Producers fighting for US law changes

(TheDrinksBusiness) - Eighty years after the repeal of Prohibition in the US, vestiges of restrictive legislation remain. But the big spirits producers, led by Diageo, are fighting in the courts to have them deleted from state statute books.

In what has become known as the “Missouri Liquor Wars”, Diageo has fired its distributor in the Mid-Western state and moved its business to what it claims is a more efficient rival. This might seem a normal business practice, but Missouri is what is known as “franchise” state, one in which the producer is effectively locked into a particular distributor, the owner of which must reside locally. In all but name, the individual state ensures the continuing relationship and protects the status of the local wholesaler.

There are a dozen US states still operating the “franchise” distribution system, which was designed to get wholesalers to help states collect sales taxes and stop alcohol distribution falling into monopoly (gangster) hands, a key consideration in the immediate post-Prohibition era.

But that was in 1933. Today groups such as Diageo, Pernod Ricard and Bacardi complain that the franchise laws are long outdated, that they prop up inefficient local wholesalers and drive up distribution costs to the detriment of the consumer. They want the right to streamline their US distributor networks, a process that has been underway in “free” states for a number of years.