Monday, October 22, 2012

The Distribution Dilema...

Picking a distributor is probably the hardest decision that a brewery has to make short of actually deciding to start the brewery in the first place.  I am fairly certain that I have a growing ulcer that if dissected would bleed the logos of all the local beer distributors.  Not an hour of the day goes by that I don't think about it.  I have made more than a few lists with pro and con columns listing all the finer points of how each distributor operates.  Did I mention it's a big deal?

But why?  As I have discussed before there's a lot of reasons why choosing a distributor is a big deal.  In Ohio a brewery can self-distribute but in Kentucky you cannnot.  So to sell beer in Kentucky you MUST have a distributor.  What most people don't realize is that in Ohio (and most everywhere) distributor agreements operate under franchise law which means that when you sign with a distributor it is essentially a perpetual agreement.  That means you don't sign a one year or three year agreement and then "decide" whether or not to continue the relationship.  Nope.  It means that distributor agreements are in effect until such time as they are "mutually severed".  If things aren't going well then the distributor can either let you go or they can tell you "tough shit".  At that point you can sue for negligence to try to get out of the agreement, but that generally doesn't turn out well for anyone but the lawyers.  This is not to say that a distributor would stoop to that level, and every agreement is generally done in good faith.  Still, it's something you have to be aware of when considering the "worst case scenario".

So if its that big of a deal then why do it?  Why not just keep self-distributing?  Well, as I mentioned you can't self-distribute in Kentucky so I am missing out on a big hunk of the local market.  But, there's more to it than that.  Self-distribution was never my long term plan.  I wanted to do it starting out so that I could learn that side of the business since it is where I was the least experienced going into this endeavor.  Boy have I learned a lot in the past 4 months.  Some good stuff, some bad stuff, and some stuff that makes me wonder what the hell kind of business I have gotten myself into.  I definitely haven't learned it all in this short amount of time but I have learned enough to know that I don't want to do it much longer.

As a self-financed "one man army" it is simply not practical to self-distribute long term.  I don't have the time to make the beer, sell the beer, deliver the beer and do the myriad of other things that go along with running a business.  To do it would require a lot of capital that I simply don't have.  To meet the sales targets that I have I would need at least one if not two full time sales reps/delivery drivers.  I need to get a bigger delivery truck (the Ranger has really taken a beating the last few months).  I have to pay these people (bear in mind I haven't even gotten a paycheck yet), insure the truck, and so on.  Essentially I am creating another "business" unto itself.  This distribution arm now has to struggle with being new to the local market and try to convince customers that they should write an extra check and schedule an extra delivery every week from a new supplier.  Some accounts are fine with that but others don't like the extra hassle (so I have found).  In the end you still only have one or two people out "hitting the streets" trying to sell your products through primarily "cold-calls" whereas the other distributors have many more people who already have relationships with accounts.  Certainly over time you can build these same relationships but it takes a while to build this kind of business and in the meantime I can't sell as much beer as I need to stay in business.  Granted, if we had a big bankroll maybe I could pull it off, but I simply don't have it.  In my mind I would rather spend any "extra" capital we may get on additional equipment to grow the business.  That in a nutshell is why we are getting a distributor.

So before I get into the particulars I want to put out a HUGE disclaimer.  All of the local distributors that I have talked to have been extremely nice to me.  I have had multiple meetings with several of them and they have been very helpful with information about their company and the distribution world in general.  My decision to go with one versus another was purely a business decision and not because of any personal reasons or "issues" with any of them.  I consider all of them to be my new friends in the business.  Also, my reasons for my choice were what I thought was best for me and my business and do not in any way constitute an "endorsement" of one distributor over another.  Everyone's "path" is different and what seems best for me may not be best for someone else.

Granted every market is different and one of the first things a brewery needs to consider is how it wants to fit into that market.  The market here in Cincinnati is fractured between Ohio and Kentucky due to different state laws that don't have much overlap.  So whatever you decide to do in Ohio doesn't necessarily translate into anything in Kentucky.  Indiana is different yet, but to be honest I haven't even looked into how things work over there.  In this area you can break the distributors down into a few "groups".  There are distributors that distribute the "big brands" along with some craft and there are others who deal only in craft.  Some of these distributors have territories that cover the whole state and others only operate in certain counties.  Some are strictly in one state or the other and some have branches on both sides of the river.  There are also differences in how sales forces are structured, chain account access (think Kroger's) and things like that.

So there is no one way to "skin the cat" as you can see.  It depends on what you want for your business.  Going with one of the "big guys" means being able to tag onto a large logistics network that can make moving product around fairly easy.  The smaller craft only distributors are generally less "corporate" than some of the "big boys" which can make them a little more nimble which is nice.  Which is better?  Well, both and neither, depending on how you want to be positioned in the market.

Choosing a distributor that covers the full state means that when you're ready to grow all you have to do is "turn on the switch" to expand into other counties without having to sign a new agreement with another distributor.  Signing with a more local distributor means you can choose different partners in different markets that may suit your needs better in that particular region.Once again, which is better?  It depends.

This may be a rather simplistic way to look at it and trust me, there are a lot more in's and out's that I won't go into.  To me, this pretty well illustrates the primary "paths" that I had to choose from.  For me there are advantages and disadvantages to each of these paths which has made this whole process mind-numbingly difficult.  You have to consider what is best for you now AND what will be best for you 10 years from now.  To be honest I have spent so much time and effort just getting this brewery off the ground that I can barely picture what may or may not be happening in 10 years.  This is where the ulcer part comes in.

So after weighing all the options, wavering back and forth for weeks and pulling out some of the little hair I have left, I have finally made a decision.  As of Monday November 5th our products will be distributed in the Cincinnati and Northern Kentucky area by Stagnaro Distributing.  I'm excited to have finally gotten this decision out of the way and hope I have made the right choice.  Only time will tell but in the meantime I am looking forward to concentrating more on production.  This is not to say that I will never make a sales call again.  I still plan to be out in the market visiting customers once a week.  I just won't be doing it 3-4 days of the week like I have been!

Sunday, October 21, 2012

Why the Arthur's tap conversion is a big deal.

For those of you who may not be aware, Arthur's Cafe in Hyde Park has been making some news lately (I hope the link stays working).  They are converting all six of their draft taps to only local beer making them the first establishment in the city to do so.  I wanted to take a moment to expound on some of the ways in which I think this is a HUGE deal in this town.

1.  It's not just a marketing ploy.
Well maybe it is a little bit.  But its the RIGHT kind of marketing.  Arthur's is a local establishment.  Arthur's is a small business.  As Chris states in the video, a big part of this whole thing is about supporting other local small businesses (aka the breweries).  A lot of people like to wave the "support local" flag.  Sometimes it's lip service and sometimes (such as this) it's not.  Arthur's is really putting their ass on the line here.  Some of the old standby beers that they have had on tap for quite some time are going away and they may risk alienating some of their regular customers by this change.  Still, they are willing to give this new concept a try and for that I commend them.

2.  This wasn't possible just a few short years ago.
The whole Mark Twain quote about Cincinnati being 20 years behind the rest of the world is sometimes more reality than hyperbole.  If you travel to some other states such as Colorado and Michigan you will generally find a larger number of local taps in bars than you will regional and national brands.  Here at home that really hasn't been possible until now.  There simply weren't enough local options.  With the new guys that have opened lately (yours truly included) and a few more that are coming down the pipe, the excuse that there just aren't enough local brands no longer holds water.  For all of those folks out there that like to talk about Cincinnati's great brewing tradition, well guess what....we're bringing it back and here is the first big indication of it in my mind.

3.  It will hopefully become a harbinger of things to come.
OK...this one is partly a selfish reason.  As I have been out self-distributing my product in the last few months I have noticed a lot of bars with a lot of taps that may only have one local beer at most (and sometimes none).  Granted it is certainly their perogative to sell whatever products they wish and I am totally fine with that.  Still, I can't help but think that maybe they don't realize that there are more options out there and maybe they are somewhat "afraid" to serve more than one local beer.  I hope that if the Arthur's change to all local goes well maybe other establishments will experiment with putting more local beer on tap.  Not necessarily all their taps but to get 2-3 out of the sometimes 20+ isn't too much to ask is it?  Of course this means I (hopefully) get to sell more beer thus the selfish comment.  But more than that it means more local options in more local establishments for more local people.

So hopefully this doesn't sound too preachy.  I'm not trying to insinuate that people should only drink local beer.  There's too many other good beers out there for that.  I just hope that someday we can have a great beer culture in this town similar to what can be found in places like Portland, Denver, or most everywhere in Michigan.  I think we are well on our way but there is still work to be done.  To that end I think this commitment by Arthur's is a big step in the right direction.  If you do to then get out and support it and your local breweries wherever they may be poured!

Monday, October 15, 2012

You don't have to go to California to get fresh beer in Cincinnati

There's been a lot of talk and fervor in the local beer world the last few weeks about the Stone Brewing Company "Enjoy by" IPA campaign.  If you are unfamiliar with this product it is a Double IPA brewed by a very well respected California brewery that is meant to be drank within a month of the time it was produced.  A lot of effort (and expense) was put into making this beer, packaging it quickly, and getting it to market at an incredible speed so that it could be drank at the peak of freshness (I was told that it was trucked here by teams of drivers so that the truck itself wouldn't have to stop in order to save time).  There was even a Twitter tie-in for people to request who got to tap it first.  The result.  The beer is all but gone within a week of hitting the market (and well before the "Enjoy by" date).  People are still asking for it, but almost everyone is out of stock.  As far as beer launches go I think everyone would agree it was a success.

But the whole thing has got me thinking.  While I understand (and totally agree with) what Stone is attempting to do by bringing the subject of freshness to the forefront with this concept I still find myself a little perplexed by the response.  People went absolute bat-shit crazy for this beer this past week.  You would have thought that the only beer anyone every drank in this town was a year past its date code and stored next to the furnace all the time.  Meanwhile, quietly, without any fanfare (and a much smaller marketing budget) I released a new seasonal IPA about a week ago as well.  I didn't have to drive it cross-country day and night to insure its freshness.  I didn't run a twitter campaign to see who gets the "opportunity" to drink it at it's freshest.  I just sold it to a few places and they put it on tap.  It's fresh.  Why?  Because I just made it and it hasn't traveled farther than 5 miles since then.  I didn't do anything special to insure that this batch was delivered any fresher than any of my other products because it is a part of my everyday mantra to make sure the beer is as fresh as possible.  This is the very definition of what local brewers do.  We make fresh local products that don't have to be trucked across the country.  I'm guessing that new batches of Mt. Carmel IPA and Rivertown Hop Baron hit the market last week as well.  Granted Stone is a brewery with a bigger reputation than any of us local guys, but our beers are every bit as fresh if not fresher in this market and that's what we do EVERY DAY, not just every once in a while as a special marketing campaign.

Once again, I do not want to belittle what Stone has done.  I think it is a great idea, and judging from the response a lot of local consumers did as well.  I just want everyone to remember that you don't have to wait around for a special promotion from a California brewery in order to drink fresh beer in this town.  That's what your local brewery is here for!

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