How Taprooms Can Play Nice with Distributors and Retailers

Everyone loves the taproom.

Curious beer drinkers love it for the variety, authenticity and ability to connect with the place and people that make the beer.

Brewery owners love the taproom for the direct connection with the consumer. What do guests like or not like? What is interesting or important to them? How can you serve them better?

Best of all, the taproom is very profitable. I mean, super-awesome, raise-the-eyebrows and whistle profitable.

Only problem is, distributors and retailers are threatened by the taproom.

Breweries used to know their place (insert sarcasm here). Breweries make the beer, and then sell it to the distributor. The distributor then sells the beer to the retailer. The retailers sells it to the consumer.

In this system, everyone makes money, everyone skates their lane.

But now, breweries are cutting out the middle man, and grabbing that profitable retail sale. And they’re pissing off their partners in the process.

Maybe there’s a better way. Maybe there’s a way for breweries to run a profitable taproom, while still enjoying a profitable business relationship with distributors and retailers.

Maybe there’s a way to ‘play nice’ with your distributor and retailer partners.

Let’s kick around a few ideas.

Issue #1: Taprooms are stealing sales from distributors by self-distributing their own beer.

When a brewery self-distributes their beer, they cut out the traditional distributor. The distributor loses out on the ability to sell the brand and make their gross profit.

Self-distribution allows the brewery to control where their beer is placed and to keep the profit that ordinarily would be paid to the distributor.

Is there a middle ground here? I think so.

I’ve run a lot of financial pro formas on self-distribution. The economic conclusion is always the same: the brewery should self-distribute within a tight radius of the brewery – 20 to 30 miles, no more.

This setup allows the brewery to keep costs of distribution low, while targeting the most likely retail customers – the local guys that know your beer.

Outside of this 20 to 30 mile radius, use a traditional distributor. Allow them to do what they do best – leverage their sales and delivery teams and relationships at retail.

The distributor won’t love this idea, but it gets them in the game. The distributor gets the beer brand, future brand value and additional gross profit dollars. All good things.

Issue #2: Taprooms are stealing sales from retailers – bars, restaurants and off-premise stores like chain and convenience.

Bars, restaurants and convenience stores make their money selling beer. When that same beer is sold through the taproom, the retailers lose out. Each beer that is consumed a taproom is one less beer consumed at a bar or restaurant.

Worse yet, the retailers argue, is that many taprooms serve food. The taproom went from being a cute, little spot to try a few samples of local beer to a direct competitor. Game on.

Retailers have only one choice: they drop the brewery brand. They don’t put it on draft, they don’t put it on the shelf. The retailer loses, the consumer loses and, believe it or not, the brewery loses.

Is there a middle ground here? I think so.

How about partnering with local restaurants to bring their food into the brewery taproom?  The taproom can feature and promote local restaurants and even set up a system to have the food delivered right in.

The restaurant won’t love this idea, but it keeps them in the game. It demonstrates that the brewery recognizes and respects the value the restaurant brings. It shows importance of supporting local businesses and each other.

Wrap Up 

Taprooms are super profitable. But those profits may be short-term, and short-sighted, if breweries don’t recognize the value that distributors and retailers can bring to their business.

As in most things, we are stronger together than we are divided.

When breweries, distributors and retailers work together to find a common solution that serves everyone – most importantly, the customer – everyone wins.

And best of all, everyone is profitable.