Compromise limits out-of-state brewing

The Center Square

A compromise on out-of-state contract brewing looks to settle an issue between Pennsylvania brewers and wholesalers.

A bill awaiting third consideration in the Senate, HB1615, would clarify that brewers with existing out-of-state brewing agreements can sell this alcohol without going through distributors, but will otherwise need to work with importing distributors in their geographic areas.

The agreements allowed an in-state brewery to produce beer outside Pennsylvania, then deliver this beer into Pennsylvania without using a distributor.

The change is a fix to close what distributors called a loophole that allowed brewers to avoid relying on distributors for sales. Pennsylvania has a three-tier system for alcohol in which producers must sell to distributors who then sell to retailers.

“We have a very complex system selling alcohol and distributing alcohol in Pennsylvania,” Rep. Jesse Topper, R-Bedford, the bill’s sponsor, said during a June 2021 Liquor Control committee hearing. “At the end of the day, we are trying to be fair.”

Balancing fairness can be tricky when the financial interests of brewers, distributors and retailers conflict.

“We’re still trying to piece together parts to make sure that everybody is treated fairly and equally, and right now that is not the case,” Topper said. “There are some brewers who are – when they bring in their product from out of state, the majority of them have to go through the three-tier system that we set up.”

The compromise, which allows existing out-of-state brewing contracts to continue but prevents the creation of new ones, has satisfied brewers and distributors alike.

“The PA Beer Alliance strongly supports HB1615, which fixes a loophole in the Liquor Code, and we ask the legislature for an affirmative vote,” Jay Wiederhold, president of the Pennsylvania Beer Alliance, a trade association for distributors, said in an email.

Brewery advocates echoed the Beer Alliance.

“The Brewers of PA support HB1615 as currently drafted. After numerous months of negotiating with our wholesale partners we feel this compromise bill adequately and fairly resolves the issue of out-of-state contract brewing,” said Adam Harris, executive director of BOP, a trade association of brewers.

“As currently drafted, any PA brewery currently using this process can continue to do so and can transport their beer back to PA themselves. Moving forward after the passage of the bill, any new brewery utilizing out-of-state contract brewing would need to use a wholesale partner to bring their beer back to PA.”