Thursday, July 13, 2017

How We Get Our Beer

Monday morning Leoš Frank drove his small van across Wisconsin. It was loaded with beer he made. Frank is the brewmaster and co-owner, with his wife Theresa, of Lazy Monk Brewing in Eau Claire.

He reached Oshkosh a little after 10 a.m. His first stop was Gardina's. He immediately began unloading cases and kegs of beer from his van.

Leoš Frank

It's becoming more common for small, Wisconsin breweries to deliver their own beer. It was once the rule here. That ended with Prohibition.

When Prohibition was repealed in 1933, new restrictions were put in place. At their core was the three-tier system; a web of regulation intended to create a barrier between breweries and retail outlets.

More than 80 years after its implementation, the three-tier system remains. One outcome has been to stifle the direct contact small brewers once had with their customers. Leoš Frank doesn’t subscribe to that.

In Wisconsin, breweries producing less than 300,000 barrels of beer annually can circumvent the second tier. Frank, who brewed 648 barrels last year, has taken the alternate route. He distributes his own beer. Hence his Monday morning trip across the state.

“I wanted to do it this way because it gives me a connection to my customer,” Frank says. “And I thought this is a better way to represent myself. I might not have as much exposure as with a beer distributor, but this way there's no insulation between me and the customer.”

Frank, who launched Lazy Monk in 2011, has been delivering his beer to Oshkosh for almost two years. His first outlet here was Gardina’s. He’s since expanded to include The Ruby Owl, Oblio’s, and the Lion’s Tail Brewery Tap Room in Neenah. He also takes his beer to La Crosse, Madison, Milwaukee, and Waukesha. Still, the majority of his sales come from his brewery's tap room in Eau Claire.

Between the brewery and tap room, Frank struggles to find time to get out on the road. “There are plenty of times that I wish I didn't have to go pick up kegs, but if I didn’t think it was worth it, I wouldn't be doing it,” he says. “I think that it's worth it just because of the personal connection. The beer business is a personal business. Nothing else.”

Others have come to see it that way, too. Currently, four breweries self-distribute in Oshkosh. Black Husky Brewing of Milwaukee has been at it the longest. In the past year, Lion’s Tail Brewing of Neenah and Knuth Brewing of Ripon have also brought their beer to the Oshkosh market.

Of course, money plays a significant role in the decision to self-distribute. Distributors typically take a 25-30% cut on the gross margin. That money stays with a brewery that self-distributes. But that comes at a price.

A significant downside is access to market. Getting beer into larger outlets such as chain grocery stores and gas stations can be next to impossible for a brewery that goes it alone. Frank has had better luck than most. He’s been able to get his beer in Walgreens and Target stores in Eau Claire. But on his terms. “This way I can control the growth,” he says.

For a small brewer that element of control can be critical. Especially when distributors have been quick to fill their portfolios with beers they have little interest in promoting or selling. It’s a way to reduce competition. And a small brewery that finds itself buried at the back of a distributors book has little hope of extricating itself. The law is stacked heavily in favor of distributors.

Wisconsin's beer distributors aren’t taking the self-distribution trend lightly. In June, it was leaked that lobbyists for the Wisconsin Beer Distributors Association are working on legislation aimed at making three-tier regulations more rigid. The plan would make it more difficult for a brewery to sell beer directly to its customers. The proposal has been roundly criticized by brewers.

Barring any sudden, reactionary moves by the state legislature, we’ll likely see more breweries going the self-distribution route. Most recently Bare Bones Brewery of Oshkosh began self-distributing its beer in the Green Bay market. And both  Fifth Ward Brewing and HighHolder Brewing plan to self-distribute when they open in Oshkosh in the coming year. Unfortunately, none of them will be rolling through the streets of Oshkosh in the thundering style of their predecessors.

1 comment:

  1. Maybe you should get yourself a couple of horses and become a distributor. Work for beer?