Why you should self-distribute…until you can’t.
“I just want to spend my time making beers (wines, spirits, or really anything) that make souls weep, unicorns smile, and grown men fall to their knees.” Whether you’ve been playing around at home for years or working your way up through the ranks, knowing you always wanted to start your own brand, the final leap is always a huge moment.
After you’ve smiled the bankers to death, signed away your life, emptied your life savings, out-paper-worked the regulators, found and fit out a space, and bought equipment and supplies, you’re actually ready to start. And…it sucked, okay, maybe it didn’t suck, but you’re definitely not bringing it to the competition next week. Finding your groove in the new space will take some time and trial and error. But you got into this because you know your stuff, and after some time, you’ll find the intersection of gut-wrenching self-doubt and exuberant confidence, and your lineup of products will be ready to serve to family and friends. After that, it’s time to start selling the product, but how and where?
Finding a distributor on day one isn’t the right path for most craft breweries, wineries, distilleries, or even a viable one. If you’re just getting started, I’m here to tell you that no distributor will care about your product as much as you do. Not one will have the passion, persistence, or perseverance you possess - and that’s exactly what’s necessary to win skeptical bar managers over to giving you a shot. So what’s a gal to do…roll up your sleeves and do it yourself.
Distribution is a lot of work, I’m not going to lie, and those kegs or cases aren’t going to carry themselves. When you’re just getting started, you already feel like there’s way too much to do, so why take on even more? In a word, “control.” As you scale up, you’re going to lose control of what happens at the point of sale (at least outside your space and sales team). You won’t know what your distributor’s sales reps are saying, how they’re positioning your brand, or even caring for your product.
In the beginning, when your reputation is still being built, the more you can control it, the better off you are. Time for a shameless plug; if you have production software but not distribution and sales software, we’re here to help. Self-distribution lets you keep building before you “sell” to a distributor. How do you think it looks from the distributor’s shoes if you have 30 or 40 accounts, buying 7 or 8,000 liters a month versus you on day one saying, “I’ve got a bunch of accounts excited about my product”? The farther along you get on your own, the more you’ll get when it comes time to negotiate your distribution agreement.
For all you Americans (and to a degree Brits) out there this is a good moment to talk about the arcane system that is called the three-tier system. Designed to “protect” consumers, I won’t opine on the validity of that argument, it does impose a lot of regulation into the operations. Get a lawyer and NEVER sign a U.S. distribution agreement without your lawyer looking at it because once you’re in, there’s a good chance you’ll never get it out (at least without writing a big check!).
Self-distribution allows you to work around that system, build relationships with customers, get direct market feedback, and share your story directly.Eventually, you’ll need to work with distributors, especially as you grow out of your home market, but why not delay it as long as possible?
It also doesn’t hurt that while you’re getting started, you’ll get to pocket that +/- 35% margin that your distributor will take, you’ll also be way more flexible than nearly any distributor, and you can build deep and meaningful customer relationships that will pay dividends for years. It’s the same reason you should open a taproom or cellar door, the ability to control the story, build your brand, get direct feedback, and make a little extra cash along the way.
Now I’m sure you're thinking, who is this Singapore-based software founder to talk about alcohol regulation in the US? I may be based in Singapore, where none of the nonsense three-tier systems rules exist, but I am also a US lawyer who built an alcohol distribution business. Today, I make sales, CRM, and inventory management software to help producers and distributors sell more and know more about who they sell to. Reach out, and let’s talk.