AS NUMBER OF BREWERIES EXPANDS, DISTRIBUTORS TRY TO MATCH PACE
Prohibitively expensive San Diego real estate has not deterred emerging breweries from opening, and San Diego County is on pace to break the 90-brewery mark by the end of 2013, from just north of 30 breweries five years prior. Even affluent neighborhoods can find great beer within walking distance; from Thorn St. Brewery within reach of Golden Hill, or Culture Brewing Co. in tony Solana Beach. And while breweries quickly fill the surplus of “real property” in San Diego, tap space isn’t keeping up.
“It used to be tap space in search of beer,” said Craig Broderick, proprietor of Brody’s Burgers and Beer in Jamul. “Now, it’s beer in search of tap space.”
Though 18 miles from the heart of downtown, rural Jamul has a neighborhood brewery in Cold Bore Brewing Co., who self-distributes and is a regular feature on Brody’s 23 taps. According to Broderick, Brody’s came online at the right time.
“Had I started my biz earlier, I would have been in dire need of beer,” Broderick remarked in regard to his geographical disadvantage, “but from last year to this year, it’s night and day in terms of beer availability.”
Broderick continued, noting that smaller breweries had issues getting carried by a large distributor, such as Crest Beverage or Budweiser/Anheuser-Busch, but that changed when Stone Brewing opened the distribution side of the company and started carrying smaller-batch breweries who couldn’t meet larger distributors’ quotas.
While providing a much-needed relief valve to the mega-distributor bottleneck, Chad Heath, Southern California sales director for Stone Distributing. still feels pressure to keep up with the onslaught of new local breweries.
“This amazing explosion of selection has challenged distribution a bit in keeping up with the sheer amount of products we are now able to sell,” Heath said. “There will come a point when breweries aren’t able to find distributors to distribute their beer because they are ‘full’. To date we aren’t there yet, but I feel that is inevitable and, for some of the startup brands, it would become more and more difficult to secure distribution deals.”
But that doesn’t mean there isn’t any hope for emerging breweries, Heath continued. “Good beer will win out and there will always be room in a quality distributor’s portfolio for breweries producing exceptional product.”
THE GIVE AND TAKE
In a business that’s all about relationships — as distributors are prohibited from negotiating with vendors based on price — Heath maintains that the biggest challenge in those relationships is providing access to limited-release, rare beers.
“Almost all craft breweries these days are making small batch, exclusive beers,” said Heath. “They put a good demand on the wholesaler to make sure these beers get to the right accounts, on time and with the correct quantity… Stone has refined this process to a ‘T’.”
Frank Green, brand ambassador and sales manager for Port Brewing Co./The Lost Abbey, said that there is great opportunity for breweries who have in-house representatives and also partner with a larger distributor, such as Stone.
“Having (Stone) working in concert with me allows for more visits and touches on my accounts,” Green said.
Grant Tondro, co-owner of Urge Gastropub, The Barrel Room, and Brothers Provisions in Rancho Bernardo, said that, like all good relationships, the vendor-distributor romance involves give and take.
“All our distributors know that our goals are to have specialty kegs for specialty events, which drive our sales and are a lot of fun to put on,” Tondro noted. “(Distributor) goals are to hit their depletion quotas. As a result, we often have conversations that revolve around ‘I’ll take a Fat Tire now if I can be guaranteed a La Folie later’ topics.
While Tondro uses New Belgium Brewing for an example, he said there are similar pushes being made by self-distributing breweries and their representatives.
“Of course, we wouldn’t take a keg of absolute crap just to secure a specialty keg, but we feel that it is reasonable to help them hit their depletions as long as they help us put on great events,” said Tondro.
One brewery that Tondro mentioned as being notably persistent and a regular feature on Urge’s tap list is Firestone Walker Brewing Co., a sentiment echoed by Broderick at Brody’s.
“Firestone is at a size where, although distributed by Crest Beverage, they’re actively pursuing full-time space,” said Broderick. “And they have reps out in Jamul who are willing to work on those relationships.”
Broderick added that, in addition to self-distributing breweries, the recent arrival of Craft Beer Guild Distributing of California gives even greater access to smaller breweries and their limited releases, which prompts the question: with distribution options increasing, who drives vendor-distributor negotiations?
“Nobody is indispensable,” said Darren Renna, general manager of the Coaster Saloon in Mission Beach. “For example, Ballast Point and Green Flash are distributed by Crest Beverage — by far the biggest player — but if you want first access to Palate Wrecker, Dorado or a new specialty product, then you are better off dealing directly with the brewery than the distributor.”
Green at The Lost Abbey sees growing popularity for distribution reps among smaller breweries, but many times that means that one person is wearing multiple hats.
“A lot of these new breweries are working without a sales rep. I know of one brewery where the brewer is literally doing everything himself,” which includes bartending, brewing, and distribution rep work. So while the distribution representative position has become more popular, sometimes this means one person wearing multiple hats; not necessarily a new hire.
According to Green, relationships work at their optimal level when vendors work with breweries and distributors in tandem. This results in win-win-win for brewery, distributor, and vendor.
“I currently work with six Stone sales reps, along with their sales manager and several others in the sales department,” Green said. “The more beer I sell for them, they benefit and, in turn, sell more beer for me and I benefit.”
As a vendor, Renna added that he gets the benefit of increased responsiveness by working with the breweries and distributors.
“The salesmen do not want to see (flagship beers pulled off tap). Five years ago, such a threat would not have gone very high up the ladder, but today I would have a regional manager calling me within hours.”
A NEW CHALLENGER
Tondro noted that the number of distributors and reps with whom he works has increased by nearly 50 percent within the last year, and much of the increase is due to new breweries that self-distribute.
Green countered that, by working exclusively with a brewery representative — and not partnering with a distribution company — the portfolio of beers available is more limited.
Despite such reservations about working with breweries exclusively, dealing directly with smaller and newer breweries becomes an increasingly viable alternative for vendors. In fact, for at least one local brewery, working directly with the brewery is the only way to get their highly sought-after beer.
“Societe is selling all the beer they can make,” said Broderick, referring to Societe Brewing Co. who, by design, only self-distributes its beer.
“It’s a privilege for me to be able to get it, as opposed to a bigger brewer who is just battling for tap space and only now realizing how valuable it is.”
For Broderick, the privilege is such that he drives to Societe to pick up the kegs himself.
“They said they’d love to sell us beer, but they couldn’t drive out to Jamul to get it to us. I said, ‘No problem, I’ll pick it up,’” and even then, Broderick is only able to pick up what beers Societe has available, but even expending this much time and effort can outweigh the indignity of dealing with hard-driving sales representatives.
“It’s such valuable space and there is so much beer to fill that space, how are you going to put on a mediocre beer by a brewery just for the chance, the lottery, or opportunity to get a select beer later?” Broderick mused.
“It’s an unrealistic goal for me to get (Russian River Brewing’s) Pliny the Elder. It’s been made clear to me by their distributor. But now it’s not an issue because there are more beers that can match Pliny. No disrespect to Pliny; it used to be the lead dog, but the rest of the pack has come up.”