It's probably not possible to know now whether Kentucky law governing production and distribution of beer is so confusing by intent or mistake. Regardless, it's time to clear it up.
House Bill 168 promises to do that and protect the interests of beer producers and consumers in Kentucky. It should be passed.
The bill seeks to prevent breweries from owning distributorships in Kentucky. It would enforce a three-tier system of beer production, distribution and sales much like that for wine and spirits. Under this system, adopted in many places after the repeal of Prohibition, the producer of an alcoholic beverage, with few a few exceptions, can only sell it to a wholesaler who sells to retailers.
Since 1978, when Anheuser-Bush won a court challenge to gain ownership of a distributorship in Louisville, the producer-distributor-retailer system for beer has been the uneasy norm in the rest of Kentucky. At least until last summer when Anheuser Busch-InBev (Busch was acquired by a multinational in 2008 for $52 billion) struck a deal to buy a distributorship in Owensboro.
A court challenge resulted in Franklin Circuit Judge Philip Shepherd ruling in AB-InBev's favor, relying on the 1978 ruling. Still, he acknowledged, "there are many public policy issues surrounding this controversy that deserve debate."
A lot has changed since 1978. Then, an imported beer was likely Heineken or St. Pauli Girl, a premium beer was Michelob, there were a several major breweries in the U.S., a local beer was brewed in someone's garage and a good selection of beers ran to 20 or 30 varieties.
Since then beer production has branched in two distinct ways. At the macro end of the market breweries have consolidated, leaving AB-InBev and MillerCoors owning about 75 percent of all beer brands sold in the U.S. At the other end of the spectrum, there's been an explosion of microbreweries.
In Kentucky, the state Alcohol Beverage Commission reports, only two microbreweries were licensed in 2002 where there are now 28. Nationwide, The Economist reports, the number of microbreweries has jumped from about 100 in the 1980s to 3,000 now.
AB-InBev owns many brands in addition to the entire Budweiser-Busch line, including Coronoa, Modelo, Stella Artois, Beck's, Bass and Labatt.
But it wasn't enough. The Economist reported last fall that in America AB-InBev, "is suffering growing competition from small makers of 'craft beer.'" No surprise that AB-InBev has been snapping up craft breweries from Long Island to Oregon, despite the disdain for those beers and their effete drinkers in the Anheuser-Busch Super Bowl ad. It now controls almost half of the U.S. beer market.
In this environment, AB-InBev's move to expand its distribution footprint raised alarms. A distributor owns the exclusive right to distribute brands of its choosing in a specified area. AB-InBev, of course, wants to distribute the brands it owns. So, the distributor, instead of hustling to serve ever-changing consumer tastes at competitive prices, is pushing its own brands at its own prices.
That inevitably means small brewers will struggle to get their products to retailers, reducing consumer choice.
Judge Shepherd wrote that the current dispute "is the latest battle in a regulatory war that has been waged for over 50 years."
Legislators must bring this half-century of uncertainty to an end with a law that benefits Kentucky's consumers and small business people, not the largest beer producer in the world.