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From: Trifactor Distribution Solutions
Beer Distribution Problems Brewing
By John T. Phelan, Jr., P.E.
It’s a safe bet that when you’re sitting on your patio deck enjoying a cold Bud, you don’t give much thought to how it went from St. Louis to your local liquor store. But for the nation’s 1,500 breweries, 2,800 beer distributors, and approximately 530,000 retail businesses that sell beer, it’s a time-honored route laden with checks and balances.
Known as the three-tier system, a brewer can only sell beer to a state-licensed distributor, who in turn can only sell to a state-licensed retailer, who in turn can only sell to an adult consumer of legal drinking age. But of the three tiers, none has been affected more, or seen the way they do businesses drastically altered over the past 30 years, than the beer distributor.
Decades ago, the beer distribution business was somewhat of a cookie-cutter operation. Back then there were fewer than 100 brewers pumping out suds in mostly standard-sized bottles and cans that were shipped by distributors in full pallets, all bolstered by the battle cry “stack ‘em high, and let ‘em fly!”
Then, in the Eighties, the game changed.
“In the early Eighties, we were dealing with mostly full and half-pallets, and less than 100 SKUs,” recalls Joey Lopez, VP of Operations for Cone Distributing, Inc., which operates two warehouses servicing 11 counties in Central and Northern Florida. “But then Coors started the regional beer boom in the mid-1980s, and things started to change. Now, we are dealing with over 600 SKUs.”
The proliferation of microbreweries, or “craft brewers,” has greatly affected the beer distribution industry, says Eric Criss, President of the Florida Beer Institute. “The number of craft beers has grown as consumer palates have become more sophisticated and more people are enjoying different types of beer,” says Criss. “Brewers like Sam Adams have pretty much led that charge with their seasonal beers. What were once four or five different beers has now become hundreds, creating a real challenge for the beer distribution industry.”
The craft beers are definitely here to stay, points out Criss. Craft beers may only reflect 2% of the beer market, but it has shown 40% growth. In 2008, the craft brewing industry produced 8.6 million barrels of beer in the US.
Bernie Little Distributors, an Anhueser Busch Wholesaler, has felt similar growing pains. Richard Harper of Bernie Little shares, “Up until 2005, since we were an exclusive wholesaler for Anheuser Busch, our SKU count held steady at around 200. However, since then, with the increase in demand for specialty brews and the acquisition from Inbev, our SKU count has doubled and will continue to grow. As a result, the processes that made us successful in the past are no longer efficient. My biggest challenge these days is developing systems that can allow me to increase the number of SKUs that I store and still maintain the ability to pick accurately and ship on time.”
As the number of SKUs increases, the need for automation becomes more and more of a factor in an industry historically reluctant to change. But with some high-volume distributors now pushing out upwards of 100,000 cases of beer per day, a number that is capable of increasing by as much as 25% during the high-peak seasons, that reluctance may become a requirement. Eric Criss thinks that warehouse automation in beer distributors has to happen to keep up with consumer demand for a wider selection of products. “Distribution centers will have to rely more and more on automation as the number of SKUs continues to increase,” says Criss. “Although it’s not a concept the distribution industry has fully embraced.”
As a rule, beer distributors need to be able to anticipate distribution needs three to four months out, while always holding enough inventory for 15-30 days. Lopez explains, “That’s the timeframe we found when consumers will buy beer, consume the beer, and return to buy more.” In addition, most distribution centers store enough stock per SKU to last two days in their forward picking area, in an effort to reduce travel time.
The beer distribution industry may be driven by the three-tier system, but unfortunately there’s no “reverse” shift on this vehicle. If a retailer doesn’t sell his beer before it expires, it can’t go back to the distributor. And, subsequently, if the distributor doesn’t move the product out the door, there’s no returning it to the brewer. It’s an industry where First In-First Out (FIFO) rules the day. A distribution center better have the means and processes in place to follow the rules, or the result will be lost revenue.
Read More Here
Beer Distribution Problems Brewing
By John T. Phelan, Jr., P.E.
It’s a safe bet that when you’re sitting on your patio deck enjoying a cold Bud, you don’t give much thought to how it went from St. Louis to your local liquor store. But for the nation’s 1,500 breweries, 2,800 beer distributors, and approximately 530,000 retail businesses that sell beer, it’s a time-honored route laden with checks and balances.
Known as the three-tier system, a brewer can only sell beer to a state-licensed distributor, who in turn can only sell to a state-licensed retailer, who in turn can only sell to an adult consumer of legal drinking age. But of the three tiers, none has been affected more, or seen the way they do businesses drastically altered over the past 30 years, than the beer distributor.
Decades ago, the beer distribution business was somewhat of a cookie-cutter operation. Back then there were fewer than 100 brewers pumping out suds in mostly standard-sized bottles and cans that were shipped by distributors in full pallets, all bolstered by the battle cry “stack ‘em high, and let ‘em fly!”
Then, in the Eighties, the game changed.
“In the early Eighties, we were dealing with mostly full and half-pallets, and less than 100 SKUs,” recalls Joey Lopez, VP of Operations for Cone Distributing, Inc., which operates two warehouses servicing 11 counties in Central and Northern Florida. “But then Coors started the regional beer boom in the mid-1980s, and things started to change. Now, we are dealing with over 600 SKUs.”
The proliferation of microbreweries, or “craft brewers,” has greatly affected the beer distribution industry, says Eric Criss, President of the Florida Beer Institute. “The number of craft beers has grown as consumer palates have become more sophisticated and more people are enjoying different types of beer,” says Criss. “Brewers like Sam Adams have pretty much led that charge with their seasonal beers. What were once four or five different beers has now become hundreds, creating a real challenge for the beer distribution industry.”
The craft beers are definitely here to stay, points out Criss. Craft beers may only reflect 2% of the beer market, but it has shown 40% growth. In 2008, the craft brewing industry produced 8.6 million barrels of beer in the US.
Bernie Little Distributors, an Anhueser Busch Wholesaler, has felt similar growing pains. Richard Harper of Bernie Little shares, “Up until 2005, since we were an exclusive wholesaler for Anheuser Busch, our SKU count held steady at around 200. However, since then, with the increase in demand for specialty brews and the acquisition from Inbev, our SKU count has doubled and will continue to grow. As a result, the processes that made us successful in the past are no longer efficient. My biggest challenge these days is developing systems that can allow me to increase the number of SKUs that I store and still maintain the ability to pick accurately and ship on time.”
As the number of SKUs increases, the need for automation becomes more and more of a factor in an industry historically reluctant to change. But with some high-volume distributors now pushing out upwards of 100,000 cases of beer per day, a number that is capable of increasing by as much as 25% during the high-peak seasons, that reluctance may become a requirement. Eric Criss thinks that warehouse automation in beer distributors has to happen to keep up with consumer demand for a wider selection of products. “Distribution centers will have to rely more and more on automation as the number of SKUs continues to increase,” says Criss. “Although it’s not a concept the distribution industry has fully embraced.”
As a rule, beer distributors need to be able to anticipate distribution needs three to four months out, while always holding enough inventory for 15-30 days. Lopez explains, “That’s the timeframe we found when consumers will buy beer, consume the beer, and return to buy more.” In addition, most distribution centers store enough stock per SKU to last two days in their forward picking area, in an effort to reduce travel time.
The beer distribution industry may be driven by the three-tier system, but unfortunately there’s no “reverse” shift on this vehicle. If a retailer doesn’t sell his beer before it expires, it can’t go back to the distributor. And, subsequently, if the distributor doesn’t move the product out the door, there’s no returning it to the brewer. It’s an industry where First In-First Out (FIFO) rules the day. A distribution center better have the means and processes in place to follow the rules, or the result will be lost revenue.
Read More Here
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