A Not-So-Surprising Shift in the Massachusetts Brewing Industry

According to Dan Adams of the Boston Globe, Night Shift Brewing, one of the more successful and entrepreneurial breweries in Massachusetts,  is set to launch their own beer distribution company.

Based in in Everett, Night Shift has built their brand from the ground up. They developed an allegiance of customer support that travels near and far to their taproom in order to enjoy their wildly popular beers. In 2014 they moved into a 30,000 square foot facility in Everett with a large taproom. Their beers became so popular that they recently opened an expanded taproom area to accommodate the nightly influx of eager patrons. During this time, the brewery has always self-distributed its own product. Weary of the long-term relationship that is created once entering into a distribution arrangement with a wholesaler, they opted for full control with potentially less reach while building their brand. 

After only four years in business, they have reached the point where a more aggressive distribution network is required to keep up with demand. Yet, they appear unwilling to succumb to the inevitable reality that all growing breweries do, namely signing with a wholesaler. Instead, the founders opted to establish their own distribution company and obtained a wholesalers license under M.G.L. Ch. 138 §18. Night Shift Distributing LLC will not only be able to distribute Night Shift Brewing's output, but they also intend to take on other breweries throughout the state or those looking to enter the Massachusetts market. This is a highly unusual path for a growing brewery in Massachusetts, but hardly surprising. 

Distribution in the Massachusetts brewing industry has become a provocative issue. Under M.G.L. Ch. 138 §25E, once a brewery enters into an agreement for a wholesaler to distribute their product the relationship is near impossible to terminate. Brewers have opined that they sometimes find themselves in the awkward position where their distributor is not promoting their brand to their desired standards yet are unable to terminate the relationship due to prohibitive requirements under the law. Over the past few years, brewers have joined together and supported legislation that would change this law, but have been unsuccessful in obtaining enough legislative support to pass the bill. 

With the explosion of new breweries throughout the country, this potential burdensome relationship between a brewery and its wholesaler has caused an interesting shift in the Massachusetts brewing industry. For one, new breweries now carefully conduct their due diligence prior to entering into a distribution agreement because of the pitfalls that may arise down the road. Further, more and more breweries are self-distributing their product. Under M.G.L. Ch. 138 §19C(g)(4), the holder of a Farmer-Brewery License can self-distribute up to 50,000 gallons of their beer per year to any restaurant or retail liquor store, among others. This has provided great flexibility for growing breweries to self-distribute their product in their surrounding communities and beyond without marrying a wholesaler.

One of the most interesting shifts arising from the distribution agreement law is that many new breweries are electing not to distribute their beer at all. Instead, they open a small-scale brewing operation and couple that with a taproom where they can sell their product directly to consumers. This is why small-scale brewing operations are becoming newest and most popular neighborhood bars throughout Massachusetts. 

With this latest twist in the ongoing distribution battle, Night Shift has drawn a line in the sand. Brewers want a law that provides the flexibility and opportunity to operate their business as they see fit, while wholesalers are concerned about losing their book of business. There is a great deal at stake in this every growing industry and if brewers are unable to change the law, it looks like they will change how the industry operates.