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View Full Version : Distributors signing Breweries before they open



Coelacanth
07-27-2015, 04:14 PM
Out of curiosity what do you think of the trend of Distributors signing Breweries before they've opened or even brewed.
This seems like a bad move for breweries and distributors alike .

Is it just another sign of the gold rush mentality / beer bubble?

Thirsty_Monk
07-27-2015, 07:26 PM
It is called brand management. Take them out of market.

lhall
07-28-2015, 07:25 AM
It is called brand management. Take them out of market.

I think it could be a good thing in some cases. The distributors understand the market better, and can help the brewers with styles or brands that fill a niche in the market, rather than just another me-too beer. I think it is more of a risk for the brewer than the distributor, though. If you have the option to do some self-distribution after starting up, you are in a much better bargaining position when you do sit down with a distributor.

GlacierBrewing
07-28-2015, 08:37 AM
It has been my experience some distributors will put you under contract not to promote and sell your products but to control where your beers are sold and, more importantly, where they aren't sold. If they are "distributing" your beers, they don't need to compete against your brands in the marketplace, fighting for limited tap and shelf space. They just don't push and place them: easy peasy lemon squeezey!
BEFOREHAND you sign, check into how difficult your state laws have made it to cancel a distributor's contract. You might be very surprised. If they want to sign you before you've even made anything, beware. Sounds like they want to tie you up.
Prost!
Dave

TTB Helper
07-28-2015, 03:04 PM
All comments are right on the money.

We encourage all of our start-up clients to focus on in-house sales if they are opening brewpub/gastro pub or taproom. Build a reputation, build some demand and if it is allowable, try some self distribution first. Once you've established some "brand equity", you'll be in a better position to negotiate all aspects of a distributor/wholesaler agreement. For those that are opening a production brewery or are contract brewing, we help them understand how to develop as much leverage with wholesalers as possible right out of the gate.

Don't be afraid to ask for help and do your homework before talking to the wholesalers. We frequently negotiate with wholesalers on behalf of our clients. Rather than accept a one-page distribution agreement from the wholesaler, we provide a comprehensive wholesaler contract that's been developed based on decades of experience. It addresses all aspects of the brewery / wholesaler relationship. You can give away a lot of money and miss-out on wholesaler participation and brand support if you don't know what's possible.

Cheers!

Coelacanth
07-28-2015, 05:35 PM
I agree with the comments.

There are 2 other breweries that are expected to open around the same time we are - both of those Breweries have signed with the same distributor - who is by all accounts a fine distributor. However This is new to me - signing before opening.
I had expected to (as you suggested) focus on in store sales, and (hopefully) build a following.

I just didn't think it was becoming the norm to sign before brewing had commenced (or equipment was even installed).

In may state, distributors hold the cards...and "own" you until they release you or sell you...

BeerBred
07-28-2015, 07:34 PM
Interesting none of you mentioned anything about price for rights. I know one brewery in Virginia who collected six figures for their rights before producing a drop.

BrooksCooper
10-29-2015, 06:03 PM
Just another voice. We chose to self-distribute at the start for a variety of reasons. We were quite happy that it quickly became a LARGE part of our day to keep up with accounts, so we hired a distributor much sooner than we had planned to. Because we were able to bring them a book of business, and sales and turn rate data on our existing accounts I was in a position to negotiate a better deal than anyone I've talked to who is even close to our size.

AND, self-distributing allowed us easy face time with our customers when we were interviewing distributors. Since they knew us and trusted us our customers were very candid and actually steered us away from one distro who was in the running.

My poor truck sure got some miles on it, but it was worth it.

lhall
10-30-2015, 08:06 AM
BrooksCooper is right on. If your state allows self-distribution, it's the best way to get started. You can build your brand in a sustainable manner, you'll get loyal accounts that will stay with you for years, and when it comes time to hand it over to a distributor to grow it even more, you'll be in a good bargaining position. You can negotiate things such as payment terms, co-oping of certain promotional expenses, etc. Remember cash flow is king when you are starting out. Not only will a distributor take 25-30% of the margin, but payment terms will often stretch to 30 days if you can't negotiate.

foodadd
08-16-2016, 06:02 PM
it seems gold push people