The (RAPIDLY) Changing Face of Craft Distribution

Jake Sauter, vice president of craft distributor Clear River Beverage in Minneapolis, sheds some light on the shifting landscape.

Jamie Bogner Nov 14, 2019 - 8 min read

The (RAPIDLY) Changing Face of Craft Distribution Primary Image

CBB As a distributor that focuses on craft beer, how have the dynamics shifted over the past six months?

JS There are a couple of things happening—the focus on hyper-local beer is starting to diminish, and retailers do not see geography as their top need for the beer they are promoting. At the same time, the desire for what is “new” is increasing with a significant portion of consumers, so we are narrowing our focus to only one or two core brands per brewery (serving that portion of the consumer base that loves what they love) while rotating everything else to keep the brewery fresh and top of mind, both in the on and off premise.

CBB How is price affecting the product mix?

JS Price is becoming a scary topic in the craft world. With so many brewers penetrating the marketplace, they have to rely on price more and more just to maintain, let alone increase, sales. We also see more brands at a ridiculous price at retail, essentially being “blown out” as beers get toward the end of code, to make room for what is coming next. That kind of extreme discounting due to forecasting challenges is not good for the supplier or the distributor and creates a negative cycle of additional price pressure.


CBB How do these relatively large and slower-moving retail and distribution businesses adapt to address this rapidly shifting consumer interest?

JS As a distributor, this obviously makes the business more complex, but it doesn’t change how we are going to market. As a craft distributor of national brands, we pride ourselves on being brand builders and the primary point of contact for our retailers—we don’t have any supplier reps who live in our market—so we really have to work closely with our suppliers to be proactive in meeting the needs of the market.

CBB As a distributor, you have the dual challenge of optimistically helping build breweries’ businesses while also offering a realistic appraisal of sales potential. How do you balance these competing impulses, so that you’re not creating orders for breweries that lead to them over-forecasting production, you’re not taking on more inventory than can reasonably sell without the aforementioned discounting, and retailers don’t over-order and get burnt or end up discounting a brand?

JS It is a constant conversation we have with suppliers. In reality, we are always going to have shrinkage because we are selling a perishable food product, but we have to find ways to minimize our loss. How you phrase the question is also interesting, asking about the “realistic appraisal of sales potential.” We have actually lost out on a couple of suppliers because we gave a realistic view of what depletions would be, not what we thought they would want to hear as part of our overall pitch. Distributors have to be honest with suppliers, and vice versa; it’s the only way the relationship works.

CBB The desire for “new” among consumers has led to a growth in small contract-brewed brands that seem to appear out of nowhere on store shelves around the country. How, as a distributor of many out-of-state brands, do you evaluate the potential for these brands in your territory? And how do you balance the needs of more established brands with the excitement of having new and limited products to sell?

JS As I mentioned earlier, we are having to slightly tweak our portfolio mix. If we work closely with the our brewers, we can find the right mix of established and new product. As far as evaluating potential, it all comes down to quality. And it really doesn’t matter whether it is an in-state or out-of-state brewer. The liquid has to be great. We have been extremely fortunate to have amazing brewers choose us as their distributor, and we do not take that lightly. We realize that the only thing that we produce as a distributor is relationships, with both our suppliers and our retailers, and we work every day to better those relationships and try to create value for our partners.


CBB You mentioned that retailers are seeing consumers less motivated by hyper-local. Does that mean it’s less of a purchase motivator for consumers or that those consumers for whom it is a value have been moving their purchases away from traditional retailers and to those local breweries themselves?

JS It could be a little of both, but I think that quality is becoming more of a motivator than geography. Don’t get me wrong, “local” still is doing well, but we are seeing the trends shift. Even some of the local brewpubs are starting to feel the pinch if they are not heavily invested in quality control and producing a consistent product.

CBB We’re seeing an increasing shift toward limited distribution drops and short-term contracts (generally centered around events) that allow brands not consistently distributed in a state to move some pallets, and new middlemen have now sprung up to facilitate these types of limited distro drops. How important are these to your business, and how do distributors develop internal systems to allow this to happen efficiently?

JS I think that anything that gets people excited about beer is great. Like all distributors, we do a bunch of festivals each year, and it is fun to see how excited people get to try a beer that is only in the market for a short time. And it’s even better when we get additional beer to support the brewer and the event at retail accounts. It is a lot to manage as a distributor, having to make sure that everything is properly licensed through the state, working with cooperage returns in some cases, and just scheduling the logistics of getting the product to our warehouse. It’s probably not a good fit for all houses, but we have found all of the work worthwhile because, at the end of the day, our team is a bunch of beer geeks who get really excited about the beer we get to help bring to market. However, it is critically important that the brewers do extensive homework before they do this. With the varying laws by state, brewers need to understand what they are getting into, and sometimes sending a limited distribution drop to a state through a broker or quick conversation with a distributor may lock you into a long-term distribution deal with that distributor that is difficult to get out of.

CBB Direct-to-door sales are on the rise. How do you see this trend impacting retail in the future?

JS I don’t think it is good for the industry. We all need to remember what has brought us to where we are today. The three-tier system for alcohol that was established after Prohibition works, plain and simple. Without it, we would not have the number of craft brewers that we have today and our consumers would not have the choice that is really unprecedented in this industry. Any legislation or systems that threaten any of the three tiers are dangerous, and even though something may seem like a short-term win, we have to make sure we are thinking about the next dominoes that may fall.