Tags

, , , ,

I intended to post this update a couple weeks from now, as we spent a little time on the subject of “reform” last July when the State of Michigan issued a number of recommendations for changes that would change the ways beer producers, retailers and wholesalers function within the state.

Here’s a little further detail on some of the major points from the perspective of the craft brewer at the time: LINK

We have it on good word that negotiations are still ongoing in Lansing as lobbyists on both sides of the issue are peddling their influence.

In fact, a bill has now been proposed. You’re going to hear a TON about this going forward…and there will be some spilled beer as a result.

While there is much noise in the above-linked article regarding the “gas station” provision – something that’s already common practice in many states (and I find the “public safety” arguments to be complete bunk, coming from a trade group trying to maintain their turf) – other issues are more relavant to the craft industry. One of the big issues, of course, is self-distribution for small brewers. While I certainly understand the arguments on both sides of the issue, having worked all three tiers in the past, I wonder if perhaps this is an issue that can be a “win-win.”

Distributors or wholesalers want to maintain their control, of course, and the potential revenues that come with mandatory distribution, but let’s face it: in the modern market in most areas of the state, there are only a handful of wholesalers, and most of them have literally THOUSANDS (if not hundreds of thousands) of SKUs to try and manage. Consolidation is making this an even bigger problem. It is impossible for them and their staffs to give attention to all of them, despite their best efforts, and it’s the small players who usually slip through the cracks, particularly if they don’t have much name recognition in the market.

Brewers (opens .pdf), on the other hand, want the attention and freedom that come with self-distribution, but let’s also face it: many or most of them have little to no understanding of the costs and efforts involved to build and maintain a distribution network and the retailer relationships that go along with it. Having worked in the middle tier in the past, let me tell you, the hours are long, often thankless, and it ain’t always easy.

I’m guessing that this piece of reform would accomplish two things:

1. It would eliminate the expense and hassle of “building small brands” from wholesalers and allow them to concentrate more resources on brands that have some volume. The job isn’t getting any easier for startups as it’s no longer “special” to be local. You need to be local, have a good product and some following. These things take time and are not always present in new breweries entering the market, often undercapitalized, and are sometimes busy learning from mistakes.

2. It would build an appreciation among small brewers for the difficulties faced in distribution. I’d bet most small brewers would be eager to pass along distribution responsibility for their brands as they grow beyond a few core accounts. After all, brewers are typically in the “beer business,” not in the logistics and sales business. Who wants to spend money on trucks, warehouse space and sales guys when you can be making beer? Who wants to spend 18 and 20 hour days meeting retailers, repairing trucks, loading and unloading trucks, in strategy meetings, making sales calls, fixing draft problems, stocking shelves, dealing with returns, and doing promotions in far off retailers instead of being in the brewery making beer and talking to customers?

Bottom line, I would argue, is the current system was created nearly 80 years ago as the nation passed the 21st Amendment to address issues that are no longer present and current conditions can fairly be said to warrant some reforms. While the system has done some things well, let’s not forget that it was reform in the mid-80’s – specifically, the creation of the brewpub and microbrew licenses – that opened the doors to this tremendous new craft beer industry in the state.

Personally, I would urge the wholesalers to look at this as a positive. It can reduce costs and eliminate small volume SKUs that are not as profitable while creating true partnerships with those producers who do use and appreciate a distribution partnership. Hopefully, these new changes can be fair for all the parties involved and continue to shepherd a growing industry in the Great Lakes State for decades into the future.

Advertisements