But that’s no guarantee the placement will last. If a new distributor enters a certain geography and snatches up those desirable retail placements, that can have ramifications for even the smaller breweries in competing distributors’ portfolios. When a category captain at a major retailer shifts from an AB InBev product to a Molson Coors or Constellation product, say, the downstream effects for other brands in those houses can be dramatic.
“When there’s a change in category captain, theoretically the rest of that portfolio loses out. It doesn’t always happen that way, but that’s really important for a brewery itself to have those relationships with the retailer,” Clements says. “If you’re just relying on your distributor, then yeah, those things could potentially happen.”
McDonnell echoes that sentiment, adding that changes in the power structure of distributors are hardest on breweries who don’t have mutual communication with and clear expectations of their distributor partners. That becomes even more crucial as consolidation increases. As Reyes throws its weight around new areas of the state, breweries and distributors should be clear about how they’ll work together to mitigate any potential threat Reyes poses. McDonnell recommends setting those goals down in writing, ideally through an annual business plan reviewed by both parties.
“Every business owner has probably run into a $10,000 problem or a $100,000 problem that could have been an $8,000 legal bill. Distribution contracts are no exception,” McDonnell says. “Small breweries need to be thinking of them as long-term investments that require legal assistance. Agreements are based on the best-case scenario, but good contracts are based on the worst-case scenario.”
Supplier-distributor relationships are a two-way street, now more than ever before. A decade ago, when distributors were playing catch-up in the craft beer space (and some were signing on any local option they could), the expectation was that, once the beer left the brewery for the distributor’s warehouse, it was not just out of the brewery’s hands, but its mind. No more.
“Brewers can’t just drop off the beer and think that it’s going to sell. Managing distributors and distribution is not easy,” Clements says. “Reyes is a good choice for a lot of breweries, otherwise it wouldn’t have as many brands as it has. Just because you’re a big distributor doesn’t mean you’re a bad distributor. You just might not be the right long-term choice for every brand.”
