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frigatebay
03-11-2008, 06:51 AM
It seems like every week or so a small independent wholesaler is being bought by a large big brand wholesaler. Is this good for craft beer. Seems like you could equate big wholesalers as walmart type businesses, just the opposite of what craft beer is. Any thoughs on the future of small wholesalers?

Beersmith
03-11-2008, 09:44 AM
Consolidation in the distribution industry has been happening for quite awhile now and I think it will continue well into the future. I agree with you that consolidation does not bode well for smaller breweries. I don't think there is much you can do to stop it so you might as well figure out how to adapt.

Choose distributors who you think are going to survive/grow in the future. You will receive much better brand emphasis from a distributor who you have been with than from one who recently acquires your brand via merger/takeover/purchase.

I think most importantly as an industry, small brewers need to protect/expand their rights to self-distribute. Self distribution may be where many of us end up in a few years. Also, the ability to self distribute helps keep distributors "honest" IMO........

highhopgod
03-12-2008, 07:17 PM
We are setting up shop as a contract brewer under a small wholesaler license, we will keep you update on how things go.

frigatebay
03-13-2008, 07:59 AM
Thats how I operate now. I self distribute my brand and also rep 2 others. By your Zip I suspect we've talked before. I'm just north on 81.

Brewtopian
07-20-2008, 01:50 PM
With the recent move by AB's biggest distributor breaking its exclusive agreement with them is likely going to result in a much more competitive environment by the big guys who want the growth and profit from the craft players. Craft and imports are where the profits are but the volume is still coming from the big brands and the distributors need to balance this out by having good volume from AB, Miller/Coors but a good stable of crafts an imports.

This I believe is great news for the craft beer industry as this puts those that are capable of producing volumes for regional distribution in the drivers seat and able to negotiate some pretty good deals for themselves. Those that aren't big enough currently but can show consistent growth are going to be in a better position to attract capital for expansion or set themselves up for mergers.

At first we're probably going to see a big rush of just a handful of brands but as those brands reach a plateau the middle to small brewers should see interest pick up and markets begin to become available to them through these bigger distributors. Now is the time to start marketing your brand and refining your image to best position yourself for this new reality.

World Class Bev
07-22-2008, 02:04 PM
You certainly correct - small distributors are going away. There are far fewer distributors in the US than there were 10 or 20 years ago. All the economic pressures are there to promote that trend and probably increase the rate of that trend. Beer margins are thin, especially on macro brands and transportation/delivery costs are getting higher and higher. Both of those factors lead to consolidation where cost efficiencies can be gained. Add to that threats to the three tiered system by major box stores and everyone feels the need to consolidate or get left out of the business entirely.

Having said that, we're in an environment where micro brews are flourishing and there are many more of them than 10 or 20 years ago, which is exactly the opposite trend of the consolidation in distribution. Why? Because the consumer wants better beer and as long as that trend continues, distributors will be increasingly attracted to smaller, high quality brands.

I think much of the advice already given is dead on. Though I think there will always be some small distributors out there, they will get fewer and fewer in number as the business gets tougher. I'd recommend finding a distributor who wants your products and can understand and promote them, but I would also think about the long term prospects for your potential distribution partner.

frigatebay
08-11-2008, 01:20 PM
I think the condsolidation of distributors make it more difficult for a brand to get a foothold in the market. big dist. seem to do better with established brands and ones with lots of $$$ behind them. Just my $.02.

K
small brewer/distibutor

World Class Bev
08-12-2008, 05:42 AM
I wouldn't disagree with Frigatebay that there are large distributors who focus on large brands, but on the whole I think the climate for distributors has changed pretty markedly over the past few years in favor of craft brewers. I think that trend will continue as long as the market is so clearly moving in the craft direction.

Whether small or large, more and more distributors are becoming craft friendly and I don't think that being large necessarily makes a distributor anti-craft. On the contrary, while those craft-unfriendly distributors are out there, I think that the general trend is for the large distributor to look for craft opportunities these days.

That doesn't take into account that many distributors have little experience with craft products and sometimes they have no idea how to deal with them or how to get them to market, but the interest level is certainly increasing and many large distributors have already figured out how to work with craft brands and make them a focus, which is not something that would have been remotely common 5 or 10 years ago.

On the other hand, the small distributor has fewer choices for larger brands these days as Miller/Coors presses for distributor consolidation and InBev/AB is going to start doing the same.

In fact, I think it could be argued that consolidation will increase the interest level in craft brands, because the larger brands will become more and more unavailable to smaller distributors who will have to focus more on craft brands in order to survive. Over the next few years, distributors who used to rely on Bud, Miller and Coors to pay the bills are going to have to look at alternatives to brands that are not going to stay with small distributors.

frigatebay
08-12-2008, 06:14 AM
With less wholesaler, ie less competition, once a wholesaler has achieved a reasonable # of brands what is their incentive to take on more brands? There reaches a point of saturation and the only way to grow one brand is by taking away from another brand in their portfolio. By saturation I don't mean craft beer but #of taps available, # of shelf slots etc. More wholesalers means more competition, more incentive for each wholesaler to go the extra mile.

K

World Class Bev
08-13-2008, 06:44 AM
I agree with the idea that fewer distributors mean less competition in the long run, but I think that the current environment breeds a lot of incentive for distributors to work harder, because no one wants to be the guy who "gets gobbled up."

However, if a point of saturation is going to be reached, I don't see that as a distribution problem, per se, but as more of a market reality. Frigatebay rightly points out that a distributor who cannot increase sales by bringing on additional brands is going to stop bringing on those additional brands, but that may simply mean that a particular market is not going to support additional brands, no matter who the distributor is. The old model of distribution is to force sales through marketing and shelf placement, but the craft consumer is much more product conscious than to have their buying decisions leveraged in that fashion, else they'd be buying macro brands to begin with.

Gaining distribution is one thing, actually selling the beer is another. Those two things are not the same and no distributor, large or small, is going to spend a lot of time and effort gaining distribution for beers that don't move off the shelves.

I don't see consolidation hurting craft brewers, though. I think the biggest issue for craft brewers right now, vis a vis distribution, is the proliferation of the breweries themselves. I'm a huge craft beer fan and craft beer drinker, but the reality is that we are approaching a national quanitity of breweries that is getting into pre-Prohibition era range. Today, there are 1500 plus breweries in the United States with over 600 of them bottling and shipping beer. That is a pretty staggering number and while I wish the best for all of them, it is a lot of brands for any distribution environment, especially a consolidating distribution environment.

I guess the silver lining here is that craft beer is still a relatively small percentage of total beer consumption, so that suggests room for growth. But while new breweries are coming online, established breweries are also increasing their brewing capacity in many cases. So while the craft brewing environment is a very friendly one, competition among craft breweries for "stomach share" among consumers is going to increase.

In the end, I still believe that distributors will support the craft movement strongly as long as the consumer demand is there. The bottom line, in my opinion, is that most distributors today are much more responsive to consumers than ever, which is a very good thing for the craft movement.

frigatebay
08-13-2008, 07:41 AM
I don't think that the craft beer sales of a distributor is a factor in a whether a dist. gets bought. It seems to have more to do with the consolidation of larger brands. With the growing number of small packaging breweries out there is seems there should be a growing number of small wholesalers dist. those brands.

I don't want to seem like i'm anti large wholesaler, but from my point of view I'd like to see more small distributors popping up like small brewers. Companies of similiar size and goals working together in my opinion is a better business model then companies who are 100's of times different in size working together in the beer business.

What my goals are for sales might and probably will be different than that of a large wholesaler. My brand might be very healthy at X ce's per month but to a large wholesaler they see my brand as under performing and shift focuse to brand abc instead of mine. Where a small distribute see a different economy of scale and might be very happy with X ce's per month.

einhorn
08-13-2008, 09:13 AM
I agree with your thoughts on "I'd like to see more small distributors popping up like small brewers", Frigate, but I think that the reason for it not happening is mainly due to

1) microbreweries being local and catering to locally owned stores, restaurants and the general market
2) microbreweries don't have the manpower and/or cash to penetrate into other markets, even with the help of distributors
3) taking in a good selection of micros is fairly restricted to major markets, where the "big boys" have already set up shop and carry the more interesting brands

One side comment to World Class: the 600 breweries in the US who are bottling and shipping beer is just the start. In Germany there are still over 1200 breweries catering to an equivilient of 1/4 of the population of the US. I think that there is still a long way to go as far as market share is concerned.

World Class Bev
08-14-2008, 05:54 AM
The bottom line on distribution is that it simply costs more to operate as the size of the business gets smaller and that's a very tough nut to crack. I salute and admire the small distributors out there who are making a go of it, but economic pressure is working against them, not for them. Ultimately, I think that getting good beer to market should be the focus, however, and not the size of the business involved in doing it.

I agree that there is probably a long way to go on market share, but the market isn't going to support 1200 shipping breweries immediately. It will take time to get there. It is easy to compare to European countries and say that we can be like them, but we're not going to do it all overnight.

Think of how far the beer culture has advanced here in the last 10 years. I'm thrilled about that and it's all good news for the US in that respect. I don't think it will stop anytime soon but we have a lot of work to do to get more people to embrace craft beer.

Europe certainly has a vastly different beer culture than the US and a long history of small breweries being successful, but those European brewers who started brewing here as early as the 1850's found out that there is a huge social difference between the two continents and eventually turned to lighter flavor, lighter bodied beers to appeal to larger markets after largely failing here with more robust, traditional beers.

Having said all that, much of Europe is heading the opposite direction of the US in the beer world and turning towards more and more mass produced, macro style beers while the US is just now embracing micros, so Europe is not quite the shining example of high quality beer that we often perceive it to be.

einhorn
08-14-2008, 08:44 AM
"Europe is not quite the shining example of high quality beer that we often perceive it to be" - agreed - but let's not forget that almost all American microbreweries are trying to emulate and re-create styles that are European.

World Class Bev
08-15-2008, 08:50 AM
I love European and European style beers, but I'd rather be a craft brewer in the US these days than a traditional brewer in Belgium or Germany. I think the outlook is better for the US brewer.

einhorn
08-15-2008, 11:13 AM
Here is also wholeheartedly agree with you - that is why I returned to the States.

They are completely different markets, with a different history (as you noted)and the future for all of these markets is changing rapidly. Having spent most of my business life in Germany, I can only speak in depth about that market. Things are very hard right now for breweries of all sizes, mostly due to the price sensitivity. A 1 EURO mark-off per CASE (10 liter volume) can mean incresed sales of 20% and the cheapest beer available (in returnables)costs around EURO 5 per case. Needless to say, a $8.99 6-pack would collect dust on the shelves.

A good friend of mine in West Lafayette is a customer of World Class Bev, and he speaks praises of your company and commitment to crafts. For that I applaud you.

Prosit !