Future of Beer Distribution
The Future of Beer Distribution in America
By Charlie Papazi
With recent consolidation, mergers, buyouts and a continually changing retail landscape, it is well worth revisiting the dynamics of the four‐tier system that in principle has worked well in America: brewers, distributors, retailers and beer drinkers. There has never been a more exciting time for beer drinkers in America. It is all of our responsibility to build upon America’s new beer legacy.
America’s state regulated three‐tier system in its intended form helps provide beer drinkers access to a diversity of beer brands and styles. This is a good thing, for several reasons. Forward‐ thinking distributors are currently enjoying their role as distributors of beers made by America’s pioneering small and independent brewers. Independent distributors make good margins on these beers, help create beer excitement and provide added support to local communities nationwide.
Small and independent brewers seek knowledgeable distributors who understand their values. Working relationships have made great and amenable strides in the past few years. Beer distribution in America is now at the most important crossroads of its post‐Prohibition journey. There is increasing pressure on distributors to consolidate. Where is this pressure coming from and why?
Brewing companies merge or buy out others to create efficiencies, increase profit and thereby increase shareholder’s value. When mergers and buyouts occur, tactics emerge to increase shareholder value. Pressure is applied on the distributing and retail tiers. Because of their volume share of sales, large brewers feel they deserve increased attention. This desire for share of mind can force distributors to make decisions based on supplier demands rather than what is best for the distributor’s business, what is best for the beer drinker’s choice and what is best for growing the beer market as a whole.
Distributors may decide to consolidate and drop brands made by small brewing companies based on the demands of larger suppliers. This limits choice in the marketplace. We can observe that there is a history of incentives offered to limit choice to the beer drinker by limiting distribution. Let me make one point of clarification here. I’m not referring to choice of beer types. Brewers large and small can make any kind of beer type and offer some degree of diversity. Is that what the beer drinker is currently seeking? I don’t think so.
Limiting choice of beers from America’s small, independent brewing companies will eliminate the personality and uniqueness that has driven America’s beer legacy; a legacy that is now recognized throughout the world and has helped drive increased and responsible enjoyment of beer in America. To the valued beer distributors of America, I can predict that there will be pressure to give up independence. There will be an allure of short‐term incentives, all at a price that would certainly be paid for in the future.
American beer drinkers matter. It is quite obvious that they appreciate being able to support small and independent while also indulging in their favorite big‐name national brands. On my timeline it has taken 30 years to develop excitement in the American beer world. To ignore the dramatic shift in beer attitude would be a costly digression in fortifying the American beer market.
If the three‐tier system chooses the path to limit consumer choice, the distribution system as we know it today could self‐destruct. On the other hand, a strong, independent distribution tier will promote consumer choice, effect stronger brand value for all of America’s brewers, encourage the continuing trend of diversity, create beer excitement and embrace independence.
Both consumers and craft brewers need a strong, independent distribution system. Distributors will need the flavor, diversity, personality and brand value offered by independent, small brewers. Certainly self‐distribution options will need to exist for some brewers who distribute locally, but the backbone for the future of beer in America is a stronger and more forward‐ thinking relationship between small, independent brewers and independent distributors.
What can small, independent brewers and beer drinkers do? Pay attention. Understand and realize what dynamics are presently shaping the future of American beer culture. Tell our story and encourage a rule of law that permits fair access for all brewers in getting their beer to the demanding beer drinker. See BA Positions Statements for more information on Independent Wholesalers.
source: Charlie Papazian, beertown.org (The Brewers Association)
