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DISTRIBUTION

Distribution can be essential for breweries at many different stages of growth. In some states a distribution contract/partner is required simply to sell your own beer to your tap room to serve it. For others, Distribution can be put off until way into the future….perhaps not in the business plan at all. Breweries growing one step at a time may plan to handle limited self-distribution (in states that allow it) to get their feet wet or just to support their neighbors, with the intent to grow into formal distribution someday.

 

Regardless, it is important to understand the benefits and costs of distribution so that any plan can properly account for the time and cost of each step to prepare properly. Therefore, feel free to explore informational articles that may be organized in Open or Grow even when you’re in the Plan stage. It’s never too early to learn.

 

Distribution is necessarily connected at the hip with Accounting, Branding/Marketing, Business Plan, Human Resources, Legal, and Sales. All of these elements are essential to executing a distribution plan well. And quality execution, including utilizing the requisite time and resources, is necessary to ensure maximum success with your distribution partner.

Building Effective Distributor Strategies

Establishing an effective distributor strategy is a combination of your growth strategies and the opportunities that new markets may provide your brand. It is safe to assume that in today’s competitive and crowded craft beverage sector, market expansion is vital to sustaining young brands’ growth; appointing distributors in new markets is a critical component of a growth strategy; and being able to effectively determine why and where to scale your brand will greatly impact your long-term success, in terms of both volume and value.


This brief article will look at a few of the distributor management strategies that we at Brand Elixir Partnership see as most important to consider when looking at the growth of your branded business through appointed distribution networks.


The Building Blocks of Distributor Management Strategy
There are many schools of thought on why and how to select and partner with distributors. In our combined four decades of working with distributors, we have found the following elements to be most important when determining the strategic path of one’s craft brand:

 

 

While not an exhaustive strategic list, the above diagram focuses on the critical elements for you to employ in order to control the destiny of your brand, even when in the hands of third-party distributors.

Pricing for Profit

“All Goods Worth Price Charged” (George Garvin Brown, circa 1880’s)

 

Margin management is one of the most important issues to address when expanding and building your business. Given the cost of doing business outside of your tasting room and home market, it is critical to understand, and manage, your margins.


Low margin goods tend to stay low margin and they limit your ability to invest behind your brand. By establishing high margins for your brand, you arm yourself against such pressures as competition and regulatory constraints. Strong margins will enable you to:

  • Build your brand on a consistent basis

  • Support retail programs

  • Take advantage of opportunities that will help you drive volume and distribution

  • Keep your distributor engaged and focused on building your brand


When establishing your margin ranges, it helps to understand the margin requirements along the value chain. The following are simple margin guidelines you can follow:

  • Retail: 30-35%

  • Distributors: 25%+

  • Suppliers (YOU): ????


Metric Setting

“If you don’t know where you’re going, any road will get you there” (Lewis Carrol)


You are the master of your brand. Nobody knows or understands your brand better than you. Logically, then, distributors are the market experts. However, contrary to popular belief, distributors are in the inventory management business, and not the brand-building business. Brand building is what you do.


Distributors are focused on inventory management because too many slow-moving SKUs hurt their margins. And slow-moving inventory attracts the wrong kind of attention by distributors. In short, you do not want your brand to ever make it on the “Slow Moving Inventory” list.


One way to avoid unwanted attention by your distributor is to be focused on specific metrics. The more focused and specific you can be with your distributor, the easier it will be for your distributor to deliver the intended market results. What are your objectives for entering a market? Is it to gain market share vs. a key competitor? Is your brand an on-premise only strategy? Do you think that you brand will have the most success in a concentrated area or set of retail accounts? Clarity of purpose saves you and your distributor time, money, and energy. Distributors truly appreciate suppliers that provide them with focus and specificity.

Lastly, if you’re wondering about how to set focused goals with your distributor, it helps to use the model of SMART goal setting:

  • Specific

  • Measurable

  • Achievable

  • Time-bound


Managing Execution

“Inspect what you Expect” (Tom Peters)


Having set your expectations and metrics with your distributor, it is now incumbent upon you to measure the results. In truth, distributors expect (and respect) suppliers to work with them in ensuring that brands are built according to suppliers’ strategies. Moreover, distributors expect their suppliers to provide:

  • Direction: what is your Brand’s development plan?

  • Focus: Where should distributors target their efforts?

  • Tools: The Brand’s story and selling materials that resonate with retailers

  • Commitment: Investments, both in brand support and time, in their market


There are other ways to partner with your distributor for profitable growth and to “inspect what you expect”:

  • Active planning with SMART goals

  • Regular check-ins with your distributor

  • Working the market without distributor assistance

  • Helping the distributor with their issues

    • Resistant accounts

    • Procut education

    • Community outreach

    • Recognition for jobs well done
       

Applying the Learnings

“Learning is not compulsory…neither is survival” (W. Edwards Deming)


So now that you have established your strong margins to support your brand’s growth; set SMART goals with your distributor to ensure you brand grows both strategically and profitably; and, you have established a productive rapport with your distributor, it’s time to apply your learnings. Applying in market learnings will improve your chances for success in the next market you enter and will aid in continuing your brand’s growth trajectory where it is currently.

In beverage alcohol, as well as in most industries, data drives better decisions. And, while our industry is relationship-based, it is heavily data-driven:

  • Data drives Insights: your brand grew xx% over the holidays because of the tasting and coupon program you and your distributor programmed.

  • Insights drive Action: If couponing and tasting programs drive volume, maybe it would be smart to program these types of programs during other key times of the year.

  • Actions drive Results: Due to the implementation of new programs, your volume and profits are both up xx%
     

Seeking to capture data and understand its implications will help you leverage many market situations to your advantage. For example:

  • “Why should we carry your brand?”: You just might have the data to show where their competitors are doing better because they carry your brand

  • “Who is your consumer?”: Having insight into who is purchasing your brand will help you and your distributor better target accounts, and will help give you programming advantage in those accounts

  • “Why do you think your brand deserves our promotional support?”: Because you have been tracking your brand’s activity-based performance, you will know that in this account, your brand’s volume exceeds your closest competitor by xx% and by having that endcap (or feature, or discount tag), your account will earn $xx extra per bottle sold because of your strong margins and accelerated volume.
     

Finally, key facts can be incredibly persuasive when you are competing for shelf space, programming, or new distribution. Here are just a few areas around which you might consider collecting data:

  • Category Trends

    • By Segment

  • Volume

  • Growth

  • Value

  • Channel Trends

    • On- vs. Off-premise

    • Chain vs. Independent

  • Brand Trends

    • Distribution

    • Channel penetration

    • Volume

    • Velocity

    • Revenue

Succeeding with your Brand

“I find that the harder I work, the more luck I seem to have” (Thomas Jefferson)


You got into this business because of your passion for beverages and brand building. We hope that these strategic ideas that we have presented will help you with your distributor selection and management. Brand building is a long-term proposition, as is building relationships. However, taking ownership and accountability of your brand in all markets will make you a more effective business leader and brand builder.


If you’d like more specialized attention to your distributor matters – give us a call! Brand Elixir Partnership can help you build a distributor strategy unique to your own brand and business objectives.

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Contributing Author

Andy Mansinne                                                          President, Brand Elixir Partnerships

 

Andy is the Founder and President of Brand Elixir Partnership. His business leadership experiences, strategic acumen and coaching skills impact results for his broad client base. From start-up beverage businesses to international wine conglomerates, Andy’s approach to ensuring his clients’ success starts with his understanding of strategy, rigorous process development and team-oriented execution.

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Contributing Author

Joe Karcz                                                                      Managing Partner, Brand Elixir Partnerships

 

Joe Karcz is the Managing Partner of Brand Elixir Partnership. Joe brings a wealth of Marketing and Sales insights gleaned from a diverse career in the adult beverage industry. His career spans the entire arc of product commercialization – from product design and development to marketing strategy and support planning, to sales management and field execution.

Truck Self-distributing goods

Self-Distribution:

Marvelous or Onerous?

Laura Lodge

Is self-distribution legal in your state? As of November of 2020, self-distribution was not legal in AL, GA, DE, FL, KS, KY, LA, MO, MS, NE, NV, RI, SC, & VT according to the Brewers Association. Always double-check the regulations in your state to confirm and find out details that could be critical to your business planning.
There are a number of pros and cons to consider when thinking through self-distribution. Some of the 

 

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The Care & Feeding Of Distributors:

Part I

Andy Mansinne

The explosion of new craft breweries, distilleries and wineries over the past several decades has been a benefit to local economies, curious consumers, and to the craft entrepreneurs themselves. However, for every craft brand that “makes it big” (insert your meaning of “big” here), there are many other, equally hard-working craft brand owners who struggle to scale, and still, many more that simply fail. While we cannot address every solution for a craft brand’s business woes, we do want to take time in 

Contract & Pen

Distribution Contracts:

Content, Strategy, and Negotiation

Laura Lodge & Candace L Moon

Distribution Contracts require both an eye to strategy and legal structure/protections. This presentation is intended to showcase the importance of both while emphasizing the diversity in the industry; no one size fits all solutions exist. Please note that this is not to be construed as legal advice.
Fundamental differences between Traditional Distributors, MegaDistributors, and Brand Collectors include their intent to actively sell your products and grow your brand in coordination with you. Read 

Beer Pallets on Forklift

Fantastic Importers and Distributors

and Where to Find Them

Scott Rosenbaum

Whether you’re a potential employee or supplier, here are the qualities you should look for.


No one wants to end up with a dud. No one wants to settle for less than they believe they’re worth. This is true in business as in love. Sadly, too many employees and suppliers settle for what suffices rather than what satisfies when it comes to business relationships. The issue doesn’t stem from the lack of 

PLAN

  • Research Your State Distribution Requirements

  • Review State Franchise Laws

  • Understand Requisite Quality & Consistency

  • Consider Self-Distribution 

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oPEN

  • Establish Self-Distribution Limits

  • Plan Distribution Essentials

    • Product Storage​

    • Keg Rental/Purchase

    • Delivery Vehicle

    • Support Equipment

  • Establish Brewery Distribution Team

    • Accounting​

    • Delivery

    • Sales

    • Warehouse

  • Explore Expansion Needs/ Cost

Grow Graph

GrOW

  • Select New Territory

  • Review New Territory Franchise Laws

  • Create Point of Sale Items

  • Additional Brewery Sales Team

  • Explore Distribution Options

  • Select a Distributor

  • Negotiate Distribution Contracts

  • Train Distribution Sales Team

  • Manage Distribution Partnership

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