State Distribution Laws
Alabama
License Needed to Self-Distribute: No
Statute: Code of Ala. § 28-3A-6
Alabama is one of the few states that does not allow brewers to self-distribute in any fashion, meaning brewers must engage and work with licensed wholesalers in order to get their products to retailers.
Alabama also has laws aimed at protecting distributors and limiting the rights of brewers/manufacturers in distribution arrangements. Every distribution agreement entered into between a manufacturer and a wholesaler must be in writing and provide the wholesaler with an exclusive distribution territory. The laws do permit manufacturers to enter into a temporary 90-day agreement allowing a wholesaler to distribute into an otherwise unsupplied territory. Additionally, manufacturers are prohibited from:
- coercing wholesalers into accepting or delivering beer they haven’t ordered
- restricting a wholesaler from selling other brands
- requiring a wholesaler purchase certain brands as a condition of purchasing another brand
- requesting a wholesaler provide audited financials as a condition of renewal or continuation of the agreement
- withholding or changing the quota of order in bad faith
- requiring wholesalers to contribute to an advertising fund
- retaliating against a wholesaler for filing a complaint
- requiring OR prohibiting a wholesaler from making management changes without reasonable cause
- interfering with the transfer of a wholesaler’s business, if the transferee is another licensed wholesaler, or if the transferee would otherwise qualify as a wholesaler; and
- restricting association among wholesalers
On the flip side, wholesalers are prohibited from:
- not devoting reasonable efforts to the sale and distribution of all brands they agree to carry
- selling products outside of their designated territory; and
- transferring the business without giving their manufacturers notice
Brewers cannot amend, modify, cancel, terminate, fail to renew their distribution agreement with a wholesaler unless they meet certain criteria. First, the brewer must act in good faith, have good cause, and give the wholesaler 60 days’ notice. That notice must: i) state the brewer’s intent to amend, terminate, etc.; ii) state the reasons the brewer is making the change; and iii) provide the date the changes will take effect. Alabama considers “good cause” to be a situation where a wholesaler fails to comply with a reasonable and material provision of the agreement, the brewer learns of this failure no more than 18 months before taking action, and the brewer notifies the wholesaler and gives a reasonable opportunity to fix the problem. The brewer must give the wholesaler 30 days to come up with a plan to fix the problem, and an additional 120 days after that to actually fix it.
Brewers can also immediately terminate the distribution agreement upon written notice when:
- the wholesaler becomes insolvent or declares bankruptcy
- the wholesaler loses a state or federal license which prevents them from operating for more than 61 days or
- a 10% or more owner of the wholesaler is convicted of a felony which affects the good will of the wholesaler
Brewers may terminate the distribution agreement on 15 days’ written notice to the wholesaler when:
- there is intentional fraudulent conduct on the part of the wholesaler
- the wholesaler doesn’t adhere to its sales territory
- the wholesaler fails to pay the brewer for delivered beer within 2 business days of a request for payment
- the wholesaler intentionally transfers its business to a non-wholesaler or
- the wholesaler intentionally ceases business for more than 61 days
