selling distribution rights

[fredipa]

Hey All,
We are a tiny brewery in a remote area, but have (probably foolishly) gotten our beer going in some areas that are hours away. We have been talking to a small distributor and everything sounds pretty good. But I was having a discussion with another brewer at an event a couple days ago and he mentioned that a distributor had to buy the distribution rights to an area. Is this the norm? Is it really a formality and costs $1? Or is this a fluid, negotiable item and then could I get some advice?
Thank you
Cheers
Mike

[BeerBred]

I love it when people ask questions that rely on geographic information and then leave that info out. I have opened 16 states. A distrib in Mississippi just paid 7 mill for new Belgium and 3 for another brand. My old companies policy was not to charge for our brand which was a leader at the time. Not a policy I would have agreed with. I have never heard of a monetary requirement to acquire a brand. I would also say you aren't going to obtain a fee if that's what you were hoping for. Maybe you are in some state I never worked in and there's a requirement to purchase, but I doubt it. Good luck tho. Contact me if you need any advice. Free.

[fredipa]

Thanks for the reply. Actually, no, we don't expect a big pay day for contracting rights with a distributor. We are in Oregon, by the way. We are new (about a year and a half old), tiny, no training, no experience, trying to feel our way. We have had great public response to our beers, and an award in a large beer competition. That has opened many doors for us, but also encouraged us to expand too broadly geographically. We think this distributor may be really good for us, but have to figure out what we are signing up for and how the game is typically played. That is if there is a typical way. I'll try to figure out some real specific questions to ask. Thanks for offering.
Mike

[BeerBred]

I never understood why breweries think they're to geographically wide. Unless they're concerned about not having a rep monitor code dates that is. Start by identifying all the possible distribs, who are they? I will review them to the extent I can from here... Do you have a website? Tell me about your beers if you don't..

[fredipa]

It looks like Columbia (who wouldn't return my calls when I tried a while back), Summit and Bigfoot are the bigger players here. The guy we are talking with is Alebriated. Seems like a good guy and is small, more like us. Our website is chetcobrew.com.
Do you think we should be asking for a clause that lets us out of the contract if he sells out to a bigger distributor? He's fine with letting us keep our local distribution.
How is payment usually done? Pay on pick up? Net 30? Other?
How do we handle making sure our beer doesn't sit in a warehouse too long?
I appreciate any info or suggestions you can provide.
Who do you work for and how long have you been in the business? Sounds like a long time. Have you worked Oregon? California? We are on the border. That's another issue, we need to figure out how we can get in CA since it's 5 miles away and we're bordered by water on the west.
Thanks again
Mike

[BeerBred]

PM sent. I need 10 words to send this. here are ten words...

[Brewtopian]

We're in Idaho which from what I understand is similar. Here in ID a brewery can self distribute anywhere in the state up to 30,000 bbl of production. After that you have to sign with distributors in each region you plan to sell beer in.

There have been instances of distributors buying the rights to distribute in state brands but that was after they were established, had handles in most accounts and were packaging.

If a brewer wants to move from one distributor to another typically the new distributor will have to buy out the old one's inventory and compensate them with 6 months of projected sales. Of course that all only happens if the brewer is under contract and hasn't hit their 30,000 capacity limit. If those two things haven't happened then its a handshake deal and the brewery can just walk away and the new distributor takes over. We saw this with one local and one regional brewery here this past year.

[BeerBred]

I have just learned in my market there is a distributor who has paid significant money to acquire local brewery rights. Some of these breweries are brand new.