Ohio’s Craft Brewers Look to Change Ohio Distributer Franchise Law

As the state wraps up the most recent operating budget negotiations, one issue that was sought for inclusion but didn’t ultimately make the final bill is the desire of Ohio’s Craft Brewer community to alter the current law, which governs contracts with the state’s beer & wine distributors.

Craft beer, the locally brewed beer, has been tackling the mega beer giants like Anheuser-Busch InBev, Heineken, Molson Coors Brewing, Miller Brewing Company, and others, for well over a decade. These craft breweries have gained a substantial share of the U.S. beer market. Total beer sales by volume edged up 1 percent in 2021, while craft brewery sales rose 8 percent to 24.8 million barrels, according to the Brewers Association. Independent brewers’ share of the U.S. beer market by volume rose to 13.1%, up from 12.2 % the prior year.  Forbes reported there are over 9000 craft, independent brewers in the U.S. and many communities define their brand and success by their local craft beers. 

Following the repeal of Prohibition, states created a three-tier alcohol distribution system which sets up the approval of exclusive beer and wine distribution companies for specific territories in a handful of states including Ohio.  News reports indicate Ohio is one of only 11 “control” states in the U.S. that does not permit competition between beer and wine distributors and instead sets up monopolies across the state.

The Ohio General Assembly has been debating the continued interaction between the beer distributors and breweries.  The current law was adopted in 1974 establishes certain conditions that would permit a contract between a distributor and brewer to exit a contact. According to budget testimony from the OCBA the current law doesn’t reflect the market that exist today. With more than 400 craft brewers in Ohio the state’s outdated law, which governs the ability for a craft brewer to change distributors once they enter a contract limits access for Ohioans who want to purchase the products crated by craft brewers.

According to a recent study released by the Ohio Craft brewers Association, https://ohiocraftbeer.org/wp-content/uploads/2023/06/OCBA-2022-Impact-Study.pdf, the craft brewing industry generates $1.27 billion in annual economic impact to the state’s economy. Since 2011 Ohio’ craft brewers grew from an estimated 45 to over 400 in 2023.

Current law does allow a brewer who produces less than a million barrels a day to self-distribute, but the challenges to create and maintain a regional or statewide distribution operation are significant. The continued growth of the industry is dependent on the ability to provide access to the products being made and according to the OCBA the current law inhibits access for Ohioans.

Stand along legislation is expected to be introduced now that the state operating budget has been enacted and this issue is certain to generate discussion at the statehouse as the General Assembly moves forward with their work in the fall.

Efforts to amend the current contract law between distributors and breweries was attempted in the state operating budget but failed to gain inclusion in the budget; however, efforts will likely continue as the General Assembly returns from their summer recess.