Tag Archives: beer self distribution

One Beer Article You Need To Read And Why, 2/2/17

Outside of the fact that they North Carolina legislature is a mess that can barely pass a budget so that the state can function on a yearly basis, the attempts of North Carolina breweries to get rid of the self-distribution cap are interesting.

I will state up front, I believe the cap to a bad idea.  It was a law instituted at a time when there were two beer companies in the US and NC was trying to force them to use distributors even though they had the means and infrastructure not to.  Fast forward to 2017, the law is now being used by distributors to force small craft breweries to sign with distributors or artificially stunt their own growth.

The distributors are holding on to every penny they can as the world changes around them.  Do you have any idea how much 25000 barrels is?  That is the current cap.  And do you know how hard it is to deliver that much beer in a year?  By the time a brewery gets to the point where they self-distribute 25000 they are pretty much running two businesses: their brewery and a logistics and delivery business. Some brewers will gladly choose not to have that second headache.  They started brewing beer just because you wanted to brew beer, not be UPS?

Forcing breweries to sign over a percentage of their profits to a third party is wrong.  Breweries should have the choice to use a distributor or not.  However, I think the percentage that would choose to sign with a distributor won’t change significantly with the change in the law.

To me, the more fascinating thing is how the craft beer industry has matured to the point where you have different segments of the business with different wants and needs.  The concerns of Olde Mecklenburg, NoDa, or Red Oak who are all right at the 25000-barrel limit are not the same as a brewery that just started 18 months ago, and is pushing it to get to 3000 barrels per year. To them, something like the amount of state and federal excise taxes is of greater immediate importance to their growth.

The bigger breweries keep playing on our romantic ideal of the cool brewer just making beer for people to enjoy. However, as craft beer matures it must be seen in part as a business that that in 2015 accounted for over $22 billion in sales.

I worked at McColl Center for Visual Arts, an artist-in-residence program, as a fund raiser for a while.  One of the things learned about art and creativity from the artists is that the most creative and successful artists were also some of the smartest business people.  Romance and business are not mutually exclusive.

In the future, a mature craft beer business won’t castigate brewers simply because they choose the smart business move.  I keep saying and I keep coming back to this:  The liquid in the glass is all that matters. As craft beer grows bigger and matures that becomes more important to remember.

One Article You Need To Read And Why, 10/17/16

The first North Carolina brewery I ever visited was Spring Garden Bar and Grill in Greensboro when I lived there at the end of the 20th century.  They brewed their own beer and made OK food.  It was a great place.  Then the owners changed the name to its bestselling beer, Red Oak, and later closed the bar/restaurant and opened a huge brewery down I85 towards Burlington.  They have concentrated on off-premise sales ever since.

Now, the owner is going to open a beer garden and beer hall.  Great.  I literally laughed at the small mention of the original restaurant in the article because I honestly never understood the decision to close it and focus solely on off-premise sales.

From the sounds of it, it seems they are going to build something similar to what OMB has in Charlotte and it will be a boon for that stretch of I85 that is not actually in any city.

It’s almost like they looked around at almost every other brewery in the state who sells a lot of beer (and makes more money) selling beer at their own taprooms.  Red Oak makes a crap ton of money making and selling its beer to bars and restaurants around the state.  They pump out more than 23000 barrels a year.  Like many of the breweries its size, Red Oak makes a consistent middle of the road, easy to drink, entry point beer that gives the drinker the feeling of being part of the craft beer movement.

This is actually part of a trend in craft beer.  Brewers and their investors have figured out the same thing Red Oak has, “own premise” sales give you a greater return than off-premise sales simply because there are so many breweries now, you are not guaranteed permanent taps in bars anymore.

Bryan Roth has a great article in Good Beer Hunting about this exact thing. As the number of breweries has increased the number of bars has decreased nationally.  For bars to be successful in places with a deep craft beer culture they have to understand what they provide that is different from the brewery tap room experience.  First, you have to have enough taps to provide a good sampling and cross section of craft beer.  Second, you have to provide a non-corporate atmosphere that makes patrons feel like they are at home.

I think the best description a bar in a craft beer heavy area can hope for is neutral ground.  Your goal should be to have all the best of the local beer on as much as possible while providing a good sampling of the best beers from around the country. I hope that is what we do at Craft, that is our goal at least.

500 Words On One Article You Need To Read And Why, 9/28/16

If this weren’t so pathetic it would be laughable.

I’m not one of the craft beer people who has a problem with the three-tier system.  When it is enforced fairly and evenly over all three-tiers everyone makes money.

I don’t have a problem with distributors in general.  Most work hard for the brewers they represent and push their product at a sometime annoying level.

My problem is that many distributors have refused to adapt to the changing landscape of the American beer industry and feel entitled to run the beer industry anyway they see fit.  In almost each and every state, the large distributors have enough money to give them a political influence they use to keep a strangle hold on the industry because, since the end of Prohibition that is the way things have been.  So, anytime I hear an argument from a distributor about why they are necessary that isn’t a business based argument, I know they are slinging b.s.

The thing is, there are good business arguments as to why distribution companies are necessary for the beer industry.  Right now, here in NC, one of the many things our state legislature has managed to screw up is the raising of the self-distribution cap on breweries.  The current limit is 25,000 barrels. Brewers want it raised to 100,000. Distributors are worried that if the cap is raised they will lose many of the small brewers who they are contracted with currently.

This ignores the fact that none of the breweries in NC save maybe 3 or 4 produce anywhere near 25,000 barrels much less 100,000 and many still use distributors.  Why? They want to be brewers and not distributors.

I’ve talked to a few of the brewers who self-distribute when they deliver beer to us. It is hard to distribute your own beer.  You have to pay for salesmen, drivers, and trucks/vans that you have to maintain.  These are good business people who know that there is going to be a point where it will no longer be cost effective to self-distribute.  They also know that point might come well before they hit any self-distribution cap.

Here is my advice when asked by brewers:  Self-distribute as long as you can and when the time comes find a distributor with a small enough portfolio to keep you from getting lost.  That mistake causes many brewers to sour on the distribution model.  They look for a distributor and get wooed by one of the big houses with talk of grocery stores and convenience stores and multi-county reach.  Then they get lost in huge portfolios and stop getting into accounts that carried them from the beginning.  I have seen this happen multiple times in the past two years.

To sum up: The three-tier system isn’t inherently bad, but bad distributors are horrible.  Distributors who care more about money and political influence instead of their portfolio short circuit a system that should work and make money for everyone in the industry.

Five Beer Articles You Need To Read And Why, 4/20/16

The thing I find interesting about meditation is what thoughts float through my mind as I concentrate on my breathing.  It isn’t the important things in my life that float through my head that bother me.  That is expected.  It’s the silly things.  Why am I thinking about a television show I haven’t watched in 5 years?  I didn’t even like it when I was watching it.  Anyway, here are the Five Articles.