Distributor views on small, new craft brews?
I've found that distributors often have an initially negative reaction to new craft brew labels. Is this common?
What advice for new (or existing) craft brews trying to penetrate good distributors?
This seems like a significant barrier to expanding the craft brew market. I would be interested to know if those with more experience concur or not, and their insights.
About ten years ago, I worked for a really excellent microbrewery in Colorado, and the way we became attractive to distributors was by self-distributing in our city (a college town with a population of almost 100,000). We sold a lot of beer, and that made distributors sit up and take notice. We also made a much higher profit by doing so, compared to working with a local distributor, and when we did expand our sales outside of our local area, we retained our own distribution in-town.
Thanks. I've some other here in CA tell me similar stories - although no one seems to keep doing it after they get an outside distributor alternative.
CA has a 3-tier system. Its not clear to me how someone can brew *and* distribute legally. In my case, we're contract brewing through another party, so legally I think its ok.
Any chance you or anyone is familiar with the legal issues there?
I have to echo the comments of Tarmadilo. Although I worked in that same town (at a different brewery), the lessons remain valid. We've taken that same approach with our brewery. We have a distributor who purchases our products to distribute around their territory, but we've found we can gather more loyal clients if we self-distribute. True, we cannot get the same market penetration right off that our distributor can, but we get more per item when we self-distribute. Also, we build one-on-one relationships with the businesses purchasing our products.
It has been our experience that since we're the new kids on the brewing block locally, we're not the biggest fish in our distributor's pond. Just a fact of life.
Do geographical exclusivity laws prevent us (the self-distributing brewer) from distributing in the same areas as our third party distributors? (ie, once I give the rights to County A to Distributor X, can I still self distribute there?)
I think that is going to be a matter for you to negotiate BEFORE you sign your distributor's contract.
I've also brewed in Virginia, where they had a very strict three-tier system in place, and self-distribution wasn't legal. Definitely look into what you can and cannot do! Seems to me if you're a contract brewer, you may be able to license yourself as a distributor, but I'm no lawyer!
Agree with Glac. You are entering into a partnership with the distributor, so you had better have a good reason (special circumstances) for co-distribution in the same area. Unless you have a really good existing relationship with a distributor, don't want to get overly creative with the contract. Make it simple, and make sure you have the ability to buy back the contract (at a set price) if they don't perform.
Yes, it is completely legal in California. It is much more profitable to self distribute as long as you understand that economics will limit your size.
Attracting distributor interest
I have seen Tarmadillo's theory in action.
Look at Dales Pale Ale, for example. They started by self distributing just over a year ago. They are now very successfully selling beer through distributors in several states.
Everyone is trying to sell craft brew in 22oz bombers. This is a heavy, cumbersome, low volume seller in a competitive market segment.
Why not offer 6-packs of high quality craft brew in cans?
Distributors want an easy to handle, hard to break package that is familiar to consumers. They want an easy seller. The can market is wide open to microbrewers.
Half the take home beer market already in cans. There is demand for a good quality craft brew in a portable, environmentally friendly package.
Juts look at the runaway success of Dales Pale Ale. They have become the "story of the year" in 2004 according to New Brewer.
While I think the idea of craft beer in cans is a very interesting one, and one that has merit, I'm not sure that clumsiness of the 22oz bottle packaging is a big concern for the distributors I have spoken with - at least in this market (PA - which has some wierd laws about beer sales). It's just not their number one concern when looking at whether they want to take on distribution for a new brewery.
I'd guess they're more interested in what will sell since that's the ultimate driver of revenue. Is there that much additional cost for them handling 22oz bottles? Maybe the 22oz bottle doesn't sell as well as a 12oz package though... I'm no expert.
Are there some numbers on this you can share with us as someone who has undoubtedly made this careful comparison?
Bottle breakage issues
I think most pressure comes from the retail side of the equation.
Suppply and demand are factors. At retail, 22 oz glass bottles sell in single units. 16oz cans sell in 4-packs, 12oz in 6-packs. This increases the average ticket, and drives volume up.
I still think breakage is an issue.
A business contact of mine once mentioned a problem that plagued him with his energy drink. He had arranged a distribution deal with a major retail chain. The sales/distribution and product stocking process was farmed out to a distributor.
His product was packaged in small clear glass bottles. The belief was that the product would sell at a higher price when packaged in premium glass bottles. (This seems to be common belief among craft brewery owners as well.)
The product fetched prime eye-level retail space and, at first, sales soared. But after several months sales dropped off significantly.
He decided to tour some retail stores to see what was happening to his "golden egg" and was shocked to find that his premium product had been relocated to the lower racks and in some cases the bottom row of cooler shelves alongside bulk products.
The reason? Retailers decided on their own to move his product after single bottles were being accidentally dropped off shelves by consumers. Retailers claimed that broken glass was "a safety issue."
His energy drink is now back on shelves in 8.4oz slim cans. Sales are back and the product still fetches over $2.00 per serving.
Last edited by Kersten Kloss; 06-25-2004 at 08:21 AM.