The Breakthru-Lakeshore transaction not only constricts the distribution options for breweries in Illinois, but it illustrates the challenges a large wine- and spirits-focused house faced in launching a craft beer division. Since its origins as Wirtz Beverage, Breakthru had primarily sold wine and spirits, including Diageo, Brown-Forman, and Gallo Family products. It launched its craft beer division in 2013, with Deschutes as its largest craft brand. Shortly after, it added Ballast Point, which it would later trade for rights to Dogfish Head in 2018.
“When we went with Breakthru in the beginning, we recognized they weren’t the strongest ones in the [beer] space because they were so new,” Neurauter says. “But we had a lot of hope and faith that they’d build a good machine because they built such successful liquor distribution.”
By all accounts, the beer division never quite found its footing. Deschutes, its first and most important brand, saw its national sales volume, as tracked by IRI, slip by 4,123 barrels from 2018 to 2019, a 3% decline.
“They wanted to just tack on beer revenue to their wine and spirits thinking they wouldn’t have to change their business, and they thought that beer revenue would be a lot bigger than it was,” says a former Wirtz employee who asked to remain unnamed because they still work in the industry. “They thought it would be 2-3 million cases a year. If they ever did a million cases of beer in a year, I’d be shocked.”
Kahle says he’s proud of what the craft beer division built during his tenure at Breakthru, and speculates that perhaps Breakthru was just a few years too late to bring craft beer into its portfolio—most significant national craft brands were already signed into Illinois distribution. He also adds that Breakthru could have selected managerial personnel from the beer side rather than just wine and spirits.
In the end, Kahle says, large corporations often opt for the path of least resistance; in the case of a beer division that’s struggling: “The easy way, in this case, is probably just to unload it to Lakeshore.”
