Good Beer Hunting

Critical Drinking

It Was Then That I Carried You — A Defense of Distribution

The coolest thing in the beer cosmos right now is the Brewery Can Release. This is a fact. I will not entertain debate on the matter. It makes sense on so many levels. If you love beer, the release is where you get the freshest beer. It’s where you see everyone who shares your passion for good beer. You get to contribute to a local business’ success. And hey, it’s cheaper than taking your friends to a movie. For breweries, it’s an incredibly intimate experience with your biggest supporters, an excellent source of high-margin revenue, and a way around a broken beer distribution system.

But I’d like to expand on that last benefit. Part of the reason the Brewery Can Release is so cool is because so many breweries have realized that the beers they want to make can’t go through a traditional three-tier wholesale model (brewer sells to distributor sells to retailer). Whether the beer is expensive, incredibly freshness-dependent, or just requires more hand-selling than most distributors can provide, many breweries have found that their best bet for people enjoying their beers and them staying in business is to cut out the distributor and sell most or all of their beer directly over their bar. The wine industry started doing this long ago and it’s entirely reasonable to think that, in the future, the beer industry will similarly let wholesale be the territory of the behemoths while small breweries support themselves via own-premise sales.

Collin McDonell is the CEO of HenHouse Brewing Company, which also serves as a small distributor in the North Bay area and surroundings.

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I’m not a fan of that future.

Don’t get me wrong, I love the Brewery Can Release. Making super loud IPA and DIPA and watching people enjoy it the day it’s packaged is an immensely satisfying thing. We do it every week at HenHouse. Rather, I’m not a fan giving up on wholesale for three reasons. First, I believe everyone deserves awesome beer, including those of us who don’t or can’t go to the Brewery Can Release. Second, the economic impact of breweries on their local communities is massive, which means ceding wholesale to the unimaginably large conglomerate breweries is limiting the benefits of local breweries. Third, it bothers me to see a broken thing, like the current distribution world, and not fix it.

Keep your eyes open when you go to breweries. Who’s there? Do they look like you? Do you see them elsewhere? While going to breweries to get beer is a bigger and bigger social occasion these days, it’s still a small minority of Americans who do it and it’s a self-selecting group of folks.

Chances are, the demographic at any given brewery tasting room is fairly homogeneous. There are obvious outliers, and that’s rad, but they’re just that. Rad outliers. There are so many more folks out there who love and deserve awesome, local beer! We started HenHouse without a tasting room. For our first four years, we sold all our beer wholesale, and one of the first things we learned is you shouldn’t rule anyone out. Not every customer will come to you, but that doesn’t mean the ones you have to pursue are any less valuable. Go into that honky tonk with an IPA! Go into that Mexican restaurant with a Saison! Those folks might not be coming to the uber-hyped DIPA release, but they drink beer! You should try to sell it to them.

Perhaps more immediately noticeable in the self-segregation of brewery tasting rooms is the skew toward IPAs. No one stands in line for the Irish Stout can release. No one travels across the country to the brewery just to buy the Altbier. IPA dominates the brewery can release to the exclusion of other styles, and why not? It sells better and keeps the bills paid. However, the best-selling beer in the country is still Light Lager.

That’s not to say Light Lager is the best beer, but rather, what sells in a brewery taproom is not necessarily what most folks are interested in drinking. When we circle the wagons and focus on own-premise sales, we never get a Left Hand Milk Stout or an Allagash White or a New Glarus Spotted Cow, perfect beers with a huge audience beyond simply what sells well at the brewery. These are extraordinary beers that only exist because those folks went out and found their audience far beyond the walls of the brewery.

It’s beneficial for our souls and creativity to pursue a more diverse group of customers. We live in an age of voluntary isolation, both in terms of who we talk to and what we read, watch, and listen to, but also in terms of who we actually interact with when we’re out in our communities. Breweries love saying they create community and are community-focused (In fact, we say that at HenHouse!), but if we want to be taken seriously as sources of community connection, then we have to do more than cater to those self-selecting groups of brewery visitors.

The neighborhood bar is a community-focused business, and we need to support them. The local restaurant is a community-focused business, and we need to support them. And most of the time, they have a different community than the brewery tasting room. We would be negligent as folks growing communities to ignore that.

Beyond the new people we can invite to the party, beyond the beer styles we risk forgetting about if we limit ourselves to the drinkers who will visit the brewery, what about the money we leave on the table by not selling beer wholesale? The primary reason I’ve always loved the craft beer world is that small, local breweries can compete with massive, international conglomerates on quality and, in a small enough radius, price. Meanwhile, and this is important, they keep that money circulating in the local economy.

HenHouse has always measured our impact not only in the numbers on the profit and loss statement, but in the money we create in the community. A keg we sell for $185 resales for $900 over the bar, creating $715 in value for a local business. You can look at that as $715 dollars you could keep if you sold everything over the bar, or you could look at that as a healthy margin for another local business to continue employing people and making your community a better place to live and work. Extrapolated, every 30-barrel batch is worth $11,110 to us and $42,900 to our community. This is why manufacturers—and make no mistake, that’s what brewers are—are so important to the economy at a national level—and even more so locally.

I’m constantly in awe of what breweries like Treehouse, Trillium, and Bissell Brothers are doing in terms of drawing in customers and putting the “own” in own-premise. While I’m super excited that these breweries are leading the way to ever greater heights in over-the-bar sales, I believe that model leaves behind a lot of money that I’d like to see torn away from the economic vacuum of large conglomerate brewers and kept in a local community instead.

I know, the margins suck wholesaling beer. I know, it’s really hard. I know, the competition is brutal. But I refuse to believe that we should allow the vast majority of money spent on beer—that is, the money not spent at breweries—to leave our community. Keeping money local is not just a catchphrase or fad—it’s an important building block of local communities. The profit from every dollar spent on a local business recirculates in the local economy and gets spent at other local businesses which, again, recirculate that money within the community.

The money multiplier is the closest capitalism comes to altruism: money spent locally creates more money locally. On the flipside, the profit from every dollar spent with large conglomerates is money that leaves the community and goes who-knows-where. It’s that simple.

There’s a moral case to be made that we, as small businesses, must fight the wholesale fight. Giving up ground in the wholesale channel is allowing large conglomerates—that have no connection to our communities and no desire to help our communities—to remove some percentage of our communities’ wealth. We all need those tasting room sales to keep the doors open and the lights on, but we can’t let better margins cloud our vision as to the beneficial impacts we can have as partners to other small local businesses.

On a less moralistic level, but certainly a principled one, I can’t look at a broken system and let it stay that way. The three-tier system is busted right now. Part of the reason the Brewery Can Release is the coolest thing in the world currently is it’s a phenomenon that simply couldn’t exist in most brewer-wholesaler-retailer relationships. I do not believe it is any coincidence that Trillium and Treehouse, the two Brewery Can Release heavyweights, are both in Massachusetts, a state with gnarly franchise laws.

When the legal nature of the brewer-distributor relationship heavily favors the distributor, brewers will look for other ways to get their beer to people. When the traditional distributor model is made for pasteurized Light Lager with a 180-day shelf code, brewers will look for other ways to get their beer to people. When small brewers can't afford to give up 30% of every sale for the small amount of support that buys you from a distributor, brewers will look for other ways to get their beer to people. The Brewery Can Release is a work around these problems, not a replacement. It’s totally unreasonable to expect the smallest breweries in the nation to try to fix a distribution system largely designed by the biggest breweries in the nation, but there's massive opportunity in trying to do so.

The distributor exists in most industries for fairly mundane reasons. Consolidating storage, ordering, deliveries, and billing achieves economies of scale quickly. That’s as true of selling toilet paper as it is of selling beer. It’s a financial benefit to the manufacturers working with that distributor, but its biggest benefit is to the retailer purchasing from them. For the folks who buy beer, dealing with a bunch of different breweries is really hard! It’s a lot of fielding sales reps, a lot of billing headaches, a lot of delivery drivers coming through, tons of empty kegs cluttering your space, and generally just a lot to keep straight, particularly for the small local businesses we like to work with that don’t have dedicated ordering people or an AP department. The allure of the distributor is to clean it all up, present many options coming from one place.

I spell all this out to highlight that the benefit of a distributor is primarily to the retailer, not the brewer. I think this is important, because any conversation about beer distribution must eventually turn to how to solve problems for our customers. After all, they’re the ones that this whole thing is for. When conversations about distributors turn to “breweries shouldn’t have to give up so much margin” or “breweries shouldn’t expect distributors to be brand builders,” I start to feel like we’re missing the point. Make no mistake, the distributor tier is broken, but it’s broken in how it serves retailers. That’s what must be fixed.

To that end, one of the major benefits of not wholesaling your beer is that you remain entirely in control of how that beer is handled. This is a pretty unassailable quality benefit and generally the first thing the own-premise crew argues for, particularly given the sad state of cold chain in the distributor world. While I often go to breweries for this reason, I think about how lucky I am to have the knowledge, time, and money to seek out beers in this way. I think about the majority of people who drink beer who pick it up while grocery shopping. They deserve the same quality of beer that I do, even if they don’t have time to follow HenHouse on Instagram and come to our Brewery Can Release. Forcing people to go to the brewery is writing off a huge amount of your potential audience.

People are going to continue to buy beer at Safeway, Target, Walmart, and Costco. I’m sorry, but you cannot convince me they don’t deserve excellent beer. That commitment to putting awesome beer into the scary world of corporate retail requires time, money, and focus, but no more so than a rad retail experience does.

All of which is to say: I believe wholesale beer sales, sending the beer out past the brewery’s walls, is a good thing for everyone. I believe it’s good for the creativity of brewers, good for local economies, and good for the vast majority of people who drink beers. Yes, the Brewery Can Release is the coolest thing there is, but it’s not how most people enjoy beer. We shouldn’t let the benefits of over-the-bar sales blind us to the wonders of letting our beer out into the world. But I also believe the modern American wholesaler is doomed and will undergo more painful—and, for many breweries, ruinous—changes in the near term future. Sell your beer wholesale, but don’t sell it to a wholesaler.

Words by Collin McDonnell Graphics by Cooper Foszcz