Wednesday, December 5, 2007

Larry Bell, distribution, and the Chicagoland market

The Chicagoland craft beer community is buzzing... so to speak. We are once again able to purchase pints of Larry Bell's beer in several locations in the city and the 'burbs. To catch you up, Kalamazoo Brewing pulled out of our market due to a dispute with their IL distributor, National Wine and Spirits. Debate and rumors have been flying to and fro since.

Why do beer manufacturers need to use distributors?
This is due to the mandated three-tier system in IL. From Nicholas Day's article linked above, "The system, which stipulates that all alcohol has to pass through a middleman, was established to ensure that producers couldn’t run bars and limit consumer choice by exclusively serving their own drinks, a situation known as a “tied house.” Keep in mind that this is a good thing. This has kept us from being limited to haunting "Miller bars" and "Budweiser bars."

Why did Kalamazoo Brewing pull out of the IL market?
The problem Larry Bell ran into is described in Day's article: "... according to state law, NWS was entitled to sell Bell’s distribution rights to another wholesaler without his approval, and a few months ago it decided to do just that, in a deal with Chicago Beverage Systems— the Miller distributor in Chicago." It just so happens that CBS has been sited by folks in the local craft beer industry as a distributor that doesn't exactly have what it takes to sell craft beer.
Larry Bell started his brewery with $200, boatloads of luck, and endless hours of hard work. For what? To be sold to a distributor without his input? What if he didn't want to work with CBS? Well, he had (as far as we know) 2 options: work with CBS or pull out of the market.

Okay, so screw CBS. Why didn't Larry Bell just make a deal with a different distributor?
Agreements between distributors and beer manufacturers are very difficult to terminate. This is due to franchise laws and the Beer Industry Fair Dealing Act, which was written to protect distributors from being financially ruined by large breweries. Say a distributor busts their hump to get beer out there and promote for a brewery; the brewery succeeds famously as a result; and then the brewery dumps the distributor for a different one. That type of protection seems logical enough, but the incident with Kalamazoo Brewing has highlighted a bias in the franchise laws: they apply to the relationships between small distributors and large breweries. Smaller craft breweries don't have the financial clout to bring down a distributor, but the laws apply to us anyway.

Distribution sucks... right?
No. Getting into the craft beer industry takes a lot of work and planning. Add to that the stresses of putting together and managing a fleet of trucks - tickets, towing, accidents, CDLs, maintenance, etc.?!? No thanks. We got into the industry to make beer. That's enough to think about. Even if we were in a state that didn't mandate the three-tier system (coughWisconsincough), we would still make deals with distributors based on our business model. That, or we'd get a friend to start a distribution company. Anyone interested?

Larry Bell was quoted in the articles above: "Normally when you go see a distributor, they say, ‘We’ve gone out and tried the beers and we’re very excited about selling Oberon.’ Unfortunately, I got into a relationship with a wholesaler that didn't have our best interest at heart." And that's the key, folks. Distribution agreements can be profitable for everyone involved, provided the deal you make is fair. The best bet is to get into agreements with distributors who know how to handle craft beer and who are willing to work collaboratively with manufacturers.

Okay, blah blah. Distribution agreements are complicated. The most important thing is that we can now enjoy Larry Bell's beer at some locations in Chicagoland again. How?
A new company exists: Bells Brewery Incorporated. This company is entering the market with a new brand called Kalamazoo. The first beer available from this company is Royal Amber Ale. We haven't tried it yet, but some well-beerducated folks we know went out this week to taste it. Apparently, they loved the beer so much that they had to skip their reasonable dinner plans for late-night burritos. This, as you know, is a very good sign.

We at Metro Brewing are thrilled to have Larry Bell back in our market. No, really. We mean this. The more craft beer available, the more people are going to drink it. Craft beer drinkers like choice and variety, so why not have lots of both available to us? Sure, we might have to fight for taps that Kalamazoo Royal Amber Ale now occupies, but you know, that fight would exist either way. And really, we love Larry Bell's beer. Having a few local taps will save us lots of gas money and time since we won't have to make as many border beer-runs. Now, if we could just get New Glarus down here again...

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