The U.S. beer environment during the 70s and 80s was similar to that of craft beers, in that it is similar to the way wholesalers thirty to forty years ago envisioned the future of imports. Successful European brewers who were importing into the U.S. were, decades ago, highly desirable brands with good margins, despite the fact that finding a wholesaler for the brand was challenging.
It took Diane Fall, Warsteiner’s first U.S. President, over a year to get a wholesaler in Denver where she established the U.S. office for the brand. This was in 1980. By the time I took over Warsteiner’s U.S. operation 25 years later, Warsteiner had approximately 260 wholesalers in all 50 states. Annual volume was 134K+ HL.
My top 10 distributors in the U.S. handled 60% of Warsteiner’s total volume, when one included the next 10 distributors, the volume percent rose to 80%. Bottom line was that approximately 20% of our U.S. business was done by 240 distributors. I never considered either leaving or pulling out of any of those markets, ever!
Several weeks ago, Scott Metzler, founder of Freetail Brewing Co. in San Antonio, stated at the Distributor Productivity Conference, that breweries should not expand. “But for the most part, I think the era of national brands and even regional brands in the scope is long gone…The ship has sailed,” stated Scott.
He continued by stating that all new start-up breweries should have a goal of 500 bbl., rely only on on-site sales, they should have no market distribution and they should “be happy” with that life. At the conference, Scott participated on a panel when he made this statement, a statement which was followed by support from other participants, including some craft distillers.
John Henry, a founder of El Buho Mescal, had this comment, “If you are not going to service a new market like your own backyard, then don’t go.” That statement alone might be where these owners fall short.
The question is: does the same model used in your home market apply to other markets? If that were true, then as President of Warsteiner, I might have pulled out of 200 distributors in the U.S. and have only done business with 50 distributions. That would have meant turning my back on 80% of my distributors.
At one time or another, AB, Schlitz, Miller, Pabst, Coors and others were local, but they all expanded nationally. Even a brand like New Belgium embarked on a national expansion plan, but it was almost 10 years after they started the brand.
Warsteiner put their annual marketing and tactical spending against their volume, but did not forget the other 20% of business. We focused on off-premise chains and hired experienced and knowledgeable beer pros who managed a number of states and wholesalers. In some cases, including upstate NY, we used a broker who drove grocery volume thru Wegmans.
It might be that the highly successful local model as it is currently structured does not work for expansion or out of state markets. Perhaps simply developing a market presence in chains managed by experienced beer pros would work.
A local tap room selling 500 bbl. with some food works, the industry knows this, but there are many brewers who have larger dreams. All they need to do is understand that what works locally will not necessarily work in out-of-state markets, but there is one model which will work.
It is easy to be brave from a safe distance…