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State proposes self-distribution system for small breweries

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The Delaware Office of the Alcoholic Beverage Control Commissioner has proposed a new rule that could change distribution opportunities for smaller craft brewers and offer consumers more options./PHOTO COURTESY OF POOJITHA PRASAD/UNSPLASH

The Delaware Office of the Alcoholic Beverage Control Commissioner has proposed a new rule that could change distribution opportunities for smaller craft brewers and offer consumers more options./PHOTO COURTESY OF POOJITHA PRASAD/UNSPLASH

WILMINGTON — The Delaware Office of the Alcoholic Beverage Control Commissioner has proposed a new rule that could change distribution opportunities for smaller craft brewers and offer consumers more options.

The proposed regulation is listed as Rule 911, “a rule permitting limited self-delivery of beer,” and would allow distribution to be handled by small craft brewing companies as long as certain criteria can be met, according to the commissioners’ website.

Delaware law currently requires all brewing companies to work with a commercial, third-party distributor to get their beers on the shelves of stores and restaurants regardless of size, output or other factors. 

That opportunity can’t present itself if the brewers are unable to afford to work with a distributor, Autumn Arch Beer Project owner and Delaware Brewers Guild President Jimmy Vennard said.

“At the end of the day, we want the playing field to be a little bit more level so we can have the opportunity to grow,” he told the Delaware Business Times. “Delaware requires brewers to work with distributors, but does not require the distributors to work with us. We don’t have the scale to have that partnership make sense. We would need to have a large production and large footprint in the market to make that partnership work and for it to be effective and profitable for the brewery.”

According to Vennard, brewers in 40 other states, including Delaware’s neighboring states, are able to self-distribute to stores and restaurants. That makes the First State one of the last states to approve of the effort. 

“That partnership with the distributors makes 100% sense for the bigger breweries. They’re focused on making and marketing their beer. They’re not managing their own fleet of trucks,” he told DBT. 

If put into action by the commissioner, the new rule would apply to licensed brew pubs or microbreweries that produce no more than 5,000 barrels of beer per year. If eligible, a brewery would be able to deliver craft brews to licensed locations as long as a company representative does so in a company owned or leased vehicle. Breweries would be limited to distributing 1,500 barrels or less.

In order for a brewery to comply with the new rule, it must also submit quarterly distribution reports and apply for a $25 warehouse license with a $100 inspection fee for which it must include documentation such as a lease, landlord approval, and a floor plan. 

Other fees in the rule include a $25 filing fee requesting the ability to self-deliver, and a $25 inspection fee when required by the commissioner. Two additional fees would also be collected every other year: $100 to continue self-delivery services and a $100 warehouse fee.

While the proposed regulation would open up the self-delivery option for smaller breweries in Delaware, it would simultaneously shutter the doors on the option of working with those third-party distributors.

“No brewery shall contract with a third-party entity to deliver beer. No brewery shall permit anyone other than an employee of the brewery to deliver beer pursuant to this regulation,” the proposed rule states.

The state office of the Alcoholic Beverage Control Commissioner declined to respond to the Delaware Business Times’ request for comment, citing that the public process on Rule 911 is still underway.

Vennard and other smaller brewers maintain that this new regulation is the change their businesses need for continued growth.

The issue has been “on the wish list” for the group who started working toward connecting with legislators, stakeholders and others to address this legislatively a few years ago. He said the alcohol commissioner stepped in with this proposed rule change as the guild was preparing the bill-making process.

“The Delaware Brewers Guild is very excited about this. It’s a really big deal for craft breweries,” Vennard told DBT. “At the end of the day, we want to help small businesses grow their brands and just kind of open up this opportunity that our state didn’t have and all of our neighboring states did.

Public comment on the draft regulations should be sent to the Delaware Office of the Alcoholic Beverage Control Commissioner before May 2 at 4 p.m.

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