Breweries are no longer sparsely scattered throughout the state. We are seeing concentrations of breweries flourishing in the Tampa/Saint Petersburg area, Jacksonville, Fort Myers, neighborhoods in Miami and soon Tallahassee. As the number of breweries in Florida grows and areas become more concentrated with breweries, those breweries may consider selling their beer directly to one another, rather than using a distributor for such sales.

Florida Statute §561.42(1) focuses on the tied house evil and prevents integration between the tiers. Florida Statute §561.22 performs a similar function as it prohibits the licensing of a manufacturer or distributor as a vendor and vice versa. Meanwhile, Florida Statute §561.14, in its description of license and registration classifications, notes that manufacturers are “licensed to manufacture alcoholic beverages and distribute the same at wholesale to licensed distributors and to no one else within the state, unless authorized by statute.”

The statute that authorizes manufacturers to distribute to someone other than licensed distributors within the state is Florida Statute §563.022. This is the statute that governs relationships between beer distributors and manufacturers and ties them together for life (unless the distributor wants out, basically). It was passed in 1987 and was amended via legislation the following year after agreement between manufacturers and distributors that numerous modifications were “desirable”. The “talk sheet” provided with the bill for the Alcoholic Beverages and Tobacco (“ABT”) Subcommittee noted that it was “a package resulting from discussions between the distributors and the major manufacturers which they both believe enhances the law.” Craft brewers were harder to come by back then so the fact that the agreement/discussions included “major” manufacturers is not terribly surprising.

With that in mind, the 1988 bill (Senate Bill 908) expanded upon, among other things, the permissible reasons for which a manufacturer could revoke a distributorship. These included failure by a distributor to timely pay for products ordered and delivered and fraudulent conduct by the distributor in a matter material to its dealings with the manufacturer. It also added that while a distributor must devote reasonable efforts and resources to the sale of a manufacturer’s products, if there was an agreement between the parties, “reasonable efforts” would be considered those reasonable efforts as specified in the agreement. It also added that a manufacturer may ship products to or between its breweries without a distributor’s license.

Finally, it also added, in subsection (14)(b), that a manufacturer shall not “sell directly to any vendor in this state other than to vendors who are licensed pursuant to s. 561.221(2).” Florida Statute §561.221(2) is the “tourism exception” that allows manufacturers to hold vendors licenses for taprooms on the same property as the brewery. Thus, a plain reading of the statute demonstrates that brewery-to-brewery sales are permitted without the need for a distributor (so long as the brewery buying the beer has a manufacturing and vendor license).

Of course, that brings up the past legislative session in which legal action was implicitly threatened against those who the state (or Senator Stargel?) and/or distributors decide do not properly fit within that exception, which they have decided ought to be left for a theme park. The staff analysis from July 13, 1988 does note that the bill prohibits “a manufacturer from selling directly to a retailer, other than a ‘Busch Gardens’ type licensee.” Most understand a Busch Gardens type licensee to refer to a brewery that holds a manufacturing and vendor license pursuant to §561.221 and also understand that these breweries do indeed influence Florida tourism (of course, Senator Stargel previously concluded that Florida’s craft breweries are “operating outside the context of the law”). For example, Visit Jacksonville, a travel and tourism agency funded by Duval County bed tax dollars, began planning in June to leverage the city’s craft beer scene to increase tourism in the area. Similarly, New York’s governor created a craft beer workgroup to help promote craft beer industry and related tourism. The Virginia Tourism Corporation was recently excited to announce that Virginia is quickly becoming a hot spot for craft beer tourism. In the Pacific Northwest, Yakima, WA and Bend, OR have tourism boards that are pushing the success of craft beer tourism. Just about every place in between has at least one craft beer tour showcasing multiple breweries. In fact, a 2012 study from the University of North Carolina found that among brewery patrons surveyed, 38% were tourists. Of those individuals, 36.7% indicated that their main purpose for the trip was for the beer (14% of consumers surveyed were tourists who traveled for the main purpose of beer).

Senator Stargel championed her bill as one that would protect brewers in the future from lawsuits. She said that “rather than have them face it in the courts and see them shut down because of ambiguities, I’m trying to put clarity into the law.” Florida’s Beverage Law needs a lot more to become clear, but that is not on Stargel. Might increased brewery-to-brewery sales be an impetus for potential state action against one or more of Florida’s craft breweries? Yes, could be (it would be pretty silly to believe that perceived ambiguities (misunderstandings?) would reign supreme over the plain language of Florida’s statutes).

Ultimately, breweries should consider whether making sales to fellow breweries with taprooms makes sense in terms of time and money. As the brewery landscape in Florida continues to grow, so too would the convenience of selling kegs to a friendly nearby brewery. Perhaps it would also serve as an example that self-distribution won’t end the world.

 

 

Some background that accompanied the bill. It generally discusses the perceived benefits of the amendments to prohibit direct sales from breweries to vendors. At least it didn’t cite health concerns.

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