franchise law

Hey, Craft Brewer Looking at Distributors

PUBLIC SERVICE ANNOUNCEMENT

If you have an ownership stake in a craft brewery or are friends with someone who does, or you are planning to start a craft brewery or are friends with someone who is, or you think you might someday want to start a craft brewery or are friends with someone matching that description, this post is for you.

I have worked in the wholesale tier of the beer business as a Craft Beer Manager for five and a half years now. That doesn’t make me the be-all, end-all expert for the ages, but I promise you I understand the beer wholesale business better than anyone who has never worked in this part of the industry, which is most brewers, retailers, consumers, and the general public.

At this point I could fill an entire book with advice for craft brewers, but if someone cornered me and asked, “If you could only give one piece of advice to a craft brewer, what would it be?” I would say this: “Never, ever, ever sign a distribution territory agreement without having at least one conversation with every single wholesaler working the market where you want to sell your beer.” I don’t care where in the country your brewery is, or where it is you are looking to sell your beer, this is the cardinal rule of choosing a wholesaler.

to-sign-a-contract-3-1221952-mAt this point this seems self evident to me, but clearly it’s not, because I keep seeing examples of brewers not doing this, and all I can do is shake my head.

Even if you were approached by some really cool, super friendly dude from wholesaler X, and y’all totally hit it off and he obviously loves craft beer and totally gets what you’re doing, and his company has a top notch portfolio, and even if you heard some shit about wholesaler Y and/or you have concerns about some other brand or brands in wholesaler Y’s portfolio, and you’re sure you would never want to sign with them, have a conversation with wholesaler Y. Even if it’s only one. It is conceivable what you heard about them was actually a completely bullshit rumor. It is conceivable your concerns about the other brand(s) in their portfolio are unfounded. And, without having the conversation, you’ll never know if wholesaler Y also has some really cool, super friendly dude who totally hits it off with you and who also obviously loves craft beer and totally gets what you’re doing. And oh yeah, maybe wholesaler Y has a few dozen more sales reps and works a few hundred more accounts.

What’s that? Not every wholesaler works every account in a market? Correct. Some wholesalers have a bigger footprint than others in the same market. Some have better relationships with key accounts in a market. Some clean draft lines more frequently (or at all). Some have more cold storage. Some do a better job rotating stock. Some put more money into growing brands. Some don’t pay their bills on time.

And maybe you don’t want or need the bigger footprint, or the deeper pockets, or the larger square footage of cold storage. Maybe your strategy requires more focused hand-selling to a smaller number of accounts. Cool. You might very well still end up signing with wholesaler X and that may very well be the best thing for your business. But choosing a wholesaler without exploring all your options is like deciding your favorite kind of pizza is plain cheese without ever trying pepperoni or sausage or mushroom or bell pepper. You simply don’t know what you’re missing.

By the way, if that dude from wholesaler X who you totally hit it off with and who totally gets what you’re doing doesn’t offer you this same advice, if he doesn’t tell you to talk to all the wholesalers in the market, and visit their warehouses, then that should be a huge red flag. If the powers that be at a beverage wholesaler are confident in how they go to market and confident in how their operations stack up against the competition, then they will happily encourage you to talk to everyone. If they don’t, maybe they have something to hide.

In the United States, franchise laws make it nearly impossible for a brewer to terminate their relationship with a wholesaler without the latter’s consent, so picking your wholesalers is among the most important decisions you’ll ever make. Why would you ever take a shortcut on that?

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