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Indiana gov. opens new debate on beer sales.

AP--Gov. Frank O'Bannon's decision to let a 21-year-old state rule expire so breweries can carve out exclusive territories for distributing beer in Indiana has given new life to a decades-old debate among lawmakers, beer makers, distributors and retailers.

Some retailers who feel slighted are vowing to take their fight to the General Assembly, where the issue of so-called "beer baron" regulation has been debated for years, although more quietly in the past decade.

Longtime Rep. Robert Alderman, R-Fort Wayne, says the issue is unlikely to stir the same heated sentiment it did a decade or two ago.

"I don't think there is going to be an immediate backlash, simply because I don't think the same marketplace exists today," Alderman said Tuesday.

The General Assembly passed legislation in 1989 that would have over-ridden a 1979 Alcoholic Beverage Commission rule and allowed exclusive beer sales territories, but it was vetoed by then-Gov. Evan Bayh.

O'Bannon, when he was lieutenant governor under Bayh in 1989, broke a 25-25 tie in the Senate that sent the bill to Bayh's desk.

"Frankly I was hoping that this day would never come, because it is a very controversial issue and it was nice to have 12 years of not having to deal with it," said. John Livengood, president of the Indiana Association of Beverage Retailers. "I have friends on both sides of this issue."

The O'Bannon administration said the change would lead to a more orderly marketplace that retains plenty of competition.

The current rule bans the nation's brewers from distributing beer through exclusive sales territories, something they are allowed to use in all states except Indiana.

Supporters of the rule, including many retailers, say it allows them to shop around for the best price. They have argued that without it, beer prices could go up $I to $2 a case while helping enrich a few wholesalers and distributors.

If it is allowed to expire Dec. 31, breweries could authorize one wholesaler to serve a specific geographic location, and all retailers would have to buy that brand of beer from the designated source.

Supporters of scrapping the rule have said that competition between beer brands would help keep prices low and allow brewers to control their products in the way manufacturers do.

Clifford Ong, chairman of the Alcoholic Beverage Commission, said the change likely will lead to a more orderly yet still-competitive market-place. He also said he had no doubt the current rule has forced some wholesalers out of business.

Marc Carmichael, a former legislator and now president of the Indiana Beverage Alliance-- which represents many smaller, local wholesalers, agreed. He tried to get the rule overridden by legislation in the late 1980s.

He said the rule allows wholesalers who want to leave the exclusive territory they agreed to represent when they signed their contract with a brewery to ship beer into other wholesalers' territories. He said they "cherry pick" among retail customers, focusing on the largest and easiest retailers to service to ensure the highest profit margins. That leaves the smaller, more difficult accounts to be served by local, community-based wholesalers.

Carmichael said that has driven nearly 200 Indiana beer wholesalers out of business since 1979.

"We are down to 35 or 38 beer wholesalers and as long as we continue under the present circumstances, there is no way to stop the erosion," he said.

Grant Monahan, president of the Indiana Retail Council, predicted that the change would erode competition and drive up the price of beer by $1 a case or more. "There are over 50 million cases of beer sold in Indiana each year. That means at a minimum, the state's 38 beer wholesalers get an easy $50 million windfall from the administration with repeal of Rule 28," Monahan said.

"My retail members cannot run trucks directly to St. Louis or Milwaukee to get beer," he said. "They have to go to wholesalers. To layer on top of that

exclusive territories, it's a giant win-win for the beer wholesalers."

The state alcohol commission plans to hold a public hearing on that and other upcoming agency changes or proposals in August or September.
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Publication:Modern Brewery Age
Article Type:Brief Article
Geographic Code:1U3IN
Date:Jul 2, 2001
Words:689
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