Don’t get between a man and his beer. That’s the philosophy behind one Massachusetts brewery which, fed up with an overregulated, overly complex distribution system, is starting its own wholesaler, citing the inflexibility of the status quo. “[T]hese distributors have been around for decades. They love the status quo. There hasn’t been anyone trying to reinvent the distribution side of the beer business,” said the president of Night Shift Brewing, soon to be Night Shift Distributing.
The history of the 21st century is likely to be defined by the removal of middlemen. New technological developments, along with changing attitudes, are driving a tendency towards disintermediation — a direct relationship between buyers and sellers. For centuries, this kind of relationship was difficult, if not impossible, due to constraints on the sharing of information, mainly the limited ability of producers to locate enough customers to be profitable. Thus was born the distributor, a specialist whose job was to take the product someone else made and deliver it to willing buyers, wherever they may be located.
Today, thanks to the internet and mobile app technology, this relationship is largely becoming an anachronism. Ridesharing apps connect drivers with passengers without the need for dispatchers. Tesla sells its cars over the internet without the need for dealerships. PayPal allows transfers of large amounts of cash without the need for intermediaries. All of this allows cheaper, more efficient commerce. Of course, not everyone sees these developments as positive, with the most obvious objectors being the middlemen themselves.
Because of pressure from these interest groups, the legal and regulatory environment in most states tends to lag far behind technology, and efforts at reform are resisted by interested lobbyists. We’ve seen this with the taxi lobby resisting Uber, and with car dealerships fighting against Tesla. But one of the more rigidly entrenched systems of middlemen exists in the brewing industry.
It will come as no surprise that the craft beer revolution has dramatically changed the way Americans consume their alcohol. Micro and nano-breweries are springing up faster than seems possible all over the country. The good ones quickly attract hordes of fiercely loyal customers eager to purchase beer in the largest quantities possible. But there’s a problem. Beer regulations generally require a three-tiered distribution system. In other words, brewers have to sell their beer to distributors, distributors sell it to retailers, and retailers sell it to the public. Why can’t breweries just sell directly to their customers? Because that could put distributors out of a job, even though it’s a job that is not strictly necessary anymore.
Some breweries get around this by securing retail licenses to operate as brew pubs. Others are sneakier, selling merchandise and brewery tours and giving away “free samples” of their beer as an added bonus. Maybe others will soon follow Night Shift’s lead, and start doing their own distribution.
I love any time that people figure out ways to circumvent regulations. In many cases, innovating around the law is both easier and more effective than trying to get it changed, as powerful interest groups resist political change with such overwhelming force. The process has already begun. However, if the interest in craft beer remains high, I suspect there will come a time when the three-tiered distribution system becomes, for all practical purposes, unenforceable, as consumers and producers alike search for more efficient ways to buy their favorite drink.
This article originally appeared on Conservative Review.
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