Craft Brew Barrelage Headed for Increase; Business Practices Mandate Roils Big Beer

It seems fairly certain Nevada craft brewers will get the green light to legally produce more beer – the only question is how much more. Two bills moving through the legislature would raise their annual production cap to either 30,000 or 40,000 barrels, from the current limit of 15,000 barrels.

Big beer brands Anheuser Busch InBev and Miller Coors have put aside earlier objections to raising the craft beer production cap, but they’ve refocused their opposition on provisions aimed at preventing them from hindering craft beer sales with perverse incentives to distributors.

At a Senate committee hearing earlier this month, the beer behemoths criticized Assembly Bill 431 for language borrowed from a federal court judgment that cleared AB InBev last year to acquire Miller parent SABMiller. The judgment prohibited coercive business practices by the newly merged company that might inhibit distributors from representing other brands.

The Nevada bill mimics the court order, prohibiting “a supplier” from rewarding or penalizing distributors for selling beer made by a “any other supplier.” The bill also outlaws attempts by a supplier to influence advertising, retail placement, and other marketing and management decisions by distributors, related to selling beer from “any other supplier.”

Representatives for AB InBev and Miller Coors told the Senate committee they’re in favor of allowing Nevada’s craft brew sector to grow, but asked for removal of the section restricting their interactions with distributors.

Placing the merger settlement language into Nevada statute would upset the balance of power that exists within the state’s three-tier system for alcohol distribution, said Leslie Pittman, testifying for Miller Coors.

Assembly Bill 431 arose as an alternative to a bill presented earlier this year by Senator James Settelmeyer. Distributors and the large beer brands opposed production cap increases in SB 130, and Settelmeyer publicly chastised them for failing to follow through on a promise to negotiate with craft brewers who have reached the current production limit.

The lobbyist for the state’s largest distributor assured Settelmeyer that an alternative bill was in the works, and that it would loosen the hold major beer brands have on distributors. Presumably, this would free distributors to pursue more robust relationships with craft brewers.

Settelmeyer’s bill, SB 130, would raise the craft beer production limit to 30,000 barrels annually, with a maximum of 10,000 that could be sold to customers in the brew pubs. Assembly Bill 431 would raise the limit to 40,000 barrels, with a maximum of 5,000 sold to pub customers. It also contains the business practices mandate adapted from the federal court judgment. Each bill has passed in one house and is still alive.