This question came up recently from a brewer: How do you value self-distribution rights?
A good question. But even better: How do you increase the value of your self-distribution rights?
in this post I’ll provide answers to both questions and a give you a sweet spreadsheet tool you can use to value your own self-distro rights.
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The Value of Brand Self-Distribution Rights
As the name implies, brand distribution rights are rights granted to sell certain beer brands in specific territories.
These rights are created by a contract between brewer and distributor. The brewer grants the distributor the right to sell and distribute their brands, and the distributor sells, delivers and services the products.
While these rights are typically assigned to the traditional beer distributor, the rise of self-distributing breweries has created a new path to value for breweries.
Thanks to franchise laws and high demand from buyers, brand distribution rights can be extremely valuable.
How to Value Brand Rights
The value of brand distribution rights is created when sales are made to customers, and repeat purchases occur.
The distributor’s job is to make the market. They develop customers and create recurring revenue. These recurring sales become an annuity – repeatable, consistent and predictable income.
Business people like recurring revenue, and this is what creates the true value of your brand distribution rights.
Beer brands and beer brand distribution rights are two different assets. Both hold tremendous value for your craft brewery.So, Before signing away the potential value of your brand distribution rights, it’s worth considering a self-distribution model in your business.
What are distribution rights really worth?
In the beer distribution world, the value of brand distribution rights is measured by the amount of gross profit the brands produce.Gross profit is the difference between the sale price to retailer and cost of the product, freight and taxes to the distributor.
The total pool of gross profit dollars is then multiplied by a factor – commonly known as a “gross profit multiplier”. The product of these two numbers is the value of the brand distribution rights.
Sweet Spreadsheet Tool to Value Brand Rights
Use this Tool to help value your brand rights.
When you grow CE volume and Gross Profit dollars in your self-distribution territory, you grow the value of your brand rights.
Track your past results, project future results, and use the Brand Value Tool to estimate what self-distro rights are worth to your brewery.
P.S. Not a member of Craft Brewery Financial Training? If you want more details on self-distro financial planning and route building templates, check out the Online Course: Brewery Self-Distribution 101. The course is yours free with your annual subscription.
What you’ll get:
- Step-by-step instructions to create a financial self-distribution plan for your brewery
- Plug-and-play templates and models to project sales, gross profit and operating expenses
- Start-up capital requirements, financing and loan cash flow calculators
- Delivery account building basics, and a tool to model future delivery routes
- Exit strategy planning: How to calculate and grow the Value of your Distribution Rights (a hidden asset for breweries)
- State rules on self-distribution, Best Practices, Succession Planning, and more…
Yours in Self-Distribution,
Kary
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