5 reasons for young breweries to self-distribute vs. 5 reasons to partner with a distributor

When it comes to distribution, you have the power to choose: in 36/50 states you can choose to self-distribute or partner with a wholesaler. But is self-distribution right for you? Here are ten things to consider when determining your approach.

5 Reasons for Young Breweries to Self-Distribute

1. Profit: Many young breweries don’t have the ability to brew in substantial volume. Done correctly, self-distribution can be more profitable for a small brewer.  This stage in a brewery’s development allows for recipe development, process refinement, and time to grow market demand. Selling directly to a retailer allows higher profit and the ability to develop your product and brand. Of course, delivery costs will need to be factored in, but a carefully considered small distribution area may make sense.

2. Choice:  The last 15 years have been a time of distributor consolidation. Big distributors are getting bigger, buying up small distributors to gain territory and brands. In most markets this has left breweries with only a handful of starkly similar options. Don’t settle for the best of the worst. If you’re not fully confident that a distributor in your market can meet your needs you still have the choice to do it yourself.

3. Branding: You are the most powerful representation of your brand. It’s more influential when a representative of the brewery is there to explain the intricacies of their beer and why it’s special to the retailer. Trust and respect are built when a brewer lugs in the first keg for a new customer. It creates a special bond between supplier and retailer that inspires support of this dedicated entrepreneur and their brand.  This relationship will also open a direct dialogue, and market feedback is priceless.  By continuously talking to retailers and customers you get direct, unfiltered feedback about your beer.

4. Control: A brewer is the master of their product. A brewer and the brewery staff know what’s best for their beer; from how it should be stored, to how it’s sold, where it’s sold and how it’s delivered. After passing your product to a distributor, you have minimal control over how the beer is handled. You don’t want your beer stored in an 85° warehouse. You don’t want you beer to sit on a 110° truck for six hours while being delivered. You don’t want your product to be misrepresented by an unknowledgeable sales staff. You wouldn’t want your beer to be poured at a place that doesn’t clean their lines. Self-distribution allows small breweries to perfectly execute the sales process so the consumer can taste the truest representation of the brewer’s vision.

5. Knowledge: Learn the distribution business. This is invaluable knowledge for any brewery young or old.  When forced to do it, you will realize distribution is more than simply taking an order and making a delivery.  It’s about how your brand is represented every step along the way. The interaction between seller and buyer can be complicated at times, having an intimate understanding of these relationships is essential to the long term growth of your brewery.

5 Reasons to Partner with a Distributor

1. Focus: Partnering with a distribution company you trust allows you to focus on the area of the business you’re passionate about. Know your strengths and weaknesses. Self-distribution takes mindshare, time, and resources. If you don’t have the time, the staff, or the resources to comfortably manage distribution then it’s time to outsource.

2. Cash Flow:  Take control of your cash flow; it is the life blood of a young business and will allow you to safely grow your brewery.  Liquor laws vary state to state and unless you’re in one that requires COD a self-distributing brewer needs to plan for the collections cycle as well as a percentage of late payments.  Remember, a sale is not complete until you are paid for the product delivered. When meeting with potential wholesalers discuss payment terms with them.

3. Volume: What are your long term profit/volume goals?  At what volume would your profits from self-distribution be equal to that of partnering with a distributor? Do you have the ability to hit that volume? If so, then this is the tipping point at which finding a distributor to partner with should become a real consideration.

4. Geography:  Are you getting requests for your beer outside of your sales territory? Can you meet that markets demand? If yes, then you should consider working with a distributor that knows the region. The further you self-distribute product from the brewery the less profitable it is for you. When product is sold to a distributor it is done so at an agreed price and paid on the agreed terms.

5. Opportunity:  Are you missing out on a customer base you cannot reach? A good distributor has long lasting account relationships and the customer base to expose your brand to a wider audience.  Service of chain stores is a major hurdle for most small breweries and good distribution should be able to open these doors for you.