State Distribution Laws
Delaware
License Needed to Self-Distribute: No
Statute: 4 Del. C. § 512C; Brewpubs at § 512B
Delaware brewers are not permitted to self-distribute their products to retailers.
Distribution agreements between brewers and wholesalers in Delaware can either be verbal or in writing. Brewers and wholesalers can mutually terminate their distribution agreements, but the brewer must give the Commissioner written notice of the mutual termination. Brewers cannot charge a price of more than $100 for wholesalers to enter into a distribution arrangement.
Any brewer that wants to terminate a distribution agreement without the wholesaler’s consent must submit a written request to the State, along with a copy to each wholesaler affected, at least 60 days prior to the termination date. The request must include the name and address of the existing wholesaler, and the name and address of any other wholesaler the brewer intends to transfer the distribution rights to. The notice must also list the brewer’s reasons why they want to terminate or transfer the distribution agreement. If the brewer believes they have good cause for the request, they need to list that. If they don’t have good cause, they must state their intent to pay reasonable compensation to the wholesaler. When a brewer requests to terminate the distribution agreement for good cause, wholesalers are also given the chance to file objections to the termination with the State.
Delaware defines reasonable compensation as the value of the wholesaler’s business related to the terminated or transferred brand or brands. The State further goes on to define the value of the wholesaler’s business as determined by its inventory at laid-in cost of the brewer’s brands and its associated good will. Finally, sticking with the theme of excessive definitions, the State defines the “associated good will” as 1.0 times the wholesaler’s average annual gross profits on the brewer’s brands for the last three years.
Delaware considers a brewer to have “good cause” for terminating a distribution agreement when a wholesaler fails to substantially comply with a material provision of the distribution agreement. The brewer must also give the wholesaler 60 days to fix the issue after bringing it to their attention. The State may waive the 60-day notice requirement if the brewer is terminating the agreement because the wholesaler is insolvent, bankrupt, dissolved or liquidated, has lost its license for more than 30 days, or for any other reason that would cause the brewer to suffer irreparable harm if the agreement continued.
Fun Fact: Milton, DE’s Dogfish Head consistently produces one of the booziest beers brewed and sold on US soil with 120 Minute IPA, an IPA scaling up to 20% ABV.