John Haggerty, Warped Wing Brewing Co. — House Commerce and Labor Committee (December 5, 2023)

Summary

This is testimony in support of House Bill 306 from John Haggerty, Co-Founder/Brewmaster of Warped Wing Brewing Co., to the House Commerce and Labor Committee, dated Tuesday, December 5, 2023. It states that the brewery is subject to the Ohio Alcoholic Beverages Franchise Act of 1974 and gives examples of how this adversely affects its business. In one example, it states that the Columbus market had been growing at a 20% year over year growth rate and that, 18 months into the agreement with a wholesale distributor, sales are eroding at a rate of 35% annually. It asks the State of Ohio to stand aside and allow brewers to negotiate their own agreements with wholesale distribution partners.

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Full text

John Haggerty
Co-Founder/Brewmaster
Warped Wing Brewing Co.
26 Wyandot St.
Dayton, OH 45402

Tuesday, December 5, 2023

Members of the House Commerce and Labor Committee
House Bill 306

Chairman Johnson, Vice Chair Manchester, Ranking Member McNally and members of the committee,

Thank you for the opportunity to testify today in support of House Bill 306. My name is John Haggerty and I
am a co-founder of Warped Wing Brewing Co. in Dayton, OH where I have served as Brewmaster since the
founding of our business. We are a small, local brewery who produces and sells beer and soda pop in our tap
rooms, distributes independently in the Dayton metro area, and through various wholesalers into the
Cincinnati, Toledo, and Columbus metro areas. I have over 30 years of experience working in craft beer with
the last 10 coming with Warped Wing Brewing Co. As manufacturers of an alcoholic beverage, we find it
apropos to be addressing you on Repeal Day regarding adverse impacts of a law created with good intentions
which is now wreaking havoc on small breweries.

I am submitting this testimony on behalf of my company and my fellow brewers in the State of Ohio as we
have felt the adverse effects of being subject to the Ohio Alcoholic Beverages Franchise Act of 1974. Here are
some examples of how this adversely effects my business as well as those of my colleagues:

1. All wholesale distributors promise to help develop a forecast of sales. In my experience, almost none
do and, when they do, they are rarely followed. Wholesale distributors do not feel obligated to make
sales commitments to breweries because they know we cannot terminate our agreement. This makes
it hard for us to make financial decisions regarding how or when to invest in our plant capacities and
staffing. If and when a sales forecast is made there is no obligation to follow it thus putting any
investment made into a manufacturing plant or staff a significant risk. If sales forecasts are missed a
shrug of the shoulders and a “we will try better next year” is offered. Without the consequence of a
brewery being able to switch wholesale distributors there is no incentive for the distributor to change
their behavior.

We are simply asking to be able to negotiate this in our normal contractual agreements with
wholesalers, and have those contracts be enforceable.
2. No one enters into a distribution agreement expecting it to fail. However, when performance lacks
and complaints are filed with the wholesale distributor, no action is taken as there is no risk to the
wholesale distributor if they don’t amend their behavior toward the brewery filing the complaint. In
no other industry is this allowed. If my logistics service provider is failing to meet my expectations I
should be able to find an alternative. As an example, Warped Wing Brewing Co. entered into an
agreement with a wholesale distributor to deliver our beers to the Columbus market. When we
entered this agreement we had independently developed the Columbus market on our own and had it
growing at a 20% year over year growth rate. 18 months into the agreement our sales are eroding at a
rate of 35% annually. I currently have no recourse in this relationship and when confronted the
wholesale distributor has simply responded, “yes, we haven’t handled that very well” with no further
action taken.
e are simply asking to be able to negotiate performance metrics into our contractual agreements, and
have those contracts be enforceable.

3. The previous point illustrates how hard craft brewers work to provide choice in the market. Since the
mid-1980’s craft beer has worked tirelessly to spread the word of full-flavored beer and provide a
multitude of choice in the market. This effort continues today. The wholesale distributors are trying to
claim that this effort should be credited to them when we can clearly see that they do not represent
choice they represent the “path of least resistance”. If a retailer is not aware of my brand and the
wholesale distributor is not talking about it then how will they be aware of it? If my sales are in decline
by 35% at the wholesale distributor after a period of proven growth then how much are they
representing my brand? How much can they claim that they are responsible for consumer choice?
They aren’t.

We are simply stating that brand representation metrics should be negotiated as part of our
contractual agreements, and have those contracts be enforceable.

In closing, it is Warped Wing Brewing Co.’s intent, as it is of all my fellow brewers, to continue to use the
wholesale distributor system that exists within the State of Ohio. My business is not one that is about trucks
and drivers and logistics. It is one that is about the manufacture of beer. The wholesale distributors can run
the logistics of delivery better than I can. However, I need to be able to ensure that my service concerns are
heard and acted upon in a timely manner. I have the same expectations of my malt supplier or of my trash
hauler or of my internet provider. If their service is not sufficient to the needs of my business I will find a
competitor who can do it better. In none of these areas am I committed in perpetuity for a service I have
contracted for.

We are not asking the State of Ohio to do anything for us, instead, we are asking the State of Ohio to stand
aside and allow us to negotiate our own, legally binding agreements with our wholesale distribution partners.
Agreements that would be held to the same standard the State of Ohio holds all contractual agreements to.
Please support this change to Ohio law and allow us to negotiate our own agreements.

Thank you for your time and consideration.

Most sincerely,
John Haggerty
Warped Wing Brewing Co.

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