House Bill 168 – the “Beer Bill”
Issue
Since Prohibition, the regulation of alcoholic beverages has almost exclusively been left to each individual State to oversee. With limited exceptions and like the majority of States, Kentucky has operated under a three-tier system for the production, distribution, and sale of alcohol. This means a supplier (brewer or distiller) cannot distribute or sell alcohol, a wholesaler/distributor cannot produce or sell alcohol, and a retailer cannot produce or distribute alcohol.
In the mid-1970s, Anheuser-Busch (A-B) applied for a distributor’s license to operate the Louisville distributorship due to poor management by the previous owner. The State denied the license and A-B subsequently filed suit claiming Kentucky’s statutes for malt beverages do not specifically prohibit an out-of-state brewer from also distributing. Kentucky’s statutes for wine and distilled spirits specifically include language that makes these licenses incompatible. The Court agreed with A-B arguments and thus created a loophole for out-of state brewers compared to in-state brewers and the wine/distilled spirits sector. As a result, A-B began distributing its products out of the Louisville facility and has been doing so for the past 35 years.
In 2008, the foreign owned company InBev acquired Anheuser-Busch in a hostile takeover creating A-B InBev. Soon after, A-B InBev’s CEO made it publically known their plans to own over 50% of the distribution in the United States. The first opportunity A-B InBev had in Kentucky occurred in the summer of 2014 when the operator of the Owensboro distributorship decided to sell its operation. A-B InBev purchased this license further perpetuating the inequity of allowing an out-of-state brewer to have a privilege an in-state brewer does not have.
Opposition
The primary opponent to the legislative fix of this loophole was A-B InBev. A Cincinnati-based craft brewer, Rhinegeist Brewing, also opposed the legislation. Rhinegeist had opened a small distribution facility in Northern Kentucky called River Ghost shortly after the Franklin Circuit Court upheld A-B InBev’s purchase of the Owensboro license.
A-B InBev was also successful in convincing three of the independent A-B distributors who were originally for the legislative fix and were members of Kentuckians for Entrepreneurship & Growth (KEG) to join their side. Once the legislation passed the House, A-B InBev lobbied for allowing their Louisville and Owensboro licenses to be grandfathered in and prohibit future expansion. At least six lobbying/public relations consulting firms were hired by AB-InBev and roughly $2 million was spent.
Result
McCarthy Strategic Solutions (MSS), along with another lobbying firm and a public relations firm, coordinated a multi-faceted campaign to prevent A-B InBev from having a distributor’s license, including their existing licenses in Louisville & Owensboro. MSS helped build a coalition of supporters including the Kentucky Beer Wholesalers Association (the independent MillerCoors distributors), the Kentucky Guild of Brewers (in-state craft brewers), Yuengling, the Kentucky League of Cities, Commerce Lexington, Northern Kentucky Chamber of Commerce, the Temperance League, the Wine & Spirits Wholesalers, and several retailers across Kentucky.
With the help of coalition members, KEG, the MSS team and the other lobbying group was able to get House Speaker Greg Stumbo to file the legislation – HB 168. By working diligently during the legislative session and educating all members of the Kentucky House of Representatives and Kentucky State Senate to dismiss the scare tactics and misinformation brought forth by AB-InBev and their supporters, we were able to secure 14 additional House sponsors to HB 168.
HB 168 passed both legislative chambers (67-31 in the House and 23-13 in the Senate), with broad bi-partisan support. HB 168 was one of the first pieces of legislation to pass both chambers during the 2015 General Assembly and was never amended throughout the entire process – a virtually unheard result especially with an alcohol related bill. On March 20, 2015, Governor Steve Beshear signed House Bill 168 into law upholding Kentucky’s longstanding three-tier system of alcohol regulation and forcing A-B InBev to divest of their interests in the Louisville & Owensboro operations.