Dispute taps Bell's out of the Illinois market
Move by microbrewery spotlights distributor law
By Josh Noel
Tribune staff reporter
Published November 10, 2006
A funeral is under way at bars across Chicago.
The deceased is a lovely shade of brownish orange bubbling to a fizzy head in smooth pint glasses.
The pallbearers are the thirsty souls hoisting their last rounds of Bell's beer, a stalwart on Chicago's microbrew menu for more than a decade.
The cause of death is a dispute between Bell's Brewery Inc. and its distributor, which has led the Comstock, Mich.-based brewery to stop shipping to Illinois.
Bell's still can be found at a handful of bars and liquor stores, but when the bottles and kegs run dry, one of the city's top-selling microbrews will be gone.
"This is a big blow to the average guy at the bar stool," said Michael Burton, 41, sipping one of the last pints of Bell's Two Hearted Ale to be served at Wicker Park's Handlebar Bar and Grill last week. "Without a Bell's tap handle here, it will be like a tooth missing."
The dispute spotlights the state's Beer Industry Fair Dealing Act, a 1982 law that binds beermakers to their distributors in relationships many industry observers compare with slavery. Under the law, manufacturers essentially are wedded to their distributors, able to be freed only by a buyout or convincing a judge there is sufficient cause for a separation.
Larry Bell, 48, considered one of the mavericks of the microbrew industry since he began selling beer in 1985, said his troubles began when his longtime distributor in Illinois, National Wine and Spirits Inc., sold the rights to his beer. The buyer, according to Bell and others, is Chicago Beverage Systems, one of the Midwest's largest, which includes Miller beers among its products.
Bell said he worried that Chicago Beverage would ignore most of his brews and limit its interest to the two or three that could make the most money without competing against the distributor's other beers.
Bell said he was even less impressed with Chicago Beverage after a one-hour meeting at its headquarters in the middle of August. He said officials were unfamiliar with the names of his beers and didn't know the history of his brewery.
Representatives of Chicago Beverage and National Wine and Spirits did not return several telephone calls for comment.
"They're box counters and don't have any passion for good beer," Bell said. "My choice was to be sold to [Chicago Beverage], to be sued or pull out. I saw the lesser evil as pulling out."
Experts said state beer-distribution laws were intended to protect small distributors from massive, bullying beermakers after Prohibition. But with the rise of microbrews like Bell's, and the growth of distributorships into billion-dollar businesses, many argue the law has become antiquated.
James Seff, a San Francisco lawyer, said laws are slowly shifting in favor of beer and liquor manufacturers, but that the rules still largely favor distributors.
"They're just stuck with who they sign up with," he said. "It is arguably very anti-competitive in a marketplace sense."
Bell's sales are but a drop in the bucket compared with the national brews. Bell's 57,000 annual barrels sold is infintesimal compared with Anheuser-Busch Cos.' 100 million.
Bell's decision to leave Illinois pulls him out of what he called his fourth-largest market, accounting for 11 percent of his $12 million in sales last year, and deprives beer drinkers and bar owners of what they say is one of the city's most popular microbrews, led by its summer wheat ale, Oberon.
Bell's last shipment to Illinois arrived Oct. 9. Some bars are already out, and others have enough to last through early 2007.
Bell said he has struck deals in the last several weeks with distributors in Iowa, North Carolina and Virginia/Washington, D.C. Some Chicago-area fans and bar-industry insiders hope a loophole in the state law will allow Bell's to return in a year with a new distributor. But even that could set off a court battle that Bell said he could not afford. He said he doubts he will be back in Illinois.
"We have plenty of places we can ship beer and not deal with the malarkey that's there," Bell said.
His move has become the talk in craft beer circles, and the response has varied. Ray Daniels, a past president of the Chicago Beer Society who called Two Hearted his "regular drinking beer," said Bell would have been wise to at least try to work out a peaceful solution.
"It seems like you could as least make the effort to try to work with them and see what it would be like rather than just pull out," Daniels said. "I'm admiring of Larry's accomplishments as a craft brewer." But as a consumer, he said, he's miffed.
Others say Bell has earned the right to turn his back on the Illinois market without losing loyalty, and that Chicago Beverage would have done him as wrongly as he feared.
"I think it's the coolest thing in the world," said Alex Huebner, owner Weegee's Lounge in Logan Square, lauding Bell's decision.
Local beer experts say microbrews expected to fill the void include Three Floyds of Munster, Ind., Two Brothers of suburban Warrenville and Delaware-based Dogfish Head.
Mike Roper, owner of the Hopleaf, an Andersonville bar long on microbrews, said he has avoided buying kegs from Chicago Beverage for 14 years and expects that it would have severely limited Bell's availability in Chicago.
Roper criticized National Wine and Spirits for selling Bell's rights against his wishes, and, above all, he criticized the state law.
"It's just been exposed with this situation," he said. "Most things are set up to encourage growth of business and competition. Except this. It's just not fair. If he wants to sell me a product, and I want to buy it, why can't I?"
While stewing over pints of Bell's beer at the Hopleaf's wooden bar, customers have discussed sending a petition with thousands of signatures to Springfield to convince legislators that the law needs to be re-examined, Roper said.
"I don't know how that would affect anything," he said. "I don't think it's high on Gov. Blagojevich's calendar. To change the Illinois franchise laws would be a long process."
Bell, who grew up in Park Forest and maintains a condo in Lake View, came up with an idea last week to show solidarity with his Chicago customers. Anyone presenting a valid Illinois identification at the brewery store gets a 15 percent discount on packaged beer.
"I feel bad," he said. "If they want to come get it and spread it around, I'll help 'em out."
He calls it the bootlegger's special.
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