Covering University of Colorado sports, mostly basketball, since 2010

Friday, April 22, 2011

Friday Beer Post: Rehash of distribution issues

A few weeks back, while looking forward to the Final Four of Beer Madness, I bemoaned the sale of Goose Island to Anheuser-Bush (it seems the deal didn't sit too well with the guys at GI either).  Word was that the sale was in response to the difficulties many craft breweries share of keeping up with demand, and that the Hall family was tired of trying to keep up.  In the comments, brewing professional Rico talked about the sale of GI in terms of the future of craft beer, going as far as to say that the craft industry is at a "crossroads."  With demand often greatly outpacing production capability, many breweries have to find creative revenue streams to enable an expansion of production, thus putting tremendous strain on the balance sheets until the predicted revenue starts pumping in.  It's an uncomfortable position that many small breweries across the nation find themselves in..

With that in mind, I couldn't help but notice over the past few weeks as two Colorado craft giants pulled back their distribution.  First Great Divide, and then Avery announced territorial pull-out plans.  Now, I don't expect Avery or GD to sell-out to Coors anytime soon, and no one in Colorado will have any trouble finding a Titan IPA or a White Rascal if they want one, but it is with a mounting sense of dread that I see some of my favorite breweries breaking distribution partnerships and retreating back across the Great Plains.  I couldn't help but notice, during my tour two weeks ago, how haphazardly Avery was strewn across an office park.  At the time I found it quaint and "Boulder-ish," but now, as I think back on it, it all seems very tenuous. 

To underscore the point, this is not a case of no one wanting their beers.  The truth is exactly the opposite, too many people want their beers, and they just don't have enough to go around.  The only way forward for the breweries I love is to expand; allowing more room for more mash tuns, fermentors, and larger bottling lines.  And the only way they can handle this is with a large influx of cash, which more than likely means pricey, and inherently risky loans.  If some breweries find that they are risk-averse, they might end up going the way of GI.  Rico's right, craft brewing is at a crossroads, and a perilous one at that.

Happy Friday!

1 comment:

Rico said...

The lesson that breweries need to learn about this whole debacle is that distributors and wholesalers - however good intentioned they are - tend to be filthy harlots and Jezebels to growth-minded craft breweries.

Most craft breweries aren't set up to grow past a certain barrelage per year and they shouldn't sell beer past that amount. Wholesalers will waltz their way in, tell you that your beer is the drink of the gods and they can sell it to the thirsty masses of , and then proceed to place some cash money on your desk.

What do you do if you're a poor craft brewery mired in loans and debt? Of course you'll take the money. And then you get more loans and more debt to pay for the new fermenters and bigger brewhouse you'll need to make more beer to keep the distributors happy. The worst is when you have to distribute in a state where all of the wholesalers are owned by the big 3. Then you're pretty much signing your soul to the devil - and he won't even give you the ability to rock on the guitar either.

Twisted Pine is a good counterpoint to this debacle. They're a decade older than GD or Avery and they just recently started going out of state (they LOVE them in Texas). They will never sell more than they can make because the owner doesn't want to make the effort to expand beyond their capacity. It's not going to make you rich, but it's not going to make you look foolish for expanding more than you are able to.

The lesson is the 3-tier system is the devil and more states should legalize self-distribution.