Beer Distribution 101: Self Distribution vs Distributor
Traditionally there has been a three-tier system when it comes to beer distribution. It’s where a brewery sells beer to a distributor, who in turn sells it to the customer. With thousands of current breweries and new breweries opening daily, breweries are turning to self-distribution to sell their product. They’re making this change with the intention of increasing their profit margin and still hitting their distribution goals. Of course, every state has it’s own individual self-distribution laws, which can make it illegal. However, with some form of it now legal in 35 states, breweries are looking to gain a financial and competitive edge by choosing self-distribution.
Self-distribution is not an option for some breweries, but for those who do have the choice, what factors go in to making the decision? Of course, everyone understands the previous three-tier distribution model. Distributors have been extremely helpful at getting thousands of breweries on the shelves of bars, liquor stores and bottle shops. It’s an easy way to get your beer on the shelf of places close and out of the range of your brewery. A distributor is a great option for breweries that simply don’t have the manpower to distribute their beer.
What is Self-Distribution?
With the market expanding, breweries are looking to self-distribution to keep their beer on shelves and in customers hands. Self-distribution is allowing breweries to see a larger profit margin on their beer, by cutting out the middleman when distributing to local bottle shops and bars.
There are a few things to consider when considering self-distribution.
First, is it legal in your state and what other laws does your state have about self-distribution? There are currently 35 states that allow some form of self-distribution, some states have restrictions on how much you can distribute and have a minimum size in order to distribute. The Brewer’s Association keeps a current list of state and local laws, which can help with the decision on whether it is right for your brewery.
Next is profit margin and control; it’s two of the reasons breweries decide to distribute themselves. Without going through a distributor, your gross profit can increase by 25%-30%. This is a major reason why breweries are choosing to do things themselves.
Self-distribution also allows:
- More control and focus on your distributed beer
- The opportunity for unfiltered feedback directly to the brewery instead of going through a third-party source
- Face-to-face interaction, which can benefit a brewery by increasing their value if they sell it to a distributor.
What Type of Beer Distribution is Right for Your Brewery?
Of course, an increased profit margin sounds great, but there are some drawbacks to choosing to distribute yourself. Startup costs are higher when choosing to do things on your own. You are paying upfront for the labor of delivery, equipment and warehouse space. Breweries may be limited to the local market only, in order to keep the profit margin high.
Another factor for breweries is acquiring shelf and tap space which can be tough in this competitive market. Distributors typically have contracts to secure a certain amount of space, which can be a problem when trying to get your beer some shelf space.
When making the decision to distribute, it’s important to think long term and not just in the immediate future. There is an increased profit margin with self-distribution, but are you looking to distribute out-of-state in the long run? If the answer is yes, it’s important to weigh the future potential benefits of a distributor. It’s also important to know that typically once you sign a distributor contract, you are locked into it, so weigh your options fully before making that decision.
Regardless of the type of beer distribution you choose, it’s important to be able to predict and meet the needs of the market. OrchestratedBeer allows you to input future sales orders. This allows you to create the need in the system, that will tell you what beers need to be delivered by a certain date. Whether you are looking to self-distribute or use a distributor, OBeer let’s you easily distribute your beer. Download our brochure to see how OrchestratedBeer can help make managing your brewery easier.
Are you struggle which is the best container to distribute your beer in? Check out our blog Canning Vs. Bottling to discover which containers are right for your distribution.