The Long Game Distribution

If the Zombie apocalypse were to occur tomorrow, my wife would be one of the first people to go.

I know it, she knows it.

We talk about it all the time.

I think you would agree with me when I say a Zombie apocalypse would force your hand to make really hard decisions.

Hard decisions that could really upset the familial unit.

Hard decisions that would result in 3 screaming brats not getting their way.

You can’t have screaming brats giving away your position in the Zombie apocalypse!

Long Game strategy for distribution – determining who would be the first brewery team member to go in the Zombie apocalypse.

I’m kidding.

While we are on the topic of apocalypse, it felt like the brewing industry went through one in Q1 of 2022.

January, February, March, were BRUTAL.

Poorest wholesale performance I have seen in 10 years.

The most interesting part to me was, the sales drop off was agnostic. It didn’t matter who you were or where you were located, sales just fell off a cliff.

Today, as we approach the end of summer, wholesale has naturally picked up due to the season. I believe the seasonal lift is temporary.

I am genuinely concerned for the “wholesale heavy” breweries out there.

“Wholesale heavy” as defined by SBS, generating 80% or more of their revenue from wholesale sales.

The margins in wholesale have always been weak and when you add the rising costs of labor, freight, raw materials and packaging, they are thinner than ever.

I understand that some of you are in a precarious situation. The Long Game is intended to guide you through this.

Volume v. Price

A question I get asked alot is “at what volume sold in wholesale will I breakeven.”

Preposterous question! There is no universal formula of BBL sold through wholesale that could guarantee breakeven.

Chris, three zombie pitt bulls will be released on your 8-year old daughter if you don’t give us a number.

Well if you put it like that, then I’ll give you a number.

20,000 BBL’s

Yea, 20,000 BBLs’ feels right. 20,000 BBL is the point where you tip the scale in volume v. price theory.

Let me explain.

Manufacturers make things.

They expect to sell a LOT of those things.

They typically do not rely on a retail operation to sell their things. So their sole focus is selling a LOT of things to wholesalers AND making a profit.

Craft brewing is also manufacturing, but with a twist.

  • First, you rely on your retail operations to generate healthy margins.
  • Second, you fall in a light manufacturing category, where you must win on price, offering a premium product, rather than volume.
  • Third, thanks to archaic laws a middle man dictates your success.

Rigged Game

Distribution in the brewing industry is a rigged game. No different than the games you see at carnivals. Yes, I am calling the wholesalers carnies.

If you are distributing under 20,000 bbl per year, there is only one winner.

Self-distribute?

Congrats, you don’t have to deal with the carnies, but your game is also rigged.

All doom and gloom Chris….Why?

#facts

AND

I think there is a way to win at the carnival.

Carnies rely on the chaos at the carnival to ensure there are more losers than winners. The lights, sounds, smells are all part of the chaos. All of these distractions are intended to throw you off ever so slightly so you miss the target and come back for more.

Too often, I hear, distributors are tired, they have too many brands to choose from.

Cry me a fucking river.

Distributors’ chaos is the size of their portfolio. The number of Hazy IPA’s they get to choose from is comparable to the lights, sounds, and smells at a carnival.

The more choices they have the easier it is for them to say “whoops, no!”

The number of SKU’s craft beer is pumping out a year is NOT SUSTAINABLE nor profitable.

The formula to win at the carnival and coincidentally the Long Game strategy for distribution is focus.

More specifically

  • Portfolio Focus
  • Sales Focus

Portfolio Focus – Pick 1-2 styles you want to focus on in distribution. Most of you have 3-4, in addition to the seasonal offering. The Long Game requires a super slim distribution portfolio and suggests that you put all your fire power behind two beer styles. If you are rolling your eyes at me, recall the shit-eating-grin your carnie rep gives you every time you meet them.

This portfolio focus removes the chaos they secretly love. If you are unsure about the styles to choose, dig into their portfolio. Which style can you produce, year-around, that has healthy margins? It would be a bonus if that style didn’t have tons of competition within the portfolio.

Sales Focus – A revamped portfolio will need a new sales strategy. Focusing on 1-2 beers will separate the sales reps from the mice. Your reps currently rely on variety for the easy wins. This will be an adjustment. Think about the increase in POD’s you will need with only 2 styles. Would this portfolio need to cover the entire state now rather than just your own backyard? Would the calculated approach be received better? Either way, think big with this strategy. Lean into uncomfortable thoughts with where this beer can go.

Common objections to this strategy:

“But customers love variety, they want options.”

Give them variety in your taproom.

“Our distributors will be confused with this move.”

No they won’t, they are secretly asking for it.

Is this going to be easy?

No.

Is anything in business easy, no.

I am not suggesting to pull the carpet out from your distributor, but begin thinking about how to turn the ship. Turning the ship means focusing on what counts.

That is why it’s called the Long Game.

-cf

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