Craft-brewery advocates tell committee House Bill 194 would free small brewers to negotiate distribution contracts

Adam Armstrong, an attorney who represents craft breweries, and multiple brewery owners testified Oct. 12 before the Ohio House Judiciary Committee in support of House Bill 194, which would exempt smaller breweries from portions of Ohio's Alcoholic Beverages Franchise Act and allow them to negotiate distribution contracts under ordinary contract law.

Armstrong said Ohio's franchise law, enacted in 1974, functions as an adhesion contract that can bind a brewery to a distributor in perpetuity if a distributor handles a brewery's product for 90 days or more without a written agreement. He told the committee that the statute places the burden on a brewery to prove "just cause" in court to terminate a distributor and that "just cause" is undefined in statute and costly to litigate.

"Functionally, the franchise act is a permanent restraint on Ohio's craft breweries," Armstrong said, adding the bill would let manufacturers and distributors negotiate arm's-length terms. He cited a U.S. Treasury report discussing competition in beer, wine and spirits markets.

Brewery owners gave examples of problems under current law. Dave Sotula, co-founder and brewmaster at Royal Docks Brewing Company, described several distributor relationships in which sales teams shrank, placements fell, and — he said — distributors sold the brewery's rights without adequate market coverage. "Overnight, we were essentially dead in the water," Sotula said, describing the effect of a distributor sale on retail presence. Sotula said his company has returned to self-distribution to regain control but that doing so requires significant new investment in staff, vehicles and licenses.

Mary McDonald, executive director of the Ohio Craft Brews Association, gave figures the industry uses to justify a proposed threshold in the bill: Ohio has about 430 craft breweries, roughly 100 of which use wholesale distribution, and collective craft production in 2024 was about 1,100,000 barrels. She noted that large wholesalers move far more product — Superior Beverage's 20,000,000 cases translates to about 1,450,000 barrels — and argued that a 250,000-barrel threshold to determine which manufacturers would be exempt from franchise law is reasonable.

Duncan McFarland of Phoenix Brewing Company described the taproom's community role and said his brewery avoided wholesale contracts because of the risk. He said that if contract law applied, breweries could negotiate exit terms and other protections rather than shoulder years of litigation to retrieve brand control.

Witnesses and the sponsor said wholesalers were not present to testify in the hearing excerpt and that some small breweries fear retaliation if they speak publicly about distribution problems. No committee vote was taken at the conclusion of the second hearing on House Bill 194.