25 Sep 2009 @ 9:41 AM 

I’ve often had my share of kinda irksome moments about Sam Adams. I go through wide sweeping moments where I feel like Sam Adams is primed so that someday in the future we’ll be talking about them when we say, “The Big 3.” “You know, InBev, MillerCoors, and Sam Adams.” Sometimes I feel like they choke local craft markets with their ever-increasingly-wide distribution channels. Sometimes I feel like they’re a little too eager to trumpet their role in the “craft beer revolution.”

And then sometimes they prove to me exactly how much they’re worth to craft beer.

This week at the National Beer Wholesaler’s Conference, Jim Koch, Founder and CEO of Boston Beer Company, spoke about the future of distribution. (WSJ article here)

I don’t have many direct quotes from the speech, but the gist of it is this: A lot of people are worried that distributors are going to be falling on some hard times, and so they have to look at changing their models to cut costs and increase efficiency to keep up with the changing economy, even to the point of collaborating with your competitors to share delivery vehicles, personnel, and warehouse space.

Even while distributors are a federally mandated part of the three-tier system, and a good chunk of them maintain regional dominance through less than scrupulous business practices, there’s danger in the future for them. Some retailers, especially big-box retailers like CostCo, are pushing to bypass the middleman and buy directly from the brewery.

But! (I hear you say…) how could that be bad? Well, for big box retailers it’s not bad at all, they essentially have their own built-in distribution networks. For the small retailer and the small brewery, this represents a lot more work in terms of negotiating contracts, deliveries, displays, etc., especially as distributors lose business out of their large accounts and no longer have the capital to be able to support small specialty products that won’t be immediate profit vehicles for them like, for instance, craft beer.

Let’s go back through the short history of distribution companies in the 20th Century to see how much things have changed.

When the three-tier system was implemented after Prohibition, there were something along the lines of 40 – 70 breweries nationwide with a couple of giants in the mix. Regional distributors distributed regional beers and everything worked like it was envisioned and that was fine. The whole point of the three-tier system was to protect the consumer by keeping competition in the retail market. Prior to Prohibition, breweries often outright owned saloons and, thus, could control distribution through retail outlets, price fixing against competitors, or not carrying their products altogether.

As the number of breweries dwindled and the number of distributors increased things started to get a little bit wonky. You start to see megabrewery sponsored distribution who, again, are attempting to control distribution channels in order to attempt to smother their competition – this time in the form of other distributors. It probably wasn’t that bad in the 70’s and 80’s when there were only a handful of breweries in operation, so long as everybody was playing the same game.

The past 30 years, however, have seen the rise of roughly 1500 minuscule (by comparison) new breweries and all of a sudden we’re in an entirely different market again. Now, with scads of these small breweries, distributors are more necessary than ever to get beer to market. Plain and simple, a small startup business (with comparatively expensive startup costs), does not have the resources to compete in a distribution market. Certainly, they can self-distribute in a small geographic area, but at a certain point it is not cost effective and they must rely on a distributor to sell and distribute their beer.

So, if you’ve got mega-retailers that are attempting to bypass distribution networks, all of a sudden things get really difficult for the craft brewer, again. Why? Because distributors will suffer. If distributors suffer, small craft breweries suffer. It’s an easy equation.

Enter, Jim Koch.

Koch recognizes that that future of craft beer (even – and maybe especially – his) lies in efficient distribution and that craft breweries do not have the power to create said distribution on their own. We see more and more pressure from mega-retailers to cut the middleman out, coupled with the ever-increasing cost of fuel, refrigeration, and even warehouse space. Eventually, distribution is going to take a major hit and craft breweries are going to feel it more than most.

It’s going to take a lot of work to get to a more efficient model. We’re stuck in a 20th Century model of sales and delivery distribution networks and change is difficult on a corporate level. Koch suggested it was a 10-year-plan, and he noted that it would require some contract changes with the Big 2 – which may not necessarily be in their immediate interests in terms of distribution.

If distributors can get behind the idea (and they should, even though it seems a little radical up front), it could be a great day for craft beer.

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Posted By: erik
Last Edit: 25 Sep 2009 @ 09 41 AM

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 28 Aug 2009 @ 2:15 PM 

I ran across this site today: BeerPetitions.com.

The basic idea is pretty simple: You go to this website and say My Local Bar should be carrying My Favorite Beer. This goes up on the site as a petition, and then people can go and sign it. The bar then presumably goes online, sees that people want said beer and then puts it on tap. As their copy says:

No longer will beer consumers be powerless to convince retailers to carry certain craft beers, now anyone can create a beer petition and have others sign the petition so a retailer can better understand the demand for a specific brand.

It’s an interesting idea, but I’m not sure it really stands up to reality.

To me, this site falls into the trap that a lot of computer savvy people (myself included) tend toward: that a lot of people are really connected to the internet. Yes, the U.S. has incredible internet penetration. The stats that I’ve found suggest that almost 75% of our population has internet access vs. 15% of the population in the rest of the world. However, having internet access and using the internet for something other than basic e-mail and paying your bills is entirely different. People who are really connected to the ‘net tend to forget that.

It also requires buy-in from the bar and the bar’s patrons. If you read through their About page, they give a sample of how everything’s supposed to work. Let me summarize the process. Bert is their example person in the scenario.

1. Bert finds a beer he likes in a different state.

2. Bert checks all the bars local to him to find the beer. It is not there.

3. Bert goes to his local bar and asks for the beer. The owner says, “I can’t just order a beer because you like it.”

4. Bert says, “But I can show you that other people like it, too. I will start a beer petition.” For a reason that I am unclear on, the bar owner agrees to this. Presumably, he knows Bert in some way.

5. Bert gets a bunch (30, in the example) of people to sign the petition and brings it back to the bar.

6. The bar owner says, “Wow! 30 people! I’m ordering it now!”

Here are the steps that are missing, in my mind:

7. The bar owner asks Bert, “Which of the fine beers that I am currently carrying should I take off tap?” Actually, he probably doesn’t ask Bert because what does Bert know about his sales volume? Probably he takes the beer off tap that he sells fewer than 30 pints of before the keg spoils. He should probably take that keg off tap anyway.

8. The bar owner asks the distributor that he gets all of his beer from, “Hey, do you carry this fancy beer that my patrons are asking for?”

9. The distributor says, “No, but if you put a tap of Bud Light Lime up I’ll give you some sweet tickets to the Braves game.”

… okay. Maybe I’m a little jaded.

Fact is, in a lot of cases – especially when you’re talking about out-of-state beers (like in the example on the site), the retailer may not have access to beers that the customers want because of distributor limitations. Some retailers will go far out of their way to get access to a good selection of beer, but for most establishments that’s far out of the question. After all, you can get a great deal from most large distributors on Bud and it’ll outsell most of your craft beers. If you’ve got a place that cares about what kind of beer they’re serving, chances are they’ve got their ear to the ground (and the customers) or have a good mechanism for beer suggestion, anyway. Like comment cards, or a website.

So – here’s what I like about this idea: It gives people a mechanism by which they can show retailers that there is a reasonable amount of interest in good beer. If this were a site where somebody could start a petition that says, “We want good beer at our local hangout/liquor store/dive!” that would be cool… nay.. awesome!

“We the people demand a decent beer selection!”

But to bring a petition from the internet into a sports bar that says, “35 people think your bar should carry Old Rasputin!” I think a manager would be insane to respond to that. How do they know those 35 people will come in and buy one? How do they even know that those 35 people live anywhere near their bar?

Hey, look: admin, Grote961, and webber957 all think that The Cellar Wine & Spirits in Oklahoma City, Oklahoma should have Breckenridge Brewing Co’s Summerbright Ale. Ah, well.. if Grote961 says I should have it, I’ll order right away.

This is coming off as awfully negative, and I wish it wasn’t. It’s a great idea, but I’m not convinced the time is right for the specific-brand beer petition. Bombarding a bar owner with requests for a specific beer (unless they’re inviting said requests) seems like a great way to irritate a bar owner. Trying to get craft beer sold at a lot of establishments is a challenge enough in itself. Let’s fell one giant at a time.

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Posted By: erik
Last Edit: 28 Aug 2009 @ 07 41 PM

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 04 May 2009 @ 4:13 PM 

If you’ve got your ear anywhere near the ground around beer news, chances are you’ve heard a little about Bell’s Brewery and their fight with local distributors. Their first fallout was in the state of Illinois (a fallout that indirectly managed to get Bell’s distributed here in North Carolina) and now they’re in court in their home state of Michigan.

2006_10_bells

I bring it up because traditional business news and beer geeks sort of approach this from two incredibly disparate angles. Most beer geeks will see that Larry Bell is bringing an Anheuser-Busch InBev distributor to court and say: “YEAH! The MAN is trying to keep the good beer DOWN! GO BELL’S! DOWN WITH THE THREE TIER SYSTEM!” – which isn’t entirely true, but is an admirable sentiment and only really takes in part of the picture. Then the Wall Street Journal publishes a piece titled “Eccentric Brewmaster Takes Distribution Fight to Court” which might not be the kind of view that somebody who’s trying to win a court case wants in the Wall Street Journal. It’s informational, and it’s a good (if short) article.. it’s just.. meh.

(Yeah, yeah. The Cafe. Yeah, Eccentric Day. I know. But saying it yourself in and around your brewery for branding of your cafe and product is a lot different than having the WSJ use it in the title of their article to describe you. Don’t you think?)

To sum up, if you haven’t been keeping up: Larry Bell is taking Classic Wines Ltd. to court for attempting to transfer (sell?) the Bell’s account to M&M Distributors Inc., an Anheuser-Busch InBev distributor. Bell’s contends that M&M “lacks experience selling craft beers and didn’t articulate to Bell’s a ‘coherent’ marketing strategy for its brands.”

So, to me, the suit is really about a brewery’s right to control its distribution. In the state of Michigan. I hope our side wins.

(Aside: This is one of those instances where the whole “State’s Rights” thing is actually somewhat of a pain in the ass. Interstate commerce is pretty damned common these days, you’d think that a Federal boilerplate/guidelines for distribution laws would be a nice thing to have. C’est la vie.)

In case you’re not up on distribution laws, a lot of them are a right bitch. In some states (this is an anecdotal example – take it as such), once you, as a brewery, are contracted with a distributor you are very much stuck with them. They now have all the rights for distributing your product and you have no control whatsoever. They can put your product in a hot warehouse, they can not get you tap handles, they can put it out on warm display or whatever. Your rights are that you can keep making beer and selling it to them when they want more. If they want more. If you pull out because you think they’re doing a crappy job they can charge you an amount that they say your contract is worth. It can be upwards of millions of dollars if they’re really out to screw you.

Basically, you have to trust a distributor to do right by you. Some distribution companies are awesome beyond belief. Some are unscrupulous asshats. Thus is the way of modern corporate America. They’re not always the most awesome people to deal with.

On the other hand, at some point you, as a brewery, need a distributor. Many states won’t let brewers self-distribute, they’re required to use a third-party. But even if you can self-distribute how much of your time and income is going to get tied up in buying trucks, hiring drivers, and spending time in establishments trying to wheedle a tap handle off of some guy who doesn’t care if you make good beer can you give him an extra keg under the table, because that’s what the A-B guy does? You just can’t do it. Sure, if you’re in a state where you can do so, you can start your own distribution outlet, but it really is a whole separate business. If what you really want to do is make beer, what you really don’t want to do is be a salesman for an array of different brands 5 days a week.

So, as a beer geek, appreciate your distributors (to a point) even if (sigh, yes) they’re A-B or some such crap, because they are getting good beer in for you. Hold your retail outlets accountable for problems with it, because they’re the ones in the best position to push back against the distributors if the beer that they’re delivering has been handled poorly. They’re also the ones that are in the best position to demand different brands and standard delivery procedures.

Even more so, support your local brewers who are fighting their asses off to get good beer into your hands.

Finally, the people who are really in the position to fix distribution laws are your state senators and representatives. Teach them to like craft beer, and there will be more and better beer for you.

As for Larry Bell? I have to say that I really see him as a brewer’s rights crusader. The guy is, plain and simple, sticking to his principles and his love of good beer and making things better for all breweries everywhere, even if he is just going one state at a time. I really hope that everything turns out in his favor, because it just means good things for the rest of us.

If you have some time to read stuff take a moment to read this story from the Chicago Reader about Bell’s pulling out of Chicago because of distribution laws. It goes over the history of distribution and a lot of the problems and bullshit tricks distributors like to play. Well worth reading.

In addition! Here’s an article with a lot of great specifics on Kalamabrew: Beer making, brewing and microbrews in Southwest Michigan.

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 23 Apr 2009 @ 11:20 PM 

Day 3 didn’t start out very well for me, mainly because Day 2 ended so well. Turns out that at the end of Day 2, I forgot to eat dinner. It took me a little while to get out of bed this morning. Heh.

But get out of bed I did! And I had another fantastic day.

First off, I mentioned yesterday that I was hoping that the movie that Greg Koch showed at the beginning of the keynote would be available on line, and it most certainly is. View at your pleasure, it is truly awesome. I think it actually brought a tear of pride to my eye.


I Am A Craft Brewer.

Today, I had lunch with a good friend of mine who’s working as an indie video game developer. He’s in the process of starting up his own company, very much in the same way I’m working on starting up mine – he’s a little ahead of me on the track, but in comparing notes about the industries, we found remarkable similarities. Maybe it has something to do with the fact that these are both comparatively young industries. Maybe it has something to do with the fact that they’re both rooted in passion, or that they’re both working full time against lowest-common-denominator preconceptions. Hard to say, but we were a little surprised that we felt like we had so much in common when the two end products felt like they weren’t related at all. He’s got a deadline coming up in a couple of weeks, so I won’t push now, but we’re looking at – in the future – doing an industry comparison across our sites so that we can fully explore the similarities. The way my mind sees it is that we might see some really unlikely partnerships bloom sometime in the future.

After lunch, I attended the panel Beer According to Women: How Women Brew, Present, Pair and Sell Beer. The panel was moderated by Sebbie Buhler of Rogue, full panel was Candice Alstrom of Beer Advocate, Teri Fahrendorf – Road Brewer and founder of the Pink Boots Society, and Jodi Stoudt of Stoudts Brewing Co. Really fantastic panel, with a good range of opinions. There’s a list of questions and answers laying around somewhere on the internet that I need to dig up and post here so that I don’t have to reiterate the entire panel. For the most part, the panel agreed with my feeling on the matter: How do you get women to drink good beer? You make good beer. The key word that all of the panelists emphasized was “balance” and I might argue that that’s important for every beer drinker, not just women.

In fact, I found myself thinking, almost across the board, that any of the good points about how to reach women really applied to men equally and that bringing gender into the equation really made things more complicated than they were. What I found most interesting is that there seems to be a bit of an age divide on this issue. It was evident right away in the panel, the first question asked was: Does gender matter? While 2 out of the 3 panelists said “No” (my position), one said “Yes” and continued to return to the point throughout the entire panel. I hesitate to use the world “older” to describe her because the age difference between 99% of the people in this industry is not that wide and “older” sounds like I’m saying “elder,” and I don’t want to give that impression. We’re talking maybe 10 years, here, both in age and in experience in the industry. However, it is enough, I think, for traditional stances on feminism to change significantly. It’s a tricky subject. What is clear to me is that while we might be talking about this now, we’re going to be talking about it completely differently in a few years and my theory is that we won’t be talking about it at all after a small time. Why? Because craft brewers continue to get better at their craft, they continue to put good beer out in front of consumers and in time the women will drink it as equally as the men.

The second panel I went to was Keeping it Real: Brewery Owner Perspectives. Moderated by Sam Calagione of Dogfish Head, the panel consisted of Larry Bell of Bell’s Brewery, Kim Jordan of New Belgium, David Walker of Firestone Walker, and Rob Todd of Allagash. It was phenomenal. The entire panel was anecdotal. Managerial advice took the form of stories about the startup years of each brewery, how they found their vision, when they had to finally delegate responsibilities, how they manage distribution, etc. It was funny and warming and is one of those times (like the video above) that I feel really warm about becoming part of this industry.

The only question that I felt wasn’t particularly well addressed was one by Scott Metzger of Freetail Brewing. He mentioned that a lot of the people up on the stage were in his homestate of Texas through large A-B and MillerCoors distributors and that those distributors actively choke out local Texas beers due to their current legal restriction on self-distribution. David Walker responded something along the lines of, “Hang in there, it will all be okay, things are changing.” which is probably accurate, but Scott’s point remains valid. All of these guys can say to their distributors – don’t take tap handles or shelf space away from other craft beers to put my product in, and that might be agreed upon from a managerial standpoint in the distributor, but the local guy who’s actually going into package stores or supermarkets or dive bars or whatever might not give a shit, and that’s where local breweries are going to get hit the hardest. When something of similar quality to their product comes in from elsewhere and has the advantage of being a well-known brand – a Sam Adams, a Dogfish Head, a New Belgium, etc. – and the local rep won’t follow through on the intention of the regional brewer.

Kim Jordan might not have wanted to take tap handles away when Fat Tire came into North Carolina, but I see it in bars everywhere now and I can assure you that the tap handle that came down to put Fat Tire on was almost definitely NOT A-B or Coors.

So Scott’s question, in my mind, is: When a large regional brewery starts to become a threat to local brands due to the unscrupulous actions of their distributor: what do we do?

I don’t know the answer to that question, and I think it’s going to be a tough one to answer until the three-tier system is better regulated, but it’s interesting to think about.

I, unfortunately, did not make it to the Cask event at Harpoon tonight, though I had originally planned to. I ended up meeting up with my old roommate and fantastic friend at dining (again) at the Cambridge Brewing Company. Harissa Rubbed Lamb Steak paired with Gruit? That’s the kind of meal people write about. Heh. I just wrote about it. Awesome.

Tomorrow? More women and beer and the sad conclusion of the conference.

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Posted By: erik
Last Edit: 23 Apr 2009 @ 11 28 PM

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