Did you know that beer wholesalers have a state-sponsored monopoly specifically designed to lock out potential competitors and keep prices high for consumers?
It’s true!
Beer wholesalers enjoy state-sponsored franchise protections that make it nearly impossible for a brewery to change wholesalers and are granted by the state-exclusive territories that lock out the competition.
The result is that Hoosiers pay more. It is time to break up the monopoly and end anti-free market franchise protections for beer wholesalers.
What are Franchise Protections?
Indiana grants big beer wholesalers unprecedented advantages that give them an effective monopoly on beer and allow them to operate in a privileged spot outside the free market so they can keep prices high.
-
Exclusive Territories
Beer wholesalers have small exclusive territories granted to them as a part of their distribution agreements. These small territories keep prices high by stopping chains like Big Red and CVS or independent stores that buy cooperatively from enjoying quantity discounts on products. Spirit-based RTDs will cost retailers and consumers more through the beer network than they do today through the spirit network. An RTD being sold by a spirit distributor today covering the entire state sells to co-ops and commonly owned stores in one transaction at the deepest discount available. These same products being sold through the Anheuser Busch network of distributors would have to be sold through 8, 10, 15 or even 23 different distributors each using a different price sheet for the product. In order to make sure prices aren’t artificially increased because of allowing beer wholesalers to sell these products, the use of small exclusive sales territories needs to be prohibited.
A retailer with stores in Indianapolis, Fishers, Carmel and Zionsville must purchase their beer from 4 different wholesalers who range in size from one of the smallest in the network to the largest. It is hard to conceive that wholesalers on such a different scale could sell products at the same price to a chain of stores unless there is some sort of collusion occurring. Not being able to buy at a consistent price across the stores makes any sort of marketing to consumers difficult and very confusing.Before Indiana’s beer barons were successful in lobbying policymakers to give them back their small exclusive territories in 2001, Indiana consumers enjoyed lower beer prices due to competition brought about by a healthy free market in the beer business. Today these barons enjoy not only the excesses of small exclusive territories granted by large breweries to stifle competition they are guaranteed these exclusive rights forever because of state legislatively enacted franchise laws.
-
Credit / Cash Sales
State and federal law dictate how credit is extended to participants in the beverage alcohol marketplace so that credit is not used as a discriminatory tool to favor one retailer over another or to allow what’s called a “tied house” which is where one segment, tier or participant in the industry economically controls another. Federal law says that credit may not be extended for more than 30 days. States can be more restrictive but not less. Indiana allows wine and liquor wholesalers to extend credit. Indiana law requires all retailers to buy beer only on a cash on delivery (COD) basis. This discrepancy should be addressed if the General Assembly starts making beer and liquor wholesalers the same.