Kentucky Microbreweries: Don’t Let Anheuser-Busch Own Beer Distributorships

Feb 2, 2015

Credit David Shankbone - Wikimedia Commons

A battle over beer is brewing in Frankfort.

Kentucky microbreweries say out-of-state breweries like Anheuser-Busch shouldn’t be able to own beer distributors in the state—something in-state microbreweries aren’t allowed to do.

A House bill filed by Speaker Greg Stumbo, D-Prestonsburg, would close what some call a loophole in Kentucky law, which permits out-of-state breweries to own their own distributorships.

Daniel Harrison, owner of Country Boy Brewing in Lexington, said the bill would make large companies play by the same rules as companies like his.

“If Kentucky breweries can’t own distributorships, or microbreweries, why do we let out-of-state guys?” Harrison said.

“And even more important than that, the biggest brewer in the nation, the biggest distributor in the nation, why do we let them do it?”

Kentucky’s three-tiered regulatory system for the alcohol industry requires brewers to sell their product through distributors, which in turn sell to retailers. Microbrewers aren’t allowed to own their own distributors, but large in-state brewers and out-of-state brewers can.

A group of local brewers, distributors and retailers called Kentucky Entrepreneurs and Growth says that the legislation would provide local jobs in the craft brewing industry.

But Anheuser-Busch said that passing the legislation would eliminate about 200 jobs at its distributorships around the state. Damon Williams, director of sales and marketing for Anheuser-Busch of Louisville, said the legislation is dangerous because it discourages outside investment in the state.

“If you are an international company or you are an out-of-state company and you’re looking to make an investment in Kentucky, this legislation is dangerous because it’s taking a 37-year good corporate citizen that has contributed to the company and grown their business and it’s threatening to liquidate a domestic company with legislation,” Williams said.

Anheuser-Busch has launched a public relations campaign in opposition to the bill, pointing out that even though they distributes their own products, craft beer has still been able to thrive in the state. Last year the brewing company bought a family-owned distributorship in Owensboro, which drew criticism from industry groups.

Steve Gohmann, an economics professor at the University of Louisville, said it’s not surprising that Anheuser-Busch, which makes Budweiser, wants to protect the present system.

“That makes sense for Budweiser because they can get more of their product on the shelves and not distribute other people’s beer and eliminate the competition from other breweries,” Gohmann said.

Wine and spirits-makers are also forbidden from distributing their own products.

The difference in microbreweries and in-state breweries that can distribute is based on the number of barrels of beer per year produced. One in-state brewery, Alltech, maker of Kentucky Ale, is large enough to own it’s own distributorship under state law. However, they do not.