State Distribution Laws

License Needed to Self-Distribute: Yes
Statute: 2018 Senate Bill 173

South Dakota Statute

In South Dakota, brewers who brew less than 30,000 barrels per year can qualify as a microbrewery and may self-distribute up to 1,500 barrels per year.

South Dakota brewers are not required to enter into written distribution agreements with their wholesalers, but if they do, the terms of the distribution agreement will override the restrictions in South Dakota law, unless the terms of the distribution agreement are unreasonable. These distribution agreements must provide the wholesalers with an exclusive territory for the brands they distribute. If brewers and their wholesalers do not enter into written agreements, brewers are subject to the following restrictions:

• Brewers cannot require a wholesaler to contribute to an advertising fund controlled by the brewer
• Brewers cannot withhold delivery of products or change a wholesaler’s quota in bad faith
• Brewers cannot require wholesalers to accept products they haven’t ordered (although they may require reasonable inventory requirements)
• Brewers cannot require a wholesaler to purchase one product as a condition of purchasing another
• Brewers cannot restrict a wholesaler’s ability to distribute other brands
• Brewers cannot set resale prices for their wholesalers
• Brewers cannot require or prevent a wholesaler from changing managers without good cause

Additionally, brewers are not allowed to modify, terminate, or not renew a distribution agreement without good cause. In South Dakota, good cause means:

• That the wholesaler did not substantially comply with a reasonable and material provision of the agreement
• The brewer learned of this failure less than 2 years before taking action
• The brewer notified the wholesaler in writing and allowed the wholesaler 30 days to submit a correction plan, as well as an additional 90 days to implement the plan
• The wholesaler was afforded a reasonable opportunity to comply with the agreement
• The wholesaler did not cure the problem in the required timeframe and the brewer provided a final notice of the action it will take, its reasons for doing so, and the date it will take effect (which must be at least 15 business days after the wholesaler receives the final notice)

If the brewer fails to follow the proper process, they will owe the wholesaler reasonable compensation for the value of the wholesaler’s diminished business. However, brewers are permitted to terminate distribution agreements immediately upon written notice if:

• The wholesaler’s license is suspended or revoked for more than 31 days
• The wholesaler becomes insolvent or declares bankruptcy
• The wholesaler or a 10% or more owner is convicted or pleads guilty to a felony that the brewer reasonably believes will harm the wholesaler’s ability to distribute its products
• The wholesaler engages in fraud in its dealings with the brewer
• The wholesaler fails to pay the brewer within 5 business days of receiving a demand for payment
• The wholesaler transfers its business without the brewer’s approval, which the brewer cannot withhold without good cause
• The wholesaler ceases doing business for more than 5 days unless it is caused by force majeure

Fun Fact: Of the four US presidents featured on Mt. Rushmore, Lincoln drank the least, not having a taste for alcohol. Roosevelt primarily subsisted on huge volumes of coffee, but also had a soft spot for mint juleps. Washington and Jefferson were both said to have favored fortified wines like Madeira and port, among other boozy imbibements.