuse it with more beer is a no brainer. Some beer channel had to be sacrificed. So how do they pick which one?

Is it the least successful one? Is it the most costly one? Is it the newest one? Not really. Is it the one that most burdens their brand’s development? Yep. Washington was sacrificed not because of a bad distributer; not because of a poor consumer base; not because of underperforming sales. Washington was sacrificed because its distribution rules do not allow Russian River to be certain that its beer gets to the outlets that it chooses.

Washington state law mandates all beer distributors to sell beer to retailers who request it. That means everyone from your local mom and pop shop, all the way up to the new to market superpower – BevMo. The more shelf volume you have – and the bigger your coffers – the more beer you can request and buy. How often can those requests come in from a BevMo? Every day.  How about mom and pop? Maybe every week, more like month. Before you know it, the distributor has had to sell its entire stock. No more Pliny.

Russian River is not the first out of state beer manufacturer to say “no thanks” to Washington laws. Big guys like Speakeasy and Allagash had to make similar decisions. In other states, they can control who gets their beer. In other states, its not just self-distributed brewers (like most of Washington’s small brewers) that get to pick and choose to whom they want to sell a beer. So why not focus on those other markets?  Can you blame them?

Some might say that distributors have always allocated beer to specific vendors. Very true – not always legal. What matters is whether or not a retailer is being turned down and whether that retailer decides to contact the LCB about it. The bigger the box, the bigger the chance that will become the result.

The Cilurzos are some of craft brewing’s greatest assets. Vinny emails homebrewers his very own recipes and answers just about any question that is tossed his way via email. That’s a good man. But they also run a business. Sometimes the laws make it easy to make those difficult business decisions. Washington just made itself the better cutting candidate.

 

 

 

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