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What is the true function of distribution companies?

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  • What is the true function of distribution companies?

    After talking to a few distribution companies, it is still unclear to me exactly what services they do for a brewer. It seems to me that they for the most part function only as a delivery service and do not really try to even get you into their existing accounts let alone get you new ones. It seemed like they would tell us the places they deliver other accounts to and it would be our sales rep responsibility to secure that account, then if we secure it, then they would deliver to that account and try to maintain it. Is this a true assessment of their function or did I misunderstand them when talking to them. What is everyones experience with their distributers.

    Thanks
    RNJ

  • #2
    It depends on the wholesaler. I've run into that a couple of times here in Pennsylvania and it's cost me a lot of money. I'm one guy running this whole operation and if I have to go into a particular market every other week to make sales calls, then I'm just going to load the kegs in the back of my van and sell them directly. I don't have the time or the patience to sell beer to a wholesaler who expects me to then go out and sell their beer for them. I believe in one simple thing: "you buy it, you sell it."

    I found the holy grail of wholesalers with my current partners at Gretz Beer Company in Norristown, PA. These folks are an A-B house, but they have a whole division dedicated to craft and import beer sales and marketing. I barely have to do anything except show up for some beer tastings and festivals. That's not to say that I don't wish I could do more. Their market is about 160 miles away from me and it's difficult to help them out. Plus, these people are just plain awesome to work with and I wish I could do more just because I like them personally. What's more is that the company doesn't allow direct incentives from brewers to sales reps. Which means I don't have to come up with ski jackets and Springsteen tickets in order to get a salesperson to actually pay attention to our beers. Again, I'd love to do that kind of thing for these folks because they rock, but until my company is more financially stable, I'm stuck depending on their professionalism and largesse.

    I had to learn the hard way that some wholesalers, despite the fact that they have a sales team, are little more than warehouses and delivery services that do little to nothing to actually earn their profit margin. There are also some great wholesalers out there who acknowledge the value of craft beers on their roster and understand the work that has to go into making each of those brands successful. The trick is finding the ones who work your local market and the markets beyond your own reach.

    Be honest and direct with them. Tell them simply that you're a new company that doesn't have the resources to constantly work their markets with sales calls and you don't have the capacity to lavish gifts on their sales people. Really, you have to find a wholesaler who is willing to form a business partnership with you in which you brew and package the beer and they sell and deliver it. It's a rather simple and fair arrangement, but you'd be surprised how many wholesalers don't get it.

    You have to do some networking and get some advice from other local brewers. Find out who they rave about and who they hate among wholesalers. Also talk to the bars and restaurants where you hope to see your beers and see who they recommend.

    Best wishes, man. The wholesale distribution racket for small brewers can be a nightmare sometimes. The owner of a wholesale company actually told me straight up that he didn't envy my position at all in having to deal with wholesalers in our part of Pennsylvania.
    Mike Hiller, Head Brewer
    Strangeways Brewing
    2277-A Dabney Road
    Richmond, VA 23230
    804-303-4336
    www.strangewaysbrewing.com

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    • #3
      My crass take on wholesalers is that they are in business to make themselves money. If your product can make them money, they have interest. The more effort they need to put into selling your beer, means they usually prefer selling something else easier. They don't have to care what they sell, they just want to turn over "product".
      Yes, there are exceptions.

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      • #4
        I couldn't agree more with moonlight.

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        • #5
          And here I always thought it was to screw the brewer and the retailer at the same time!

          Distributors generally don't want your start up unknown label, as moonlight said; it's just too much work. They'd rather push the products from breweries that put paint jobs on their trucks!

          And yes, there are exceptions; although very few.

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          • #6
            Originally posted by Scott M
            They'd rather push the products from breweries that put paint jobs on their trucks!
            I LOVE that statement! For years I've been asking (tongue in cheek) one of our distributor's drivers when OUR brewery's logo was gonna grace the side of their truck!

            The thought has crossed my mind more than twice that beer distributors "pick up" small, start-up breweries products because it is easier to dictate where those products will go and where they won't, therefore making it easier for some of the distributors to achieve deeper market penetration with their core (read:macrobrewed) beer brands.
            Keep you friends close but enemies closer sort of thing.

            prost!

            Dave
            Glacier Brewing Company
            406-883-2595
            info@glacierbrewing.com

            "who said what now?"

            Comment


            • #7
              We're having that kind of trouble with our new distributor as well. They have us as a product but because we don't have the resources to sell or give incentives they don't push our product at all, even though they assured us that when we went with them they would get us all sorts of new accounts. I was talking to the owner of our local bottle shop the other day and he says that our distributor's salesman don't even try to sell our product because he can get more money pushing AB stuff. It's pretty frustrating, even though we can self distribute in this state we just don't have the resources, so I guess that's what purpose the distributor fulfills.

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              • #8
                Originally posted by Scott M
                They'd rather push the products from breweries that put paint jobs on their trucks!

                And yes, there are exceptions; although very few.
                That is a good statement! Or they 'split' the cost of that paint job and then drop you...stating ridiculous reasons.

                For the most part they won't help to much in establishing your brand. But if you can establish that people like it, and more importantly, will pay for it, they can be very helpful (when you find one of these exceptions). I've definitely seen distributors do great things with a brand in a market far from the brewery's reach, but you really have to sell them on it.
                -Anthony
                Drake's Brewing
                San Leandro, CA
                www.drinkdrakes.com

                Comment


                • #9
                  Distributors sometimes get a bad rap because 'they don't push our product.' As someone who has worked in a larger brewery setting (albeit still a smaller percentage of the distributor sales that we worked with) I've spent a fair bit of time with distributors and here is a sampling of what I believe you can and can't expect from them .

                  What you can expect from distributors (anything you get in excess of this is truly a bonus):

                  1. Delivery of your beer to accounts that you have sold.

                  2. A very simplified billing system (ie you send out 1 bill as opposed to 100 each week)

                  3. Access to some cool marketing tools (some have high tech banner makers that they will produce for free / cost).

                  4. Access to one or two people in their organization who may truly love your beer and story and will push it in the marketplace.

                  5. Access to their relationships and information about the marketplace (ie who are the decision makers in this account, helping to set up meetings with chain stores, etc.)

                  What you should not expect:

                  1. Them to sell your product for you. The only thing that you can hope for is to have greater share of mind of the distributor than you deserve. If your sales are 0.1% of their sales volume, then you can't expect them to spend 10% of their time on your product. If you get them to spend 1% then you have gotten 10X what you really deserve. Some of these distributors may have 500+ SKU's. It is your product, you need to be the ones that are selling it.

                  2. Them to care as much about your product as you do. This is why you have to go into any relationship setting the ground rules from the beginning on how your product is treated from the time they get it to the time they deliver it to the account.

                  3. Their salespeople understand the craft market and where you fall into it. Remember, they are not only selling a ton of different skus of beer, but they may be selling soda, energy drinks, malternatives (and is some states wine / liquor). So your product is a small segment of ONE of the segments that they sell.


                  Having a lot of time with distributors, I think the key for me is that if you cannot afford to have someone in the marketplace selling your beer, then you cannot afford to be in that market. I know that is easier said than done, but I've seen too many instances of someone sending a couple of pallets of beer across the state (or many states away) and the product having problems selling and hurting the long term image of that brand.

                  Cheers,

                  Dave
                  David Schlosser
                  Brewmaster / Founder
                  Naked Dove Brewing Company
                  Canandaigua, NY

                  Comment


                  • #10
                    Distributors: What Good Are They?

                    I work for a beer distributor that focuses solely on the craft/specialty category and I'll say that there are some good points being made here and I'd like to chime in with some of my perspective. My parent company is a large macro brand beer wholesaler so I do get to see a lot of how that business operates as well.

                    I'll say right off that I'm disappointed to hear someone say "you buy it, you sell it." If I heard one of our brands say that or express that lack of interest in their own beer I'd be concerned that I was in business with the wrong person. There are many passionate brewers out there with very high quality beers that care about what happens to their brands and I hope that you are one of them.

                    Craft brewers come in all shapes and sizes these days and many of them are now very active on selling and promoting their brands in many markets. We welcome that and love to have partners like them, but that doesn't mean that we are not interested in smaller brands that have little or no resources. We've often gone to great lengths to help small brewers in our market to buy kegs, add new packaging and in general we are usually very open to finding new ways to help small brewers in any way that we can.

                    If you're not in a position to provide sales support, point of sale, etc., I appreciate that but you're likely not going to be on an equal footing with your fellow craft brewers who are doing those things. However, I'd suggest that there are sometimes simple and effective ways that you can gain more share of mind with your distributor partners without spending a lot of time and resources.

                    Quick example, I'd make sure that my distributor reps were more than welcome at my pub (if you have one) any time. If you have that access, throw them a coupon or something once in a while or a free beer at your place. Where possible, get those folks comfortable making you and your products a "habit." You don't even need to get the whole sales team involved in this, just focusing on a couple of key people can generate a lot of goodwill and gain you share of mind.

                    Distributors also come in many shapes and sizes. Some of them have a strong interest in craft brands, some of them don't. We are fortunate enough to be in a time when craft is growing and many distributors are paying more attention to it than they used to, but the reality is that craft is still only about 5% of overall beer sales.

                    One way that impacts us and our craft efforts - our parent company has a large fleet of trucks at around 100 and they'll let us paint a truck with one of our brands once we get them to 1% of sales. At the moment, we have 3 trucks painted with our craft brand graphics. Sounds pretty small, but that's the reality of being a small % of overall business. I'd love for us to have more trucks with more of our brands, but we've got some work to do before we get to that point.

                    Also, it often sounds to me like folks are surprised that distributors are in business to make a profit. Don't we all? I'd be shocked if a brewer wanted to be in business with the goal of losing money. I'm not saying that getting rich is our focus but I worked for many years for a non-profit health organization where I learned something very valuable - no money = no services.

                    Bob Mack
                    World Class Beverages Indiana
                    Last edited by World Class Bev; 08-13-2010, 07:55 AM.

                    Comment


                    • #11
                      Lots of great points on this thread. I think it is important not to have unrealistic expectations of your distributors. Set goals with them, not dictate terms. World Class, you guys have been great for us in Indiana. Your focus on craft beer is consistently tops in the country. Thanks
                      Joel Halbleib
                      Partner / Zymurgist
                      Hive and Barrel Meadery
                      6302 Old La Grange Rd
                      Crestwood, KY
                      www.hiveandbarrel.com

                      Comment


                      • #12
                        Originally posted by World Class Bev
                        I'll say right off that I'm disappointed to hear someone say "you buy it, you sell it." If I heard one of our brands say that or express that lack of interest in their own beer I'd be concerned that I was in business with the wrong person. There are many passionate brewers out there with very high quality beers that care about what happens to their brands and I hope that you are one of them.
                        I'm sorry you're disappointed about "you buy it, you sell it." It's really not as crappy as you think. It simply means that a good wholesale partner for a small, new-ish brewery like mine is one that is not only willing to buy the beer, but is also willing to put in the effort to sell it and grow the brand. Out of necessity, that is the minimum standard for me when I'm considering potential wholesalers. There are plenty of wholesalers out there who are working with larger breweries with regional sales reps, incentives for the wholesaler's sales force etc. There's absolutely nothing wrong with that, but from a small brewery's perspective, that wholesaler will not make a good distribution partner because the wholesaler will not put in the sales effort needed to grow the brand. And before you know it, there's a big mess because neither distribution partner can contribute to a profitable sales level.

                        You wrote, Bob, "we've often gone to great lengths to help small brewers in our market to buy kegs, add new packaging and in general we are usually very open to finding new ways to help small brewers in any way that we can." That's awesome! That's exactly what I'm talking about. You not only buy the beer and deliver it, but you obviously care enough to work with a brewer to grow the brands and make it successful. That's the kind of partnership we need.

                        And please understand that I didn't mean to imply that brewers should just sell their beers to a wholesaler and then kick back and let the wholesaler do all the work. That's just the very opposite of what we're talking about. There is no lack of interest, I am not a dispassionate brewer and I do care about what happens to my brand. As I said in my post, I wish there was more I could do for my wholesale partners, but right now we're simply not able to do much more than some beer tastings and festivals. And so far, our wholesalers have been fine with it because we articulated exactly that in the very first meeting. Eventually, we'll be doing a whole lot more to help them sell our beers. Now, I'm not expecting a wholesaler to go to the lengths that your company does, but I think there should be at least some level of responsibility on the part of the wholesaler in selling the beers. If there isn't, then brewers who don't have the capacity to do their own sales should find another wholesaler or, if necessary, even pick a different market to work in if they can't find a suitable distribution partner.
                        Mike Hiller, Head Brewer
                        Strangeways Brewing
                        2277-A Dabney Road
                        Richmond, VA 23230
                        804-303-4336
                        www.strangewaysbrewing.com

                        Comment


                        • #13
                          We TRY to Sell It

                          Mike,

                          Thanks for your response. I think I might have taken your comment a little more harshly than it was intended to be. But I am completely in agreement with your points. A distributor should be a partner to a brewer!

                          Bob Mack
                          World Class Beverages Indiana

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