Fortunately for me, California passed forward-thinking laws when they legalized microbrewing. They allowed small brewers to self-distribute, which meant you had the right to pimp your goods as best you could, door-to-door, to anyone who had an alcohol license. Without going through traditional beer wholesalers (the biggest of whom sold Bud, etc., and the smallest of whom usually had someone like Anderson Valley, North Coast or even Sierra), you could get off the ground and at least begin to create your own destiny. It was a foot in the door for the littlest guys.
On the one hand, that kind of alternative sales model can be a cool way to get your budding project off the ground. Like many entrepreneurs, I thought, I’m going to be different. I won’t need to play by the same rules, because my baby is so special, damnit. Hustle, sweat, cajole, crank, beg, promise, smile, push push push. Over and over. This is small business at its best, starting from passion and labor, ingenuity and chutzpah. Call it birthing, bootstrapping, and all the other clichés that exist for a reason: the early explosive energy of so many small businesses I’ve come across can light a spirit for the future enterprise, providing a pool of stories that flow through the project for years to come. Even a book, sometimes.
But it also has been an utterly tragic way for people to try to live their lives, if they’re not really up to the task of being their own wholesaler. I realized rather quickly that I was just such a person. Nine months of distributing gestation was plenty. Today, one of my favorite things to do is to have my wholesalers take a margin on my products so I don’t have to be the distributor, ever again. Doing it by myself, I was on a very steep learning curve, and I had a terrible time trying to wrap my brain around the logistical nightmare.
For the first nine months of my business, I’d go to the brewery in Cupertino, pick up some beer, and drive around and deliver it. I had a “distribution network” that was the antithesis of what a smart distributor should do. Still, it would become a business model for the rest of my company to this day — to sell a little bit of beer in a lot of places, to the few people in each spot who would be interested in it. I had about thirty-five or forty accounts — a few little neighborhood grocery stores, two accounts in Santa Cruz, Draeger’s in San Mateo and Menlo Park. I probably had about five or ten accounts in San Francisco, a few as far away as northern Marin County, and some out at the edge of Alameda County in the East Bay. I would drive an hour to deliver five cases, then schlep ridiculous distances to bring another account a case or two.
Around this time, my grandmother and Tracy’s grandfather both got sick. Tracy’s grandparents lived half the year in Arizona and the other half in Cleveland. We were all in Arizona for Thanksgiving that year, and after dinner, her grandfather said, “I don’t feel great. I’m going to go lie down.” He never got out of bed again. He was quickly moved to the local hospital, slipped into a coma, and passed away early in the new year. Tracy had been extremely close to her grandfather, the patriarch of their close-knit family, and his illness was devastating to her and her family.
At the same time, my grandmother was in and out of the hospital, recovering from lung cancer and surgery. She got pneumonia and all these disturbing side effects from the drugs they were giving her, and it soon became clear she was just winding down. So while Tracy was going back and forth to Arizona to see her grandfather, I was running to the peninsula to see my grandmother. Within a few weeks of each other, they both died. It was an intense process for us to go through with our families and with each other. In sad and meaningful ways, it kind of helped cement our relationship.
This was all going on while I was starting the business and still working full-time. I finally quit my job, taking freelance catering and bartending gigs to make some money. I drove my grandmother’s car another few weeks and then gave it to my aunt. I bought a little old stripped-down, faded tan mini cargo van from a guy in Pacifica. Eleven years old, two seats in front, rubber mats in back, that was it. No air conditioning, no radio, roll-down windows. It had low vinyl seats, so if you stopped short and anything came flying out of the back, you were guaranteed to get smacked in the head. I put a little boombox on the seat next to me to keep me company.
As the joke goes: “Q: What do you get when you cross a Jewish guy with Arnold Schwarzenegger? A: Conan the Distributor.” I was certifiably not Conan, nor cut out to be Distributor (whether steroids and a tiny Speedo would have cured my back problems, I’ll never know). I had no organizational skills in the area of distribution. I basically went wherever anybody called to order the beer. I wrote voicemail messages onto binder paper in a three-ring folder, with scribbled notes on how to get to the store. I should have set up a route — Monday, I’ll go to the South Bay, Tuesday to Marin. Not sure why I couldn’t figure out that pretty damn basic plan. Just add it to the list of things I just never thought to consider. Do as I say, not as I did.
The initial burst of orders and re-orders thrilled me and gave me hope, the promise of a bright and successful launch — and future. Very quickly, however, I realized that filling the shelves and the existing vacuum are very different than building a steady and growing sales pattern.
Everyone who read the PR ran straight out to get their bottle or case for Chanukah, and I’d sold out of the first hundred cases — a great run, compared to handing out Genesis Ale as a St. Patrick’s Day gift. It’s amazing and true that after all that hard work, months of creating the product out of the ether, pulling it from inside our heads to placing it on retail shelves — all the zillions of steps, the little heartbreaks and giant accomplishments that brought me to, say, March of that year — that’s when the real work started. That’s when it went from a funny idea and a cool little project to, “Hot damn — this is really happening. I better get the hell up again and again and force this thing to life.”
Getting paid was similarly disorganized. I’d hand-write an invoice when I delivered the beer and keep the receipt in one little flip book. I was operating under Tim’s license, so my accounts would mail the checks to him. He would cash the checks and give me the profit. But he was, let’s say, spread a bit thin — running around doing some sales and marketing himself and a fair amount of who knows what.
After selling the first batch and deducting the costs of the labels, business cards, postcards, shirts, the tiny ad and the monthly voice mail, I’m a bit astounded to think that I probably broke even. As we put the next batch into production, I was probably selling fifty cases a month, maybe not quite that much. I chucked in three grand for the van, the insurance, gas, old classic rock cassettes from the gas station, and a lot of Advil. I was taking home five hundred bucks a month, maybe.
There were a lot of things I liked, or that at least were instructive, about that period. The depth of the personal connections I was making with the buyers, where you’re actually showing up at the back door, personally hauling in three cases and putting them on the shelf, talking about the beer, putting up flyers — that education would prove to be priceless. I did what were called “dry tastings” at Whole Foods in Cupertino, standing next to the beer section on a Saturday afternoon, trying to hand-sell bottles of He’brew to customers walking by. Since they did not have the necessary license, this was all without the help of actually pouring samples of the beer. “Trust me, I’m Jewish, you’re gonna love it!”
All these years later, I still see distributors, some of them running sophisticated machines, others with chaotic systems. Within both models, that personal-relationship, customer-service aspect of the business remains absolutely critical. For small businesses, strong personal connections can overcome a ton of problems. Though the incentives, the grease and the back-scratching are so prevalent in the beer business (and I’m sure, so many others), the real-people part of much of the craft beer world often helped (and still helps) us to sidestep some of that payola. In fact, it makes our cottage industry stand out that much more in contrast to how things get done in the Big Boy beer world.
There are different ways of responding to the logistical problems an ignorant, inexperienced small business owner is inevitably going to face: 1) Curl up in a ball and hide, 2) Argue and rage against the machine and never change, or 3) Take some feedback and adjust, hopefully getting better through each crisis. In the beginning, I sort of did all three, all the time. The hardest part was that I was still learning what I needed to do at the same time that I needed to be doing it.
I was totally stressed all the time, and I started to have back problems from carting beer up and down so many flights of stairs, onto loading docks, into back rooms. In the mornings I’d wake up, roll over, and my back would seize up. I remember one massive tremor caused by a simple movement to towel-dry my hair. Some tough entrepreneur. But an account in Berkeley needed three cases and I’d promised another guy in Albany I’d be there. So I’d creep toward the van. In the driver’s seat, I couldn’t turn my neck or look over my shoulder. It felt like I had to force everything, jam everything, crank everything, just to get anything accomplished. There was no elegant flow to the business, or to me, at that point.
Over the next few years, like so many other small business people, I’d obsess about every detail of the project. It sometimes thrilled and inspired me, but mostly it haunted and terrified me. I could often barely slip into sleep at night after scribbling down a few last reminders about the morning or grand schemes for future success, and I would easily snap awake without an alarm and feel far behind before my toes even hit the ground. I also developed this annoying habit of constantly forgetting two or three small items that I would need for the sales day or for an event — my one banner or laminated press clips, the invoice book or zip ties. I constantly found myself running up and down the stairs, in and out of the apartment, three or four or more times before finally pulling out of the parking lot. Tracy got to counting my re-entries and re-exits while I’d be sweating and swearing, trying to check more details off than I’d ever had to organize on my mental list. I was essentially hysterical for the first three years of the business. (My co-workers might say thirteen.)
I’m always amazed whenever I come across small business people who aren’t panicked out of their minds. It’s refreshing to think there’s a human who can go through it, and then I get jealous and resentful. How the hell did they pull that off?
One key distinction with beer, as opposed to many other products, is that it needs to sell through the store between sixty and a hundred twenty days. That’s especially true for the kind of beer I had — hand-bottled, unpasteurized, perishable, particularly unstable. It needed to be fresh to taste good, and not blow up in the bottle. That was the gist of one of the more frustrating ongoing conversations I had with Simon: I’d ask, in all honesty, What’s the shelf life of the beer? And he’d just say, “You know, a month or two or so. Just get it out there and sell it, and it’ll be OK.”
I was always trying to figure out the effect of heat on the beer. Coors famously brags about being “cold-filtered.” Well, except for some exotic naturally-filtered styles, nearly every beer is cold-filtered. The question is, what happens when it warms up? Beer is a living, breathing organism (especially with the fantastic growth of wild, often sour, and barrel-aged beers). The mark of a truly quality beer shines when it remains enticing and enjoyable even when it warms up. The obsession with keeping beer ice cold undermines the big beers’ claims of superior flavor. Simon kept saying, “Just don’t let it warm up very much, or for very long.”
I’d be in the van at six in the morning, and I’d get to the brewery to pick up the beer. If it was warm out, the bottles would take on condensation pretty quickly, so the labels would get sticky and grubby. I’d be stuck on the Bay Bridge, sweating, not being able to turn around to look at the beer because my back would be seized up. On an unusually hot San Francisco night, one stray bottle from Brewmakers exploded, shooting beer onto the ceiling and all over the seats. After that, I couldn’t help but fixate on when the next one might blow.
I poured a lot of beer for a lot of people, at fundraisers and parties, in stores, festivals, bars, and delis. It was as guerrilla-marketing, hand-to-hand combat as you can get. Luckily, people loved the shtick. Unfortunately, I got a lot of people telling me they’d already bought a bottle — and still had it. I’d say, Well, did you ever drink it? Did you ever buy the beer again? It’s not intended to be a gag, or a museum piece. The point is to buy the beer, then drink it, then buy the next beer and drink that one. Repeat! A lot of people thought it was so cute, they didn’t want to open it and ruin it. I’d say, if you don’t ruin it by drinking it, I’ll be ruined out of a job.
Maybe four or five months into my arrangement with Tim at Brewmakers, it became clear that things were not right with his business. Checks to his suppliers and employees bounced repeatedly, and Tim was getting harder to reach on the phone. At the same time, he was still telling these tall tales of growth and the future. He kept going away somewhere to meet with “investors.” All the while, the staff was showing up less showered and more stoned, cranking even louder speed-metal, and doing more skateboarding in the brewery.
The bitter end came later that summer. I’d heard that the grain supplier, who hadn’t been paid for several shipments, showed up one day with a baseball bat, saying, “I think it’s time to get paid.” Shortly after, the sheriff’s department put large metal locks on the front doors, officially seizing the property and everything in it. Luckily, I had most of my profits, but there was still a fair amount of beer that would never come out of the building.
Tim essentially disappeared, went underground. I heard he ended up living in the basement of a buddy’s rented storefront. Once in a while I would see his red Jeep around town. The glass guy, the label guy, the grain guy, the cleaners — he owed everybody money. There were some seriously pissed-off people.
For the last few months, I’d been talking to one of Tracy’s friends who was curious about brewing. In the spirit of It Takes A Village to Start a Jewish Beer Company, Matt generously agreed to help me call every small brewer in northern California, trying to research a new agreement. Would they contract brew? If so, how much would it cost? Could we fit into their distribution network? What was their batch size? We had a lot more questions to ask than the first time I’d called around, the year before. I remember asking the brewers, How many microns do you filter down to? I’m pretty sure I still have no idea what an actual micron is, but I know it’s important.
Some brewers liked contract brewing for the additional revenue it generated, filling their tanks and keeping production humming and overhead steady. Others were doing well and didn’t have the capacity to brew extra beer. And some were in between. We researched everyone we could reach and came up with a short list, four or five places that had the ability to do small batches, were willing to do contract brewing, places that could do 22 ounce bottles and could do what I was looking for in the actual brewing process. We whittled the list down to a few breweries.
Coast Range in Gilroy brewed some very quality stuff, though sadly, they’d be out of business within a handful of years, unable to keep growing their core brands or stay afloat exclusively through contracting. As with Coast Range, I really liked the people that ran Golden Pacific in Berkeley (later bought by the Gambrinus group to produce Trumer Pils), which made a few exceptional beers, and others that were a bit more standard.
Then there was Anderson Valley Brewing Company, which at the time stood out as one of the premier microbreweries in the country, if not the world. They had been making very innovative and ambitious beers — flavorful, complex, experimental, small-batch. These were “extreme” beers before the concept even existed. They had a great reputation, won tons of awards, and inspired admiration in the craft beer community. The founder, Ken, was heavily involved in the national craft beer trade group, the Brewers Association. I loved the idea of combining my crazy shtick with a brewery that was able to make me a product that would be really special.
As has happened so often in my life, I stumbled on a piece of advice that could have been very instructive, had I only listened to it. I met a friend of a friend, this young urban-warrior, pierced-and-tattooed dude, who said he’d worked the previous nine months in the Anderson Valley brewpub. Right on, man. How was it? I asked. And he said, “Oh, that scene was nuts — just way too difficult to work with. I had to get out.”
But I figured, how nuts can it be? The company is so well-respected. Aww, c’mon — I’m sure it’ll be fine.
Many times during the next four years, I’d think back on that moment. I often wonder why, once I get a plan in my head, I rarely give enough credence to other voices. At the time, however, I was whole-hog gung-ho psyched and ready to kick ass. Being brewed at Anderson Valley was the selling point that allowed me to get into wholesalers, to expand around the country, to get many excellent reviews and win awards. The World Beer Cup had just named Anderson Valley one of the Top Ten Breweries in the World (along with North Coast Brewing, the only other American brewer to make the list), based on the collective quality of all beers coming out of the brewery. The next year they would be the first American brewery to win that award two years in a row. Hell, yeah. I hollered their victories far and wide. I pushed their reputation in every press release, flyer, and postcard, and I added it to my ranting-old-man voicemail message. It wasn’t even bombastic shtick aimed at mocking the beer world — it was the truth: He’brew Beer was now being brewed at one of the Top Ten Breweries in the World.
Seemingly overnight, He’brew had all this front-of-the-house awareness and legitimacy, all due to Ken and Loren’s offer to bring me into the Boonville brewing family. Behind the scenes, though, what was in the beginning a promising level of mutual enthusiasm would turn into an on-going struggle.
I found out much later, from a newspaper article, that Ken’s ex-wife must have been Jewish. Loren, his son, told the reporter, “We were interested from the beginning because our mom is Jewish.” I was thinking, whaa-aat? The town of Boonville, located in lower Mendocino county, is famous for its esoteric dialect called Boontling (a pidgin of Scottish, Gaelic, Irish, Spanish, and Pomoan Native American languages). The place is filled with farmers in overalls and guys in trucker hats (because they’re actually truckers), with a lot of weed being smoked and cultivated — typical rural northern California. I was shocked. They never mentioned anything about their Jewish connection when we were working through our negotiations.
In the beginning, when everyone had the best of intentions, it seemed like a good fit. I’d drive up to Boonville, over to the old ten-barrel brewery beneath the pub and soon to the new thirty-barrel down the street, which seemed huge at the time. At first I was buying the beer from them directly, then selling the cases to my wholesalers. Eventually it would become a licensing deal — Ken would help me with working capital — but in the beginning I had to write a check.
Once we had a contract in place, I had to function for the first time as a legal entity, a legitimate beer company. I had to register as a San Francisco business, create an employer ID number, and get federal, state, and local permits to actually run this little operation. That part was completely overwhelming. To this day, I don’t quite get the rules and regulations, though sometimes the enforcers will admit that they don’t either. I’m not so naïve to overlook the fact that most of it has to do with who gets taxes out of the transaction. At the same time, we’re supposedly living in the most liberal, aggressively capitalistic society, yet there are all these labyrinthine, overlapping jurisdictions. I’m not a businessperson, but as a Stanford literature grad I do know how to read fairly well, and I still found it next to impossible to wade through all the details.
Most of this was before the Internet was tuned up and googling along, so I was working with agency pamphlets, poorly photocopied sheets, trying to figure out what I had to do. I didn’t even know what an excise tax was. (Do I now? Don’t ask.) I had to apply for alcohol permits from the federal government and the state of California. If you take ownership of the product at any time in the process, you have to have federal, state, and usually some type of city license to operate legally.
So I applied for what’s called a Federal Wholesalers Permit, which was handled by the old Bureau of Alcohol, Tobacco and Firearms (ATF). At the time, they had a field office in San Francisco. When they reorganized several departments of the federal government at the end of the Clinton era, they closed the west coast offices and moved everything to the Cincinnati headquarters. Throughout the process, I had to call the HQ several times a day for several weeks in a row. Each time, to get through to the right agent who was handling my file, I had to go through the front desk: “H-hello, the B-b-b-bureau of Alc-c-cohol, T-t-t-tobacco and Fire-fire-fire-firearms.”
Now, I consider myself pretty progressive, and I absolutely think everyone should be entitled to equal access to jobs. But come on — just as you probably shouldn’t hire a person who has no arms to be a brain surgeon or a hand model, you probably shouldn’t hire a person with a very severe stutter to be the telephone receptionist. It seemed rather cruel to both of us.
Trying to navigate these new worlds, I was usually sitting in my kitchen, white-knuckling the phone and gnashing my jaw. I couldn’t help but wonder if they did it on purpose to keep people out of the business and reduce their workload.
That said, in fact I got through the ATF permitting fairly quickly, after they did a background check, registered my fingerprints, and loaded me into the system. Onto the state of California, my beloved home state of three generations of Jewish grizzlies.
I walked in the front door at the old office near Mission Bay and asked how I could obtain a permit to contract-brew.
“What exactly will you be doing?”
Paying a brewery to make beer for me and then selling it to wholesalers.
“So you wanna be a wholesaler?”
Why would I be a wholesaler if I’m not self-distributing anymore?
Every week they’d tell me something that was the opposite of what I’d thought I’d been told previously. I’d say, I’m only doing it this way because you told me to. And the rotating representative at the “help desk” would say, “Well, I can’t take responsibility for what you think you heard.” At one point I’d sent a letter explaining my new venture to the neighbors that turned out to be unnecessary. Because I lived in the Mission, for several weeks they’d mistakenly told me I’d need to petition the Board of Supervisors, since there were too many liquor stores already in the neighborhood. But the moratorium was on retail, not wholesale. It took months of conflicting information to get through the process. In the end, I got my California ABC Type 17 Wholesalers License, which allowed me to sell contracted beer to both wholesalers and retailers.
Thankfully, my building was zoned for combination commercial and residential live-work spaces. I established the offices for wholesaling in our kitchen. The state stipulated that the business had to have a filing cabinet. So our home address was registered with the state of California as the global headquarters of Shmaltz Brewing.
I was also supposed to have a separate warehouse, even though I wasn’t going to be warehousing the beer — Anderson Valley would be doing it. But they were in the middle of a move at the time, so I found one of those refrigerated warehouses in an industrial section of San Francisco. They had aisles and aisles of deep-frozen fish and ice cream, and one small section for refrigerated goods. They were willing to fill out the paperwork for me, so I mounted the same sign for He’brew I’d put on the outside of our loft building, took a picture of it, and submitted it with my application. After filling out the paperwork, not one time did I ever go back, nor did I ever ship anything from there. I assume I’m still registered there to this day.
After 9/11, the federal government transferred the duties of taxing alcohol businesses to the newly re-organized Alcohol and Tobacco Tax and Trade Bureau (TTB). As one of George Bush’s tax cuts, they rescinded the tax of five hundred dollars a year for the stamp that certifies us to sell wholesale alcohol. Currently, they don’t mail us any paperwork. We don’t send any money, and we don’t have any updated physical permit. Every year I just call the TTB office and ask, Hey, am I still in good standing? “Yep, you’re all set,” they said on my last annual checkup.
In California, they still send you paperwork every year, and they keep raising the price. Still, it’s only $300. If you can jump through the hoops to get permitted, it’s actually shockingly inexpensive, and mysteriously legal, to run the business once you have everything in place.
Still, there were snags. For one thing, I learned that I would not be able to call the company Shmaltz Brewing Company on the label itself. I didn’t own the facility, and I didn’t personally brew the beer, so I couldn’t call myself a “Brewing” company. Pete’s Wicked Ale was produced by Pete’s Beer Company, and Sam Adams was made by the Boston Beer Company; they weren’t allowed to use the word “brewing” because they didn’t own their breweries, either. But “Shmaltz Beer Company” didn’t have the right ring to me. I settled on Shmaltz Enterprises, like an umbrella mothership, a grand scheme that could morph into anything that we might dream up moving forward.
The beer label had to say “Brewed for Shmaltz Enterprises by Anderson Valley Brewing, Boonville, CA.” The agencies were on a kick for truth in advertising. In reality, some of the best beer makers in the world don’t own their breweries. A lot of Belgian ales, for example, are contract-brewed at other monasteries, or at family-owned (or even corporate) breweries in neighboring regions. At the time, Budweiser was arguing through aggressive advertising that Sam Adams and Pete’s Wicked were “just” contract brewers. They were using it as a dirty word, even though Sam Adams and Pete’s were clearly as responsible as anybody for the explosion of craft beer. Even some of the growing microbreweries would bad mouth the concept, but both those guys, Jim Koch and Pete Slosberg, were originally homebrewers, and clearly passionate about small-batch brewing and the fledgeling industry.
I had to go through another process with the city to get a Fictitious Business License, a DBA (doing business as): Jeremy Cowan DBA Shmaltz Enterprises. I got duplicate DBAs with Shmaltz Brewing and Shmaltz Enterprises, so that nobody else could call themselves Shmaltz. (Why would they? I wonder, looking back). To this day, when I want to access my bank account, if I get the wrong teller, they get confused: “Are you Shmaltz Enterprises or Shmaltz Brewing?” The whole process was much more convoluted than it seemed like it had to be.
I published the fictitious business name announcement in the cheapest rag I could find, filed the paperwork for the name in San Francisco, and received my business license. That allowed me to get my ABC license from the state of California to sell alcohol, which allowed me to get my federal wholesaler’s permit, which allowed me to ship the beer throughout the state and across the country. At that point, I guess I more or less felt like I had a business, barely legal or otherwise.
Regardless of how things ended up with Anderson Valley, it can’t be overstated how important that initial relationship was for me. The fact that they were willing to take on my beer proved critical to getting the company off the ground. Their reputation for great beer was widespread, and they didn’t really do any other contract brews. On top of that, everyone knew how tough Ken was. Everyone, evidently, but me.
In fact, I was mostly dealing with his son, which was fantastically easy. Loren served as the de facto general manager of the brewery. The company was going through their own changes at exactly that moment, moving out of the little ten-barrel system in the claustrophobic basement of their roadhouse pub on the side of the two-lane country highway running through Boonville out to the Mendocino coast. They could fill about twenty kegs at a run or pull in the portable bottling machine, running bombers, having evolved beyond their original 25 ounce champagne bottles just a few years prior. In the first couple of years I was with them they moved from the basement to the other side of town, building an impressive new brewery, raising their output from ten to thirty to a hundred barrels per batch. In very short order, they got ten times bigger. It’s a strain on any small business when things happen that quickly, and they were no exception.
Within a year or so Loren left, simply saying, “I’m done.” His departure had little to do with me; however, with no experience in the flow of the beer business, I was definitely a pain in the ass to him while he was there. Uncertain about timing and priorities, being my usual persistent self, I typically asked him for everything RIGHT NOW.
I never had a mentor to tell me that every little problem was not the end of the world. I was forever asking for emergency deliveries, last-minute changes, minor and not-so-minor tweaks — all this while they were trying to run their own rapidly expanding business. In a bit of a reflection on my personality, I figured out a way to ask for much more than was probably reasonable up front. Maybe that’s the only-child syndrome: You just keep doing it until somebody says no, and if nobody says no, you keep going anyway.
It’s a rather constant theme for me: to ask for more than I should likely expect, or probably deserve. So many friends and colleagues have repeatedly gone so far out of their way for me, allowing me to accomplish things I never would have without their help. Dozens of friends who’ve volunteered to work in a pinch, advisors offering hours of time, shoulders to bitch on and doors to open, all the free artistry I’ve cajoled. Whether dealing with supply catastrophes, recipe design, government compliance, trucking, or a million more details, Bob and Paul at my current brewer, Olde Saratoga, spend hours upon hours helping me build my growing concern. In that first full year of business, Loren was one of those people who went pretty far out of his way to make my new beer life manageable for me.
The move from self-distribution to the bewildering world of the wholesale network marked the next evolution of my baby business — and the disappearance of half my margin and income. Who are these people, and would their services be worth it?
I had a conversation with a beer rep, a friend of a friend who worked for the Boulder Beer Company, one of the oldest craft beer companies, from Colorado. I sat down with this guy over a few rounds at Gordon Biersch on the Embarcadero and said, Tell me about your job. How does it work?
In the beer business, we have what’s known as the three-tier system. It dates back to the repeal of Prohibition, in an effort by the federal government to keep monopolies from controlling the entire alcohol trade. The three tiers — the producers (breweries), the distributors (wholesalers), and the retailers (grocery and liquor stores, corner markets, bars and restaurants) — must remain independent of each other. Certain states allow exceptions for small microbreweries and brewpubs, which can self-distribute their own products to retailers or, for example, host a tasting room. In practice, a brewpub spans all tiers as the manufacturer, the wholesaler, and retailer, selling their goods directly to customers. The state of California allowed for self-distribution, which allowed me to operate under Brewmakers’ microbrewery permit. But most self-distribution remained small scale, so it rarely undermined the common structure of the beer industry. The vast majority of the money spent on beer continues to pass through the three-tier system.
I needed to find out what it meant to have a wholesaler. I thought if I didn’t have to schlep the beer anymore, maybe my back would stop seizing up on me, and I could focus on what I was clearly better at: selling the shtick. This guy from Boulder was a “supplier” rep. (A supplier is a brewery that supplies beer to the industry.) He worked for the brewery, doing sales and marketing in northern California to promote and sell their brands.
Right off the bat, he says, “I gotta tell you, wholesalers are a fucking pain in the ass. I bust my nuts every day trying to make a sale. I go to the stores and get them to agree to bring in the beer. And inevitably, the wholesaler screws up the order. He has the wrong beer on the invoice, or he just drops the few cases at the back door and walks away, or he doesn’t follow up on re-orders. I go back a few weeks later and it’s always messed up, and I end up wasting my time and looking like a jackass.”
It was another one of those moments where you see the extreme edge of one perspective on the industry you’re playing in. It should have pretty much terrified me as an initiation into the supplier fraternity. Now, many years later, of course I know each tier complains that the others are consistently at fault for dropping the ball. Don’t get me wrong — I’ve had plenty of times I’d love to jam a shiv into a wholesaler sales manager or a street rep for a perceived injustice, a lost opportunity, or a major fumble. Or, even worse, simple disinterest. I love hearing even the bigger craft suppliers complain about how impossible it is to get attention when steering through the beer distribution world. (Though this, of course, is cold comfort, thinking that if the big craft companies can’t get it rolling, how the hell do the little guys ever stand a chance?)
Really, though, he was being rather unfair to the wholesalers. They bust their asses all day, too. They build up the brands in their beer portfolio, especially in the craft houses, none of which have big advertising or marketing budgets,
or huge demand. There’s so much that can go wrong every single day. Given the maximum margin available based on the market, nearly every wholesaler has to run on a very tight budget, limited resources, and even fewer of the perks and giveaways so common among the biggest companies. They deal with cracked pavement, slippery floors, dank back storage rooms or basements. Hard physical work no matter what the weather — sleet, snow, dark of night. Some of the retailers are always slow to pay, or they’re not going to pay at all. Or they’re trying to pry money from bars that are run by night owls — guys snorting their A/P funds or getting robbed by their staff and managers, like the New Orleans drama. Endless mechanical issues with the fleet, and endless injuries on the job. There are so many moving pieces on the wholesale side, all for twenty-five to thirty-five percent margin.
And then there’s all those demanding suppliers — constantly wanting attention and focus, tap lines and shelf placements, distribution spread and volume. So, so needy and insistent, proud of their award-winning beers and confounded because you’re not flooding the market with their clearly worthy offerings. Whether it’s a fair, smart, or just system, there are a lot more suppliers than wholesalers; inevitably, the funnel is overflowing. Even distributors with the best of intentions end up with a price book packed with more valuable commodities than they can reasonably push.
Though the Boulder guy’s monologue included some valid advice about the industry, his entire perspective proved precisely why I don’t want to do that job — to be the distributor. I don’t want to be there at six in the morning or eight at night, picking up everyone’s broken, moldy cases for return, or chasing down money legitimately owed. I’m very happy to have wholesalers take their cut, so I don’t have to.
But I didn’t really understand that until probably six or seven years into the business. For me, at first, letting a wholesaler take their slice — half my pie — just seemed like money flying out the door. In time, I came to realize that if you set your expectations low, you might be pleasantly surprised at just how effective they are at doing the job. If you assume your wholesaler is essentially like UPS or FedEx, if the absolute least they do is deliver your product to someone you managed to sell to or someone who actually knew enough to ask for it, you’re ahead of the game. I’m exaggerating a bit, but as a small, unknown, non-advertising niche product, if I ever got them to actively talk about, represent, or acknowledge that my product was in their portfolio — if I could walk into a bar or a grocery store and someone said, “Oh, the distributor sales rep was here, and he mentioned your beer” — that was an accomplishment.
When the guy from Boulder told me his troubles with wholesalers, I kept thinking it would somehow be a little different for me. I thought, I’m working with a different model. I have a different attitude, a different brand, different consumers — different shtick.
In reality, however, it’s still the beer business. Tom McCormick, a longtime friend of the craft beer industry, past owner of a craft distributor, and co-founder of an organic beer company, endured years of my calls and emails and often talked me off the ledge, simply to remind me that there are plenty of ways to be creative, and to risk innovation for the sake of vision. Generous in spirit, advice, and support to this day, he has been consistent in reminding me that it’s still “the beer business, after all.”
As much as I did what I thought of as my “alternative” marketing and PR, I kept getting dragged back to the fact that I was simply making beer, and working with a wholesaler to get it into the stores. The laws are in place to force the model to exist. I could struggle against it or throw myself under its wheels. Or I could make a bit of peace with it and realize that at least I don’t have to chase down (too many) derelict accounts receivables or pallet-jack half the load the trucking company tipped over on the side of the loading dock. My job, every day, is to wake up early, stay up late, and push the hell out of my product.