The Government Destroyed Another Beneficial Relationship

Breweries and Distributors Are Not at Odds, When Markets Are Voluntary

  • A healthy relationship between adults is no different than a relationship between two businesses.
  • Brewers and distributors are natural companions when left to voluntary means.
  • Government involvement creates adversaries.

Relationships should be built upon voluntary choice, promoting mutual respect and mutually beneficial outcomes. In these unions both parties are better off with each other, than they are alone. Voluntary relationships can create tremendous value to this world, however these only exist when parties are free to associate, finding cooperation at the right time, place, and manner.

If this makes perfect sense in personal relationships, why then is there disconnect when we think about business relationships, such as breweries and distributors? More specifically, the25,000-barrel self-distribution cap involuntarily imposed on local brewers by North Carolina.

North Carolina state law forces brewers to hand over 100 percent of their distribution rights to a third party once they produce 25,000 barrels.

In the voluntary market, breweries oftentimes find themselves in need of distribution services outside of their own capacity. Breweries may be growing too fast for their self-distribution efforts, they may be unfamiliar in a new market, or decide they can cut costs by using a third party.

Other entrepreneurs see this opportunity and offer their expertise in distribution, competing against other distributors to help solve this problem confronting breweries. Oftentimes forgotten, distributors are also competing with the breweries’ right to say “no” should they not benefit and keep distribution in-house in a voluntary market.

Forcing relationships between breweries and distributors makes at least one party in the relationship worse off. But that is exactly what North Carolina has mandated upon brewers via multiple antiquated regulations. Wholesaler and big-beer company lobbyists are using the law to benefit themselves at the expense of smaller brewers and consumers. These groups have framed the debate, pitting what should be two mutually-beneficial parties against each other as adversaries.

Lobbyists and legislators have utilized adversarial tactics to make brewers and distributors look as if they are at war with each other. There really is no other outcome if policy continues to use the strong arm of the government to penalize and take away the rights of brewers to self-distribute their product over 25,000 barrels.

Relationships in which one party benefits only at the expense of the other party are often referred to as “zero-sum” relationships. A zero-sum-game mentality fails to see how both parties actually benefit from voluntary interactions.

Absent coercion, zero-sum relationships rarely if ever exist. If one party were to suffer or be made worse off in a relationship, then it wouldn’t happen or it would quickly end.  Mistakes are made and bad things do happen, though in a voluntary market there are always choices elsewhere.

In addition to self-distribution, there are many other liquor- and beer-related laws needing to be reconsidered. As it stands now, breweries have little to no rights if they make a mistake when forced to pick a distributor. Laws supported by the wholesalers’ union make ending a relationship with a distributor either illegal or so expensive the brewer is forced to maintain the inefficient partnership.

“In a free market, the two industries can benefit tremendously from each other.”

The difficulty when talking about this issue is that no brewer wants to make it look like distributors are not wanted in some capacity. In a free voluntary market, the two industries can benefit tremendously from each other.

However, wholesale union leaders are very happy to make it look like the breweries are the problem. Wholesalers fought raising the alcohol limit cap that passed in 2006. Now they allege brewers at the 25,000 cap are trying to push out smaller brewers and destroy public health all because it is apparently “greedy” to want to sell and market your own creation the way you as a business owner see fit.

It seems hypocritical to insinuate another party as controlling or greedy when in fact it’s wholesalers utilizing the force of the government to push brewers around. And it’s not just in North Carolina. Check out wholesaler claims in Florida, Massachusetts, and Texas in the past few years.

As long as we allow government the power to destroy beneficial relationships, lobbying will go on. It’s time for brewers to get their rights back to choose their own methods of distribution. Then, once the government is out of the way, distributors and brewers can finally find the relationship they are looking for at the right time for both – ensuring our beer is made and distributed by a happy marriage, not one born of cheap political tricks.

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