What’s Your Limit in Self-Distributing?

Beachwood Brewing exceeded its growth projections a tad faster than expected, recalls co-founder Julian Shrago.

“We kind of got to this point [where] we’d grow the business to 4,000 barrels a year,” he said earlier this year during a talk on self-distribution at the California Craft Beer Summit. “By year two, our production facility was up against 8,000 barrels of output.”

The idea at that time was self-distribution, but Shrago explained the reasoning as to why they didn’t.

“We were going to have to spend millions of dollars and going to become as much of a distribution company as we are a brewery,” he said. “There are breweries that have pulled that off successfully.

“But you have to ask yourself, where do you want to manage your risk and where do you want to invest? If we wanted to grow to 10,000 barrels a year and be self-distributed, we were going to have to spend over a million dollars just creating a satellite warehouse, investing in remote sales staff and trucks and the management became much more difficult.”

So is there a limit in barrelage to know when to stop self-distributing? Yes, and no.

READ MORE: Experiences From Self Distribution

It depends, he said, on how much you want to be a brewery versus a distribution company. For Beachwood, the biggest challenge was the location. Being based in Los Angeles, it was a geographic limitation.

“The conurbation is so dense in Los Angeles that even if we put beer on a truck, really early in the morning, to get to the northern part of Los Angeles County, we were still fighting traffic, and retail accounts might not be open until the middle of the afternoon,” he recalled. “Then it became a thing of our delivery drivers, they were going to have 12-hour days all the time. … That was the limitation and that’s when we finally partnered with a larger, regional distributor.”

So at that 4,000 barrel mark and looking toward 5,000, it made sense for Beachwood, but can you be smaller and sign with a distributor? Of course, said Chad Heath of Karl Strauss.

“We’ve launched brands that started with a distributor on Day One and have done very well,” said the company’s COO. “It’s understanding how to work with a wholesaler. I think that once you learn how to work with a wholesaler and it’s not just: here’s a contract, here’s a PO and I’m gonna see tons of growth Day One because I’m not going to do any effort to try and help with that.

“That is a very, very bad idea to do that.”

Heath explained that a brewery has to work at curating its brand.

“You have to help grow this,” Heath said. “You have to make sure that you’re putting in as much work as the distributor to get those sales out in the marketplace. It’s not a foregone conclusion that a distributor will grow your brand. It’s just not.”

If you’re a small brewery, and you have that understanding along with a very good go-to-market plan that includes working with a wholesaler, it can work. Heath added that if you want to figure it out and take some time to learn what your brand is going to be about, how it’s going to resonate with consumers, and what the top beers are going to be, then self-distribution makes a lot of sense.

Photo courtesy Karl Strauss

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