Section 1. The eighteenth article of amendment to the Constitution of the United States is hereby repealed.
Section 2. The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.
—Twenty-First Amendment to the U.S. Constitution
The past five years have been good for Minnesota beer and breweries. “Between 2011 and 2016, the number of licensed breweries in Minnesota more than quadrupled, according to the Department of Public Safety.” This boom was largely driven by the passage of legislation that allows production breweries to sell their products on-premise in taprooms and has also led to further legislative reforms, including Sunday on-premise taproom sales and Sunday growler sales (an exception to Minnesota’s longstanding ban on off-premise Sunday liquor sales). Further reforms loom on the horizon as Minnesota’s liquor laws—much of which are defined by the Department of Public Safety’s Gambling Enforcement Division—undergo annual clarification and revision.
Many of the aforementioned reforms represent exceptions to the “entrenched three-tier distribution system” of alcohol: manufacturers, wholesalers, and retailers. This system, which has existed since Prohibition’s repeal in 1933, is maintained largely at the behest of the wholesalers, who desire to preserve their state- granted monopoly on liquor distribution. As a result, any changes to this system that would benefit breweries face stiff resistance from wholesalers and, in some cases, retailers. Further, the franchise- distribution statutes enacted in the 1960s and 1970s have, in this era of craft breweries and consolidation of wholesalers, afforded wholesalers an unequal amount of bargaining power in their contract negotiations with small local breweries. Fortunately, states are recognizing the need to correct this imbalance and creating an avenue for smaller breweries to terminate relationships with their distributors if the relationship is not a good fit. The Minnesota Legislature, however, has yet to enact or even consider such a concept.
This article provides an overview of the legal issues that make up the area of practice referred to as “brewery law.” This article also provides a history of the three-tier system and the franchise- termination provisions of state beer-distribution laws that are central to this system. Finally, this article discusses the recent enactment of so-called “small-brewer exemptions” from franchise-termination provisions; these exemptions, if enacted in Minnesota, could help adjust the bargaining power between Minnesota breweries and wholesalers while maintaining the protections for wholesalers from large multinational “macro” brewers, such as Anheuser-Busch InBev NV (the maker of Budweiser and other popular national brands, commonly known as “AB InBev”), which was the original purpose for the distribution law in the 1970s and which remains a valid purpose today.