For the past decade, Kentucky’s craft beer industry has been a growing contributor to our economy. As we have grown, lawmakers have updated Kentucky’s laws to promote further investment and enable craft brewers to be a vibrant element of the communities we serve. In light of the COVID-19 crisis, however, Kentucky brewers are now asking the General Assembly to continue along the path to modernizing Kentucky’s laws so that breweries are also able to recover and reinvest in their communities.
First, lawmakers should allow for fair and equitable relationships between microbrewers and wholesalers. When the law concerning distribution contracts was last amended, the market was very different. There were less than 10 microbreweries in Kentucky and less than 1,500 nationwide. Today, however, we have over 90 licensed microbreweries in Kentucky.
The law currently heavily favors beer distributors and places microbreweries at a severe disadvantage in contractual bargaining. For example, a wholesaler can terminate a contract with a microbrewery at any time, for any reason. Breweries do not have the same rights and cannot exit a contract without a repeated and persistent demonstration of bad faith by the wholesaler.
These laws were written as rules for a different market than exists today. The protections that local distributors historically needed against monolithic megabrewers become dangerous when large, multi-generational distributors use them to pressure Kentucky’s small, independent microbrewers. The craft industry is not looking for an advantage, but simply a level playing field and business practices that hold both wholesalers and microbreweries to the same standards.
Second, Kentucky should join the 39 other states that already allow microbreweries to sell their beer on a limited basis directly to bars, restaurants, or liquor stores. The current law harms our Kentucky small businesses by limiting access to market, while allowing the wholesaler industry to dictate which beers and breweries reach the hands of consumers.
Kentucky craft brewers are asking lawmakers to put the fate of our businesses in the hardworking hands of the small business owners. Distributors are simply not as vested in craft brewers’ products as the master brewers who craft them and, as a result, craft beer is often low on the distributors’ priority list.
These two simple legislative changes would further modernize our laws, enable a speedier recovery and lead to greater growth for Kentucky’s craft beer industry. And the best part is that these legal changes will cost the taxpayer nothing. It is time that Kentucky microbreweries have a level playing field and can get their products to market.
Derek Selznick is executive director of the Kentucky Guild of Brewers. The Kentucky Guild of Brewers exists for the protection and promotion of Kentucky’s breweries.