Tag Archives: nc beer self distribution

One Beer Article You Need To Read And Why, 3/8/17

I thought this would be shorter since I got home late from closing the bar.  I was wrong.

This article is interesting not because the information is surprising. It isn’t and it has been out in the public for a week now.  What interests me is how the Craft Freedom group has changed its approach over the last two years.

When the group first started, it was a lot like Mr. Smith Goes To Washington.  There seemed to be a naïve belief that if they brought their case to the state legislator they would win hearts and minds with the power of their argument.  What they found was, yes, many legislators agree with them.  However, many of those same legislators get donations from the distributor/wholesale lobby and individual distributors.  Those legislators could not make the leap to pissing off major contributors.

What Craft Freedom has done this time is continue to lobby to the legislators, but they have also taken a more proactive media approach. They are attempting to go around the money to the people and appealing to them with a fairness argument.  They are arguing that breweries should have this freedom and to deny them that goes against our basic principles.  Of course, people vote against the principles and best interests every day. I think they can win enough votes to raise the cap to 100,000 barrels.

The unspoken part of this is what interests me most.  If and when this bill passes, how does that change the contract negotiations between breweries and distributors?  For breweries with large ambitions, this artificial cap at 25,000 makes it imperative that they sign with a distributor.  Unless you come into the negotiations with the buzz of a Wicked Weed, you are at a disadvantage.  You must sign with a distributor.  By raising the cap, you give breweries a little more leverage to make the distribution deals a little fairer.

NC beer distributors are not equal.  I suspect the opposition by the wholesaler’s lobby group is driven by a small number of large distributors and not the majority of their sales force or the smaller distributors that dot the state.  That is why I think their real opposition to the law isn’t the possibility of losing potential breweries, but to losing that contract leverage and opening the door for their big national beer companies to strike out on their own and open their own distributorships.

In the end, I don’t think the big distributors give much of a damn about whether Olde Mecklenburg, Red Oak, or any of the big self-distributing breweries who have shown no inclination to ever sign with them do once they hit 25,000 barrels. It is about keeping hold of that unfettered 20%-40% they can milk from every brewery that signs with them and keeping the “incentives” from the big beer companies flowing.

Now, I’m going to go read some of this.  I’m in heaven already.

 

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.

Five Beer Articles You Need To Read And Why, 3/23/16

Back to work. Thank god.

  • Of course, the rate of growth slowed. It is idiotic to think a 22% increase every year was sustainable in any business.  Many in the industry scoff at the idea of saturation, but it is real and it will happen.  To think that level of growth was sustainable for a long period and/or that saturation in certain markets will not happen is a fundamental misunderstanding of business.  No matter how in demand your product is, eventually, it will stop being the next big thing. I’ve been saying this for two years, there will be a moment soon when many of the breweries that opened in the last three years will close.  Many of them will be brewers that make great beer, but have horrible business plans and many of them will have great business plans but horrible beer.
  • Here is one of the OGs of craft beer writing asking the question, “Why do I drink craft beer?” There are many facets to that answer. It is one I have been thinking about lately.  I plan on answering (or attempt to answer) that and why critics are/are not necessary for a blog post next week.
  • Distributors worrying that increasing the self-distribution cap is somehow going to cut into their business is understandable but overstated. Most breweries don’t want to self-distribute at a certain point because self-distribution becomes a second business they didn’t sign up for when they started making beer.  Many of the brewers I’ve met and talked to that do self-distribution, want a distributor so that they can expand their footprint without having to worry about trucks, drivers, and sales reps.  That is why I think along with increasing the distribution cap, the laws governing the contracts between brewers and distributors should also be changed to make it easier for brewers to get out of contracts with bad distributors.
  • Brewers have been adding fruit, lemonade, and other things to beer for hundreds of years. Sours are as traditional to beer culture as pilsners.  The idea that beer that doesn’t taste like beer is some new trend is absurd.  Maybe the addition of watermelon or habanero peppers is new, but not by much.  Coco Chanel once said something like, “Fashion is temporary, but style is forever.”  Use trends to augment your business, not define it.
  • Never go into a craft beer bar and ask a bartender to just give you their favorite. That can really badly for you.  Trust me, I’ve seen it.  Everyone’s palate and predilections are different.  Don’t assume your favorite flavor is the same as anyone’s.  Now, there is scientific research that tells us why.