January 15, 2020
Morgan T. Dilks
I’ve traveled extensively in my life, but I’ve always called some part of Maryland my home. Between college in western Maryland, clerking for a judge on the Eastern Shore, or living in Baltimore, I’ve seen a broad spectrum of what this state has to offer. There are many things that we as Marylanders do well, but one that has always stuck out to me is this: we can brew a heck of a beer.
Maryland is home to dozens of craft breweries. Spanning from Cumberland to Ocean City, the Maryland craft beer landscape is beautiful (and an awful lot of fun to navigate). In a state where breweries are thriving, they are about to experience a very positive change in the laws that govern their contractual relationships with distributors.
Beer manufacturers who want to enter into a distribution agreement (also called a “franchise agreement”) are governed by the Beer Franchise Fair Dealing Act. As of 2019, beer manufacturers who would like to terminate their relationship with a distributor had to meet two requirements. First, they had to give the distributor 180 days’ notice (roughly six months); and second, they had to present “good cause.” Beginning on January 1, 2020, the 180 days’ notice requirement is being shortened, considerably, to 45 days’ notice. Equally importantly (if not more importantly) the “good cause” requirement has been removed entirely.
What this means is that craft brewers in Maryland will have a lot more flexibility in managing their relationships with distributors. The reduced difficulty in terminating a relationship with a distributor that may not be working gives the brewer the freedom to navigate their market and get out of agreements that are not helping them achieve their goals.
I have been told by brewers that I’ve spoken to over the years that distribution agreements have been a big stumbling block to their growth. Many are reluctant to distribute on a large scale out of concern of being locked into an agreement which may not work for them, and which will be very difficult to terminate. This positive change in the law will instill (not distill) confidence in craft breweries to give distribution a chance. After all, it may work well, and now, if it doesn’t, it will be considerably easier to get out of.
This change in law follows the new law that took effect on July 1, 2019 which increased the number of barrels that breweries can sell in their taprooms from 2,000 to 5,000 a year. Between the new flexibility in distribution agreements and the large increase in volume available for sale in taprooms, Maryland’s already exciting craft beer market may soon be soaring. If you are ready to make the jump, and you need some professional advice, we’re here to help.
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