With the California legislative cycle coming to a close, California independent craft beer received an unexpected boost from Governor Brown. AB 2573, an Anheuser-Busch sponsored bill, passed the legislature. But last Wednesday (on the first day of the California Craft Brewers Association (“CCBA”) 2018 Summit), Governor Brown vetoed the bill with a nice explanation. More on that later.
AB 2573, as originally introduced, would have allowed a beer manufacturer to give a licensed retailer up to ten cases of glassware per brand every year. The CCBA, through its legislative efforts, was able to amend that bill to basically limit it to five cases per manufacturer per year. Seems innocuous enough, right? Not so much. Imagine if the deepest pockets in the industry were legally allowed to give away expensive glassware to any retail account it wished. Retailers would be flooded with those big, corporate brands’ glassware with the (wink, wink, nod, nod) hope that the retailer would reciprocate by pushing that manufacturer’s products.
Independent brewers cannot keep up with that. A simple Googleization shows that glassware is expensive—ranging from roughly $30.00 to $80.00 per case. And that is without etching or imprinting. The math should be clear. Contrary to popular perception, most craft breweries are operating under pretty tight margins. An expense such as this to keep the goodwill of certain retailers only plays into the hands of those extremely large breweries who can sneeze that kind of money. The rest would have been simply priced out of what would have amounted to little more than legalized pay-to-play. Independent craft beer simply doesn’t need another exception to tied-house. I am aware that some independent craft brewers wouldn’t have cared and might have welcomed the opportunity. But I believe this one could have really hurt some of the little guys and would have taken another bite out of an already exception-heavy tied house structure.
Back to Governor Brown. His explanation as to why he vetoed it is golden: “I also worry that this law creates an economic disadvantage for small beer manufacturers who might not be able to provide free glassware in the same manner as the larger manufacturers.” Right on. It’s nice to see that we have some folks in important government positions that are paying attention.
As a funny aside, I happened to be at the CCBA Summit on Wednesday. One of my craft beer law students, Katie Green, emailed me Governor Brown’s letter vetoing the bill right after it came out–like right after. Shortly after that, I ran into several friends who are important in the craft beer world. But they hadn’t heard yet. I got to break the news and see the happy reactions for the first time. Priceless. Thanks Katie.
Cheers and let me know what you think.