Nov 122013

2013 Craft ProductionIn the early 1990s, Warsteiner’s President, Diane Fall, asked me to help them find and implement a new accounting system at Warsteiner’s Denver headquarters.  While in Denver on this assignment, Diane knowing that I had just recently left Coast Distributors in Oregon asked me if I would open a distributorship in San Diego.  Warsteiner did not have any distribution in southern California at that time and needed someone to get Warsteiner on the shelves.

I looked into this opportunity, but even though Warsteiner would have gotten good distribution in the market, it would have been difficult to be successful with just Warsteiner.  I knew that the worker’s compensation costs alone would kill the company given that the west coast states, California, Oregon and Washington, had very high workers comp. rates.  While I was tempted to jump in, it was really easy to walk away from this offer just on the insurance rates alone.

While there is much to discuss in today’s beer business regarding distributors and the crafts complaint to access-to-market, several key points are clear.  If there was access to a major distribution system, why would a craft brewer attempt to self-distribute?  Aside from focus on their brands, the cost of self-distributing when a system is available should not even be a consideration.

In Florida, the ABI and MC systems have informed the 50+ craft brewers in their state that their distribution system is available for each company to access in lieu of self-distribution.  They are providing the craft brewers with the option to choose between these systems, which are, by far, the two best and most effective way to market.

Another key point, and perhaps the most important one, is that if the crafts use the ABI and MC systems, said crafts will then be ensured of no illegal market practices and their brands will be offered on a level playing field.  In just the last years, Illinois and Arizona have both investigated illegal activity in the beer industry.  In both cases, pay to play was abused.  A brewer, supplier, importer, or distributor, if caught and found guilty, could be fined and or have their license to sell beer suspended or even revoked.  After investing hundreds of thousands of dollars in building a brewery, would a craft brewer risk this type of illegal activity?

The three tier system is by far the most effective and efficient way to get beer to the market.  Distributors have invested and built systems which can get beer to the market cheaper than what any other system offers, providing a means to merchandise, rotate, manage retailer inventory, price, and promote their beer.

One can argue that it was not that long ago that MC and ABI distributors either were not set up to effectively sell crafts, nor had the skill set to do so.   However, both MC and ABI distributors have invested heavily against crafts and can now help all these craft brewers.

So the question is, if your business card says brewer, then why be a distributor when there are better options?  If you do not know where you are going, then you might end up some place else!

 Posted by at 6:50 am

  One Response to “If you don’t know where you’re going, you might end up some place else”

  1. Quite a bit of falsehoods in the description of the benevolent distributors. I have encountered many more of them taking the low road, and have seen some great brewers held hostage because of franchise laws set to protect the distribution side of the 3 tier system.

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