Brewers may collaborate on distribution

Local craft brewers want to grow their distribution channels, but paying a distributor doesn’t always make sense to get their kegs, bottles and canned products to their customers.

The answer may be brewery consortiums, but what they look like is up to debate as Northern Colorado brewers engage in the early discussion stages of handling the operations, funding and deliveries.

“The idea is, how can my neighbor brewers pull resources to help each other get beer to Denver or somewhere else without having to take such a big cut?” said Angie Grenz, co-owner of Verboten Brewing & Barrel Project in Loveland with her husband, Joshua Grenz, and business partner, Jason Bowser.

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Brewers may find that to increase their sales, they need to deliver their products further out but not make the profit margin they need, especially if the numbers are small and distances are far. The state of Colorado allows brewers to serve as their own distribution channels to places like restaurants, bars and liquor stores, or brewers can hire a distributor that takes a cut for the deliveries and marketing support.

Consortiums would be a way for breweries to collaborate on those deliveries without having to go through a distributor. Breweries could combine resources, using the same vehicles and saving time with fewer trips, but what that could look like is in the initial discussion stages, starting with craft brewers holding a craft brewery round table in March.

Some of the questions the brewers are asking include: Who will oversee the consortiums,  all of the breweries or some kind of board? What kind of vehicles would be used and who would purchase them? Who would conduct the deliveries, a staff person or a contractor with members of the consortium sharing the invoices? What days would deliveries be made and where? And who would take the orders for those deliveries?

Verboten Brewing is interested in the concept, after expanding from Loveland’s smallest brewery to the largest. The brewery opened in January 2013 as a 3-barrel system able to brew six barrels at a time and expanded at the end of March to a 15-barrel system with five times the capacity and the same amount of brewing time.

With the expansion, the brewery hopes to increase sales to the Denver and Boulder areas this year and add Colorado Springs in 2019. To keep up with that demand, the brewery, which has a full-time salesperson, is working with another brewery to make some of those deliveries.

“We have had conversations with other breweries about pooling our resources and creating a distribution entity,” Grenz said.

If a consortium is formed, Verboten would consider partnering with other breweries for deliveries in Boulder and south Denver and retain its own distribution for Northern Colorado and north Denver to be more cost effective and to better represent its brand, Grenz said.

Verboten sees a few drawbacks to forming a consortium, Grenz said. For one, certain bars, restaurants and liquor stores like to work through a distributor, which can offer them volume discounts and represent multiple brands, she said.

Another drawback would be the time required to organize a consortium when brewers already are busy, but it also could serve as a platform to discuss issues and engage in problem-solving, Josh Gertz said

“There are definite benefits to it being able to be more collaborative, to communicate better with other brewers,” he said. “We’re a long way from working on the logistics of it. Every brewery has a different opinion on how it should be done.”

Horse & Dragon Brewing Co., which opened in Fort Collins in 2014, handles its own distribution in Northern Colorado for half of its sales and works with a distributor for another 30 percent and sells 20 percent out of its taproom, according to its 2017 sales numbers, said Tim Cochran, co-owner of the craft brewery. The brewer’s distributor covers south Boulder County, the Denver and Colorado Springs areas and the mountains, he said.

Read more about Horse & Dragon Brewing Co.

“We would consider it, even though we’re happy with how we’re set up now,” Cochran said. “It makes it more efficient theoretically … to cover a broader area without using a traditional distributor model.”

Theoretically, brewers would continue to conduct their own sales in the territories covered by the consortium but share the delivery aspect, though they may have less flexibility in the services they could provide for their customers, Cochran said. He also questions the actual coverage range with some breweries needing deliveries to certain areas but not others, along with the frequency of those deliveries, he said.

“Distribution is not that difficult, but it also takes a lot of attention to make sure you can make a profit,” Cochran said.

Wiley Roots Brewing Co. in Greeley is considered to be self-distributed but has contracted with WeldWerks Brewing Co. less than a mile away to handle its delivery functions in a hybrid-distribution model.

“This has proven to be cost-effective for both of us,” said Miranda Carbaugh, chief financial officer of Wiley Roots Brewing. “The only drawback that I know of is ensuring the retailer understands the arrangement and supports our arrangement.”

Wiley Roots finds that it can increase its sales by decreasing its distribution footprint and featuring taproom-only releases, Carbaugh said. The brewery operates on a 7-barrel system and struggles to keep up with demand from the taproom and its wholesale partners, she said.

“Since we want to take care of our local customer base in Greeley and Northern Colorado, as well as keep those higher margins from those taproom sales, we have unfortunately had to scale back some of our off-site offerings to our on-premise and off-premise wholesale partners,” Carbaugh said. “We have hopes of expansion, but that growth will not happen overnight.”

WeldWerks, founded in 2015, self-distributes and delivers for Wiley Roots and the Old Mine — Cidery & Brewpub in Erie, combining similar stops to spread out the costs. The brewery, which operates on a 15-barrel system, distributes on the Front Range and sells out of its taproom.

“We found that for our size, we have a lot more control over the whole product flow from storage systems … to the point of sale. It also gives us more control over inventory,” said Neil Fisher, co-owner and head brewer of WeldWerks. “We maintain more of those margins when we control the costs ourselves.”

Read more about Neil Fisher.

City Star Brewing, a 3 ½-barrel system in Berthoud since 2012, dialed back distribution last year to focus more on fewer accounts, mainly craft beer-minded restaurants and bars, said Whitney Way, co-owner of the brewery with her husband, John. The brewery, which self-distributes its products, no longer delivers to south Denver and Estes Park, keeping its focus in Northern Colorado and north Denver, she said. The brewery found that deliveries farther out were not bringing in profits but ended up costing the brewery, she said.

“Relatively speaking, we’re definitely a smaller brewery on the Colorado Front Range,” Way said. “For our level of production, self-distribution is the only option that makes sense.”

Self-distribution allows the brewery to have personal connections with its accounts and a presence to answer any of their questions, Way said. Plus, the brewery finished a taproom expansion last spring and is focusing on that instead, she said.

“We’re focusing on our local space,” Way said. “A lot of smaller breweries like us are taproom focused.”

Gilded Goat Brewing Co. in Fort Collins, which opened a year ago, operates on a 7-barrel system and follows a self-distribution model, delivering to the Fort Collins, Loveland and Windsor areas.

“Self-distribution just makes the most sense for us,” said Charlie Hoxmeier, co-owner and head brewer of the brewery. “We’re a really small company now, so it’s just easier for us to manage our accounts in house.”

The brewery is dialing back on distribution, in part because of the state’s new liquor laws that will allow grocery stores to sell beer, wine and spirits over several phases, including a step that allows them to sell if they buy out existing licenses within 1,500 square feet of their locations. The grocery stores would more likely work with the larger distributors to bring in their products, making it challenging for smaller breweries to get shelf space, Hoxmeier said.

In the future, Gilded Goat Brewing may consider joining a consortium for logistical support, Hoxmeier said.

“It makes sense for us to band together and maintain our foothold in bars, liquor stores and now grocery stores,” Hoxmeier said.

Open Door Brewing Co., which opened in late 2015 in Longmont to serve the Front Range, also is scaling back delivery and focusing more on the taproom that opened a year ago, said Billy McDivitt, owner of the brewery. The brewery doesn’t make beer in house but works with other breweries to create its craft product, saving on equipment costs.

“We are self-distributed,” McDivitt said. “It gives us more control over timing of things and scheduling of deliveries, and it’s more cost-effective for us right now.”

McDivitt likes the idea of consortiums, something the brewery would consider in the future, he said.

“Anything you can do to work together and share those costs is a good thing,” McDivitt said. “The craft industry is such a collaborative, collabetition. We try to cooperatively work together and do what we can for each other.”