Joshua D Aubuchon is a Senior Counsel in Holland & Knight's Tallahassee office
Imagine for a moment that you own a world-class bakery and make the best pies around. What would your reaction be if state law prohibited you from selling your pies directly to the public, and instead required you to sell them to a distributor that must then sell your pies to a retailer before reaching the consumer? Wouldn't direct sales in addition to retail supply chains simply make sense for those operating in a manufacturing space? Enter direct sales by craft breweries.
Growth in the craft beer industry has been surging as of late due to a heightened focus on direct sales from brewers to consumers in taprooms and brewpubs. According to the Beer Institute, these direct sales from taprooms and brewpubs accounted for craft beer growth of approximately 24 percent in 2017. While variations exist among states, a "taproom" usually refers to the on-site location at a brewery where customers can directly purchase beer for consumption on or off premises, whereas "brewpubs" are restaurants that are permitted to manufacture and serve beer on-site. By selling their products directly to the end consumer, they are able to make a higher margin on their products without necessitating the markups due to distribution and third-party retail.
This has some distributors and retailers crying foul based on the exception from the typical three-tier alcohol regulatory regime. In contrast, many craft breweries view retailers as crucial partners in expanding the reach of their products in the marketplace and contend that they have other regulatory burdens pertaining to licensing and alcohol production. Brewpubs are also subject to restaurant health and safety regulations. It remains to be seen whether with the genie out of the bottle for direct sales by breweries, all sides ultimately benefit as the model expands and they become interdependent business partners.
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