Tag Archives: craft beer distribution

One Beer Article You Need To Read And Why, 3/4/17

The One Beer Article You Need To Read And Why, is a cheat.  It is a quick way for me to come up with a topic to write about daily without having to do too much brainstorming.  So, when I can’t find an article I want to write about, it makes it kind of hard.

Anyway, here is an article about…wait for it…the NC distribution cap fight.  At least this one finally puts a number on all the money the N.C. Beer and Wine Wholesalers Association and individual distributors have given to NC legislators.  The total is almost $1.5 million.  That should explain all you need to know as to why progress has been slow.

I’ve been following this story since it started gaining steam 3 years ago, and I’m tired of talking about it.  However, I think the distributors are more afraid of the big beer companies pulling out of their contracts and distributing themselves.  That is a more realistic fear than the one of all these small brewers distributing their own wares.  It isn’t that much more realistic, but more realistic.

I just get tired of political fights whose conclusion is inevitable.  If the Supreme Court hadn’t stepped in, we would still be in a 40-year battle to finally get to marriage equality.  This is a much smaller and less important issue, but the conclusion is inevitable.  The politicians want to vote to raise the cap, but they get a lot of money from its opponents.  Eventually, the politician’s beliefs will win out and they will vote to raise the cap.  Wholesalers should spend less time worrying about how to stop the cap and more time trying to build good relationships with brewers.

Last thing, the distributors who treat brewers as if they are doing them a favor by distributing their beer are the ones who should worry.  I think the biggest change raising the cap will initiate is making distribution contracts fairer and forcing some distributors to treat brewers more as partners.

One Beer Article You Need To Read Andy Why, 2/5/17

On one hand, we have an article about how silly state alcohol laws are and on the other hand, we have an article about how big beer companies use distributors to screw craft beer.  Which should I write about?

Honestly, today I don’t want to write about either.  I get kind of tired talking about all the things that beset craft beer.  On one side, you have big beer companies and the distributors they use as their henchmen.  On the other side, you have state laws that make no sense in one state and make even less sense when you compare them to other states.  It can be depressing.

Today, I would rather just talk about the thing we love.  The thing that brings us together.  The beer.

I love discovering new things.  I love stumbling across a new band, a new television show, a new movie, a new book, or a new beer that blows my mind.  That is why I seek out new experiences in each of those genres.  I think anyone who aspires to be a critic agrees.  It may seem like critics look for excuses to eviscerate someone or something. However, I think most critics are like most people, they are looking to fall in love again.  That is what happens when you find something that surprises and impresses you.  It shows you all the possibilities again.

I want to return to that moment I first tasted Pete’s Wicked Ale after years of MGD, Milwaukee’s Best, and Olympia.  I want to return to that moment I saw Living Colour debut on Arsenio Hall.  Each of those times, I understood something different was possible. I understood things didn’t have to be as they are. The possibilities of the world opened to me.

I find that feeling very rare these days.  It isn’t because I’m not trying new beer or discovering good beers and breweries. I find new beers and breweries that impress me often.  However, I don’t find any beers that shake the foundations of my experience like Living Colour or Pete’s Wicked did.

That is why critics are so hard on the bad things they encounter.  Actually, critics may be harder on the intentionally mediocre things that they encounter.  At least some horrible and unsuccessful things are great swings by the talented or the untalented and overly confident that result in great misses.  Too often, you get things that are aggressively mediocre.  These things are so busy trying not to offend that they are barely worth commenting on.

That is the path to consistent return on investment.  The thing is, though, the path to true success risks offending people.  Craft beer didn’t get to this point by playing the same game as the big beer companies.  However, that success has bred an idea that if you follow a preset path you too can become Wicked Weed.  It wouldn’t be so bad if that kind of thinking didn’t result in so much bad and assertively unremarkable beer.

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 Beer Article You Need To Read And Why, 11/30/16

I love it when the article I want to write about is sitting in my inbox right at the top.  No wading through different Google Alerts or sifting through Twitter to find an article to highlight.  I open the Google Alert email and there it is.

One of the first articles in my Google Alert this morning is this one from the Boston Globe.  Shelton Brothers, beer and wine importer, is suing Craft Brewers Guild, major craft beer distributor, for what Shelton claims are unfair practices.  Primarily, overpricing their beer and intentionally not selling it to bars and retailers in favor of products from other suppliers through highly aggressive tactics including “pay for play.”

Now, Craft Brewers Guild was found guilty of pay for play last year by the state of Massachusetts.  In fact, Craft Brewers Guild isn’t contesting the findings of the state regulators they are contesting the fine. They just don’t want to pay the $2.2 million to the state.  Yet, those same regulators must now decide if Craft Brewers Guild is violating their contract with Shelton Brothers by failing to “exercise best efforts in promoting its brands.”

All this highlights the hoops importers and brewers must go through to get out of distribution contracts under franchise laws across the country.  A simple solution for a case like this would be to add an amendment to the franchise law that states if a distributor is found to have used illegal practices by state regulators, such as pay for play, all their distribution contracts can be terminated by the other parties.  So, in this case not only would Craft Brewers Guild have to pay a fine, but more importantly they would be faced with the loss of its whole portfolio.

I know it has seemed over the last few weeks, I don’ like distributors.  Is not that.  Trust me.  Over the last few days, I can tell you distributors and breweries that self-distribute both have advantages and disadvantages for a retailer.

I’ve seen self-distribution that works great and I’ve seen brewer/distributor relationships that are like hand in glove.  I’ve also seen self-distribution be a pain in the ass and distributors who have reps that don’t know their craft portfolio and simply act as order takers.  Selling craft beer requires a little more of a proactive approach then selling Bud/Miller/Coors to a grocery store does.

The deeper in this I go, the less clear it is what the Brewers Association and the state guilds should concentrate on legislatively.  I guess excise tax reform is the first thing.  That effects all brewers and distributors regardless of size.  A close second should be franchise and distribution law reform.  Bottom line:  Cut taxes and allow brewers the freedom to decide if they want to use a distributor and make it easier for them to escape a bad distributor fit.

An issue I see arising is a growing difference between larger more regional breweries (15000 bbls/year and up) and smaller breweries.  In North Carolina, the needs and wants of the larger breweries are slowing shifting away from the needs and the wants of the majority of the breweries who fall in that smaller brewery category.  I believe that will be a bigger issue going forward in the state and nationally.

One Beer Article You Need To Read And Why, 11/29/16

There are so many stories surrounding brewery mergers and beer distribution that it can be hard to keep up with what is the most important things to remember.  This article does a great job of showing how the two issues are connected and how each exacerbates the problems caused by the other.  The one thing that I think is most clear from this article is that beer franchise laws are one sided screw jobs for most breweries in this country because most breweries are too small to buy their way out of these contracts.

When the brewers who self-distribute bring buy kegs we bought sometimes we’ll talk.  Often, we get around to discussing distribution and distributors.  One thing I’ve found is that many of the small distributors don’t want to self-distribute for too long.  It is hard, even if you hire a driver or two.  Also, at that point, you are running your own distribution wing instead of concentrating on the beer.  Some like doing that and some don’t.  Regardless, it should be up to each brewer to decide.  In other words, there should be no self-distribution cap.

For those that want a distributor, they ask me which distributors do I like dealing with the most.  The answers are easy, but I won’t go into them here.  Suffice it to say, the two or three I always mention are the smaller houses that a small brewery won’t get lost in.  The problem for breweries is this: If you sign a distribution contract and after a period of time it becomes clear the relationship isn’t right for you, you are screwed.  The franchise law was set up at a time when there were more distributors than brewers, so the laws were set up to protect the distributors.  Now, that equation has flipped, but the laws are still built to only protect the distributor.

This is where the breweries fighting the most for a lift of the self-distribution cap and I disagree.  I think it is more beneficial for more of the breweries in North Carolina to have legislation to make distribution contracts fairer for both sides (and cut the excise taxes in NC).

Here is the other advice I give brewers when we talk and they ask: Self-distribute as long as it is fiscally and physically possible.  If you are a brewery with a small distribution footprint, you will probably lose money going with a distributor.  You will pay less than the 30% or whatever the going rate is right now for a distributor’s cut in paying a driver or two and having a couple of trucks.

Another thing I like about his article is that it tried to look at the effects of the mergers and buyouts from the perspective of the smaller breweries.  Many times, the issues in craft beer are seen through the lens of the larger craft brewers that many people know.  However, the vast majority of craft brewers in this country are small.  They majority of breweries in this country are microbreweries meaning they produce 15000 barrels a year or less as defined by the Brewers Association.  These mergers and how they affect distribution won’t disrupt your Boulevard, Stone, or Ballast Point availability, but if a smaller brewery gets lost in the distribution shuffle it can affect whether you get their beer or if they even survive.

One Beer Article You Need To Read And Why, 11/23/16

In the coming weeks, I have planned to write a piece or two comparing and contrasting the alcohol laws between North Carolina, South Carolina, and Virginia.  I want to see if it is possible to discern how those laws have affected the craft beer industries in each of those states.  I am currently in research mode meaning I’m reading and taking notes on the laws of each state.  Let me tell you that is a ton of uninteresting reading.  Here is a piece from the John Locke Foundation that studies this very thing.

If you are in North Carolina and are into craft beer you may know that there is a battle going on over how much a brewer should be allowed to distribute before legally having to go with a distributor.  Currently, that number is at 25,000 barrels.  That is a lot of beer and until recently no brewers in NC came close to that amount.  However, there are around 3 brewers who could sell that amount this year if they wanted to or in their eyes allowed to.  They are all independent breweries who self-distribute.

This law is silly and is propped up by the wholesaler/distributor lobby in NC that seeks to protect itself at the expense of common sense.  This paper argues successfully that this is one of many in the laws that regulate the manufacture, sale, and use of alcohol in North Carolina that are silly and against all common sense.

When you look at these laws, the only people they protect are the people who distribute alcohol in this state and that includes the state-run monopoly on liquor, which makes it one of eight states with this peculiar law.

Back to the self-distribution fight in North Carolina.  It doesn’t matter what the wholesalers say (including making specious health and safety claims) they don’t want brewers to be able to distribute more of their beer because the wholesalers don’t want to lose the money they get from distribution.  I think they would lose contracts and money if brewers could distribute more of their own beer.  However, it wouldn’t be as much as they seem to fear.

Why, distributing beer is hard and expensive.  Small brewers and brewers who only want to distribute in a finite area put up with it because it is easier and cheaper to DIY it then to pay a distributor.  However, at a certain point, a brewer is running two companies: a brewery and a distributorship.  Most breweries won’t want that.

As a quick aside, another battle brewers should fight is to change the nature of the distribution contracts. The way the contracts work is all in favor of the distributor, particularly when the brewer is small.  One tactic brewers in North Carolina could take is to make a deal on the distribution cap while getting concessions to equalize the power in distribution contracts.

I will say breweries also make specious arguments in calling for more freedom to self-distribute.  One that makes me laugh is a certain brewery swears that going with a distributor would ruin their ability to create wonderful season beers.  That is a load of crap because there are other factors that currently keep this brewery from doing more seasonal beers and none of those have to do with who is distributing their beer.

Look for more from on this subject in the next month or so.

500 Words On One Article You Need To Read And Why, 9/30/16

Being a state legislator has to be hard.  The world you have been elected to create and vote on laws for, changes at a lightning speed.  You are expected to not only enact legislation that solves current problems but also anticipate problems down the road.  That is never more apparent than with any legislation involving new and emerging industries like craft beer.  Today’s article is actually three short articles from Alabama, Mississippi, and Northern Ireland that all deal with the same thing: laws that adversely affect craft beer because no one in the legislatures knew what craft beer was nor how big a business it would become.

All three of the articles deal with how beer is distributed.  It seems in all three cases the idea of a large number of small breweries wanting to control the distribution of their own product never occurred to anyone who makes laws.  Why would it?  If Ireland is anything like the US, for a long stretch of history beer was made by large companies pumping out as much of the least offensive beer possible.  Then the beer world changed without most people noticing it and a new business category was established, but the laws are just starting to acknowledge craft beer’s existence.

On one hand, you have legislators who are trying to navigate these issues by learning about the new industry and are generally trying to do a good job to keep the playing field fair for the new and growing industry.  On the other hand, you have legislators who, because how the system works, simply carry out the wishes of the lobbies who want to restrict the changes to the beer industry that are inevitably happening.

Large and wealthy beer companies and distributors fight every day to keep the power they have within the industry from being dispersed among craft brewers.  However, I think they know this is simply a delaying tactic used until they can figure out how to keep making the money they always have in this landscape they know is changing.

The emergence of craft brewing has disrupted a whole industry.  This wasn’t entirely intentional.  All the first craft brewers wanted to do was make good beer.  They knew that some people out there wanted more than just watered down mass produced pilsners.  The problem these brewers have run into is that the people that produce and distribute those watery pilsners gathered their money and power by making sure their product was in every watering hole, grocery store and gas station they could find and they are not giving up that money and power easily.

I don’t want to make this seem like some grand eloquent fight for freedom.  Craft brewers just want to make and sell their beer to as many people as possible and want the playing field to be level so they can fail or succeed on their own merits.  That is true whether it is North Carolina, Alabama, Mississippi, or Northern Ireland.

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, 3/24/16

I don’t understand how a state that purports to promote business and wants to bring businesses in from other states passes laws that socially will prevent businesses from other states from expanding or moving to that state.  Killing a gnat with a bazooka is never a good idea.

Five Beer Articles You Need To Read And Why, 3/1/16

This is shaping up to be a long week. However, there is a light at the end of the tunnel: Brawley’s Black and Blue Festival.  Hopefully, I’ll survive long enough to get to it. On to the Five Articles.