Things to Look for in Your Contract with a Wholesaler

Aspasia Lyras-Bernacki and Richard Bernacki, co-owners of Penguin City, have been on both sides of the distribution game and feel like they have come away better off the way they started and went. The duo discussed their journey of starting and expanding their Youngstown, Ohio brewery at the 2024 Ohio Craft Brewers Conference.

Initially advised against using a distributor, Penguin City self-distributed for four years to retain control and learn the distribution game.

“Don’t sign with a distributor, that was what everyone told us when we first started our company,” she said. “I was told ‘They’re your worst enemy.’ It was the topic of many conversations between fellow breweries.

“My question was, how can you expand without them? I saw other breweries and distributorships getting their products on the shelf when I was at grocery stores, and I thought they couldn’t all be so bad. So what was the catch?”

Despite the pros of self-distribution when launching in 2017, such as direct customer connection and control over their product, Penguin City did face challenges like vehicle costs, insurance, and difficulty getting into larger stores.

“Gas maintenance, insurance, all of that,” he added. “You will need more employees. And yeah it is a little harder to get into the bigger box stores and those chain restaurants.

“They said, well, we can’t make these decisions, we have to go up the chain. So that took like six months just to get to the top.”

After reaching around 400 accounts, they realized they had plateaued as a self-distributed entity and needed to decide whether to invest further or switch to a distributor. They invested in a large warehouse and a tap room, shifting their focus from self-distribution.

“Any kind of software that would help you keep track with some CRMs routing is probably really important,” Richard Bernacki said for any brewery looking to self-distribute.

Over two to three years, they meticulously researched and met with various distributors, ensuring they understood each one’s methods and ethos.

Lyras-Bernacki emphasized the importance of thoroughly reviewing contracts with distributors. Involving all the owners, and negotiating terms to include important aspects like volume percentages and sponsorship obligations, she said, were key to them.

“There was a percentage of volume or revenue percentage, that they would release us (from the contract),” Richard said. “I don’t know if that would hold any weight because of the franchise law. At least it made us feel a little better that way that they were considering it. It’s in writing. And at least you could go to them and say, well you did say this.”

POS splits were another important one they wanted in writing.

“What items are you going to split with us? What was important to us? What did we want help with, for sponsorships,” she remembered thinking of in the negotiations. “We have a contract with Youngstown State, our state college, and we do a beer for them. So making sure that they acknowledge that contract and that they were able to go in on that contract. (You want to) Make sure you bring all those important things in what you did to them.”

READ MORE: The Support Old Nation Demands from its Distributors

While distributors can seem like enemies, they said finding one that aligns with their goals and values was crucial for their continued growth.

“Meet with as many as you can sit down with and really listen to them,” she said. “Listen to how they’re going to distribute your product. Really listen to that. Take notes, make sure you’re paying attention to the wording. It is one of the biggest decisions you’re gonna make. Get a lawyer and really read your contract. It was definitely a back and forth. 

“I know that a lot of people think that you can’t work contracts with distributors, but you can. You just have to be forceful, have your lawyer put things in. Contracts are kind of hard, but you still can get your point across, you still can get some of the things you want out of it.”

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