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Thursday, April 2, 2015

Frustration Over AB Branches Grows in Oregon

As a handful of states act to limit the predatory reach of Anheuser-Busch branch distributors, inaction in Oregon has independent distributors on edge. So much on edge, in fact, that they're looking at alternative ways to make something happen.

You may recall recent legislation in Kentucky and Tennessee. In both cases, branch distributors were outlawed. The Tennessee law does allow brewers to own distributorships under certain conditions. Not so in Kentucky, where AB will be forced to sell the distributors it currently owns. Very unhappy campers.

Anheuser-Busch will naturally challenge these laws in court. As they see it, the legislation addresses a problem that doesn't exist: their underhanded business practices. They will have a fleet of attorneys argue that their Constitutional rights have been violated. Never mind the Three-Tier System and the rights of consumers and retailers.

I've talked about branch distributors in this space before. They're part of AB's effort to leverage its position as it loses market share virtually across the board. How it works is simple. They use predatory, discount pricing and other anti-competitive schemes to keep their products on tap and on shelves.

Here in Oregon, there has been no effort to limit or block the expansion of branch distributors. AB currently operates Western Distributing in Eugene and Portland (formerly Morgan). They're able to do this thanks to a loophole in the law that puts no cap on what a large brewer may self-distribute. So they are free to purchase distributors through which they sell their products.

Efforts to block or restrict branch distributors would normally be mounted by the Oregon Beer and Wine Distributors Association, which traditionally looks after the interests of the state's beer and wine distributors in the legislature. Except the OBWDA hasn't done a thing about branch distributors.

We may fairly wonder why there has been no action. Likely, the OBWDA does not relish a fight with Anheuser-Busch. Regardless, its failure to act has caused a riff. The result is that Maletis Distributing has resigned from the group and will reportedly pursue action on its own. Other frustrated distributors may follow.

Please recall that Maletis is engaged in a dispute with Anheuser-Busch over the franchise rights to 10 Barrel. AB bought 10 Barrel last year and expected an easy transfer of franchise rights. But Maletis demanded a fair price and hasn't gotten it. So they continue to to distribute 10 Barrel products, infuriating the suits at AB. Punitive measures targeting Maletis are in place.

Of course, one of the problems with a story like this is that no one wants to talk. I'm relying on snippets of information culled from industry moles who won't be quoted and proprietary publications that can't be quoted. And there's nothing from the OBWDA because they won't talk to or even acknowledge bloggers. They're above the fray, you know.

But it's worth watching what happens. If Maletis succeeds in forming a splinter group that more fully represents the interests of Oregon's independent distributors, we may see some changes in the way things work here. The OBWDA has been around for a long time, but its antiquated cobweb site and lack of action on branch distributors suggest it needs some sort of makeover.

Frustration can be a dangerous thing.

1 comment:

  1. Nice to see someone talking about this issue. The OBWDA will never initiate, nor support, any legislation that its master, AKA large brewers do not want. The association is, first and foremost, a lobbying arm of the major brewers. Tits executive director is a lobbyist. The major brewers helped establish the association (afterall, they were the only game in town at that time), provide the bulk of its budget., and call the shots. The only times it throws its weight behind causes related to small independent brewers is when those interests align with larger brewers, such as when it is time to fight excise tax increases. That's when the association likes to trot out independent brewers as (in the words of their lobbyist) "The cute, fuzzy face of the industry."
    It will be interesting to see if a more independent-friendly association can form.

    Jim Parker


Keep it civil, please.