Distribution is going to be central to my rant today.
Even in the most mature craft markets, AB, MillerCoors and the rest of the global megaconglomerate corporate breweries make up at least 60% of wholesalers revenue stream. Good job, because I know you just assumed that in most markets those suppliers make up more than 60% of the wholesaler. The other 40% or in most cases, much less is comprised by your beloved Indie brewer. Even the most well established indie brewers in their most well developed markets comprise no more than a low single digit percentage of a wholesalers portfolio.
Here is another interesting fact. The beer that is on the shelf at your local chain grocery store was determined, in almost all cases, by someone employed by either ABI or MillerCoors. Now as ridiculous as that sounds, and it kind of is, the system is working pretty well. These ‘Set Captains’ have to observe good business practices like giving space to brands that are doing well, setting new local products that have a high likelihood of succeeding, and devoting space to styles that are growing, like IPA for example, or they will lose their ‘Set Captain’ status to their competitor. Now, ask yourself, if these guys are simply following the numbers then why would they care if they lost the job of drawing out the schematic for the grocery stores? It makes no sense, right? They have to employ a full time person to do a job that theoretically benefits the grocery store and their competitors. Luckily, I know that you are not naive enough to think that the Set Captain is strictly a utility role. Clearly they must do what is best for the grocery store but there is a lot of interpretation on what that is and there are a lot of cases that can be made by the set captain that gives them an advantage for the brands that they represent.
Don’t believe me? I can tell you that Elysian’s sales are up dramatically since ABI bought them and the reason is distribution, not because people are pumped on ABI ownership of Elysian. Set Captains determine distribution and Set Captains are paid by the megabrewers. I’m guessing you have already deduced my conclusion but in case you haven’t here is a summary.
Distribution capacity and shelf space is limited.
Megabrewers have influence over distribution by orders of magnitude greater than any Indie brewer. Indie brewers that get bought by Megabrewers become a higher priority for Set Captains because Set Captains want to keep their jobs and make their company successful. Indie brewers that continue to be Indie now have to battle Faux-Indie brewers in the minds of consumers for attention in a marketplace that has distortions in favor of the recently acquired.
I would like to add that these Set Captains have been great to Iron Horse. They have treated us fairly, given us tremendous opportunities and done their job of developing the best selection for the retailers they work on behalf of. To the Set Captains reading this I sincerely say thank you. I do not question your motives or methodology, I am simply making the case that Indie brewers selling out is bad for Indie brewers who don’t and if in this case you think I am wrong I am open to your perspective.