Philadelphia Business Journal 2019: Startup Aiming to Eliminate Craft Beer Distribution Nightmares

Philadelphia Business Journal 2019: Startup Aiming to Eliminate Craft Beer Distribution Nightmares

Craft beer has driven most of the growth across the overall beer market.

A Wisconsin craft beer startup is expanding to Philadelphia with a program letting U.S. beermakers enter new markets for a limited time. The result is that consumers get access to beer they otherwise may not be able to get. And for brewers, the company plans to simplify and handle the end-to-end logistics.

Pewaukee, Wis.-based Brew Pipeline, a direct-access platform that recently launched, in March will roll out its Guest Brewer program to the top U.S. markets,
including Philadelphia.

Through the program, Brew Pipeline will bring craft breweries’ beer to markets they may not otherwise be able to expand to — for financial or logistical reasons — for a limited time.

It could, for example, bring a small Philadelphia-area brewery to a new market outside of Pennsylvania.

Monkless Belgian Ales from Bend, Ore., is signed on, and over 70 other craft breweries are finalizing paperwork. Participating Philadelphia-area breweries are yet to be announced.

Craft beer has driven most of the growth across the overall beer market, reports Nielsen, which said the word “craft” inspires consumers, particularly the younger, legal drinking-aged demographic, to buy beer.

Over 7,000 brewers operated in the United States in 2018, up 20 percent over 2017, according to the Brewers Association. Now, more than 85 percent of adults 21 years old or older live within 10 miles of a brewery.

But most craft breweries don’t expand far beyond their hometown footprints, according to Marty Ochs, Brewers Pipeline president of sales, who said a small geography will not sustain growth.

Distributors, then, are likely more hesitant to bring in more distant brewers, due to what’s required to “sustain brand momentum.”

There is no direct cost or investment for Guest Brewer-participating craft breweries; Brew Pipeline offers a purchase price for the beer. It will provide all  compliance, state registration, applicable taxes, market support, media content and management, key account management services, distributor management, logistics and cooperage.

“Brew Pipeline will manage everything. The brewers only have to make the beer and package it,” Ochs said.

Brew Pipeline will generate a marketing kit for each brand, placing their logo alongside Guest Brewer’s on all points of sale. Brew Pipeline will also provide each
brewery with custom images and videos that both parties can use on social media to promote the partnership.

Providing those services is meaningful for craft breweries.

“Before a brewery moves to another state, they have to research everything having to do with the laws surrounding the three-tier [distribution] system in that state,” said Matt Simpson, owner of craft beer consultancy firm The Beer Sommelier.

“If someone is willing to do that and take on all the liability therein, more power to them,” he said. “It’s one of the biggest hindrances to becoming a wholesaler or expanding your product. I’ve spoken to breweries who have a hell of a time wading through that mire of legality.”

Robin Clement, owner of Monkless Belgian Ales, said the company can strategically “seed new markets” and connect with regional distributors through Guest Brewer.

Simpson, however, said he doesn’t see how Brew Pipeline and the Guest Brewer program will “breach” the wholesale and distribution model, especially on a limited basis.

On- or off-premise accounts may not want to contract or carry an out-of-town brewery for a short time — “so their customer base can get hyped and full of
anticipation, only to have that brewery go away after six months or less?” Simpson said.

Brew Pipeline will create and manage off-premise chain programming. It will only handle one to two brands per breweries, who decide on the product, states, time period and volume can participate in the program.

“For example, A local Philly brewery may have product in the program in May for the West Coast and then again in September for the Midwest,” he said.

All of the product is pre-sold to retailers through Guest Brewer. Brew Pipeline is working with distributors to identify “independent on- and off-premise craft-centric” accounts that often rotate brands,” Ochs said.

“If I were to show a buyer what was available in any given month through the Guest Brewer program, that buyer should immediately reply, ‘How do you have X,Y, or Z brands when they don’t have distribution here?,'” he said.

“I expect our craft accounts to be that in-tune with the market,” Ochs said. “If not, they are probably the wrong account. Hence, this is not a shotgun approach to the market.”

Brew Pipeline will also work with regional and national chains like Whole Foods Market, Total Wine and Costco Wholesale.

“We are now giving them more exclusive brands. The caveat is that the brand has volume to meet those specific accounts,” Ochs said.

The service, Beer Sommelier’s Simpson said, is targeted toward a particular segment of craft breweries.

“It would apparently have an impact for those breweries actually able to expand, which most aren’t,” he said. “The fact is breweries start at a size they think they can handle and expand when they think they have the funding, capital and space to grow.”

Breweries cannot do that “unless they’re ready.”

“What this company is saying is if you happen to be in that extremely niche position of being ready, willing and able to grow your business, we will help you do that,” Simpson said.

Pennsylvania’s 282 craft breweries, as of 2017, had an economic impact of nearly $5.8 million, the second-highest in the United States, according to the
association. Pennsylvania produces 3.7 million barrels of craft beer a year, the most in the country.

Some breweries have or are starting to self distribute, including Cape May Brewing Co., which self distributed for years but this year went a step further by creating distributorship Cape Beverage, which launched Friday.

Co-owner Ryan Krill called it an alternative route that would “bring a wider variety of craft beer” to New Jersey; the goal is to include its portfolio products from “well respected, carefully curated breweries, cideries, meaderies and wineries.”                                                                                                                                                 Original Article Philadelphia Business Journal

-Kenneth Hilario

2019-05-13T16:45:31+00:00