CVIndependent

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Last updateTue, 18 Sep 2018 1pm

It’s not easy to know exactly where your money is going when you buy something. Some large corporations take great care to intentionally obscure this knowledge, at least when looking at products superficially. You might despise a certain large conglomerate, and vow to boycott it … only to later find out that the paper towels you bought are made by a company that is wholly owned by that same conglomerate.

For decades in the craft-beer world, we didn’t have this problem: If you liked the beer you were drinking, you could find out who made it by looking at the label—and that was that. Well, the craft-beer market steadily grew … until the bigger boys in the industry could no longer stand by and watch its massive market share erode.

The plan was simple: Buy up craft breweries around the country.  

“What’s wrong with that?” you might ask. Not a single thing … at least not from a business and legal perspective. Lagunitas Brewing Company, the renowned brewer in Petaluma, sold half of the company to Heineken in 2015, and then sold the remaining half in 2017—yet the beer’s quality remains just as good as ever, and consumer costs have gone down. What could be wrong with that?

The short answer: Plenty. As for the longer answer, we’ll come back to this later, because now I have to try to make a relatively dry concept somewhat interesting: the three-tier system for alcohol in the U.S. At least it has an interesting origin, in the shadows of the Prohibition era and the Roaring ‘20s. In that decade, saloons popped up to serve the sinfully thirsty public, and many of them were “tied houses,” meaning an alcoholic-beverage supplier would pay a saloon to exclusively carry their products. Upon Prohibition’s merciful appeal, federal and state legislators saw the problem with this and sought to institute a system to protect the consumer from tied houses, encouraging free-market activity. Thus, the three-tier system was born: Breweries (or alcoholic-beverage makers more generally) would sell their products to consumers through a distributor that acts as a middle man.  

Benefits and drawbacks to this system have popped up in the ensuing years. One the biggest benefits is to smaller breweries: They have the possibility of getting their beer into other markets relatively easily, thanks to a distributor’s expanded network. This could allow a brewery to gain fans in places it previously might have never been known.

There is a dark side: AB InBev and Molson Coors have become the equivalent to The Empire in the Star Wars movies when it comes to craft beer. AB InBev is the massive multinational conglomerate and parent company to all of the Anheuser Busch and SABMiller beers, as well as many other brands. (Yes, that nasty yellow stuff is owned by foreign corporations. Don’t ever be fooled by the ridiculous beer commercials pasting American flags on everything.) Molson Coors is at least half-American, and I think you can guess which half. The company’s M.O. seems to be combining marketing and packaging efforts, as well as streamlining processes within the company. This allows them to produce the exact same product, no matter where you’ll find it in the world. It’s a feat of engineering, really, and something to be admired for what it is worth (and it’s worth billions for them), but what about the … uh ... taste?

Now we come to “branches”: Large breweries own distribution affiliates in select markets. While legal, it is plain to see the problem with this setup: These distribution affiliates can strong-arm local businesses into essentially becoming tied houses. “Oh, you’d like to carry (fill in the blank) brewery’s beers? They’re not in our portfolio, I’m afraid. And if you do carry them, we’ll pull all of (our popular but bland) brewery’s beers. If you want craft beer, though, you’re in luck! We have some in our portfolio. So what if we stomped on the quality of their beers in an attempt to make them more cheaply and more efficiently (with the exception of Lagunitas/Heineken … for now)?”

These conglomerates count on your ignorance of the origins of the beer you’re drinking. This isn’t anything to be ashamed of, by the way: Beer aisles are an absolute labyrinth, and nobody should be expected to stand around Googling who owns what. However … did you know that Los Angeles’ Golden Road Brewing is owned by AB InBev? Don’t be surprised; AB InBev owns at least 400 beer brands.

This mess inevitably spreads to the shelves. It’s why you might see packages of varying sizes and shapes of Budweiser, Bud Light, Coors, Miller Lite, etc. More shelf space equals more eyes on brands, which equals more sales. It has a distinct, anti-free-market whiff about it, doesn’t it? It’s also why these conglomerates spend ungodly sums of money on commercials that either dazzle you with visual stimuli, distract you with humor, or talk about all of its beer’s attributes without mentioning a single taste descriptor: “Hey, this beer is cold-filtered, crisp and golden? Those are my favorite flavors!”

At this point, a craft-beer fan needs to make up his or her mind. You don’t need my permission to spend your hard-earned dollars on any brand over another—but if you’d like to continue to see craft beer thrive, and become more interesting and exciting with each new beer released, join me in moving away from the products by the breweries that have sold out to Big Beer, and instead support the absolute glut of breweries that have not done so. The Brewers Association recently created the Independent Craft Brewers Seal, which qualified breweries can apply to their labels. (Note, however, that the seal is not yet being used industry-wide, so if a beer does not have the seal, it doesn’t necessarily mean it’s being produced by a brewery owned by one of the large conglomerates.)

Since we’re in Southern California, I’ll mention a couple of breweries that have sold out.

AB InBev owns Golden Road Brewing and 10 Barrel Brewing. The latter is out of Oregon, but opened a large restaurant and taproom in downtown San Diego—something that was a topic of great contention in a county with 150-plus breweries. If you’re in San Diego and find your way to 10 Barrel, you’ve really overlooked some amazing, independent brewers within a stone’s throw (no pun intended).

Constellation Brands owns San Diego’s Ballast Point Brewing. This buyout was a big deal in the industry when it occurred in 2015 due to the $1 billion price tag. At least Constellation is an American company; it also owns Corona, Modelo, Pacifico and many other brands. However, there are so many true craft breweries within a very short distance of any Ballast Point location where you could have a good or better time.

Go forth; stay vigilant; and drink wisely!

Brett Newton is a certified cicerone (like a sommelier for beer) and homebrewer who has mostly lived in the Coachella Valley since 1988. He currently works at the Coachella Valley Brewing Co. taproom in Thousand Palms. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

Published in Beer

What’s just as important as making good craft beer? Making sure it is available to the people who want to enjoy it.

Ever since the repeal of Prohibition in 1933, there has been a three-tier system of distribution for alcoholic products in the United States, overseen by the U.S. government.

The first tier is the supplier or producer—in the case of beer, a brewery. The second tier is the distributor or wholesaler, which purchases the product from the supplier, and then sells it to those in the third tier: the retailer—bars, restaurants and stores that sell the delicious products to consumers.

However, a new company is looking to disrupt this 80-plus-year-old distribution paradigm.

Liberation Distribution, aka LibDib, is offering what it calls the first three-tier web-based distribution platform. LibDib creates an opportunity for makers and retailers to work together directly—thus giving restaurants, bars and stores access to a larger variety of boutique craft libations.

Launched on March 22, the San Jose-based company has more than 250 accounts in California thus far, and has moved on to New York.

I spoke with Cheryl Murphy, LibDib’s founder and CEO.

What prompted you to start LibDib?

It’s really crazy, all of the industry consolidation that’s happening. … I spent 20 years in the wine business, managing wholesalers. … Every year, I would make numbers, but a distributor of mine would go out of business, or they’d get acquired, and then we would be at the bottom of the wrung at a giant distributor. It was like pulling teeth.

I had a little too much to drink one night when I was with my dad, who was my boss at the time. I was working at our family’s winery, and I said, “Ya know, you can’t do this based on the industry’s conditions. How can we be successful?”

When you take control of your own destiny, as a sales person, as a brand—that is when you can be successful. When you have a distributor in between that is beholden to larger companies … (you’re) not going to be top of mind.

My whole goal is to learn how we can facilitate legal three-tier sales. That’s really important: We are part of the three-tier system. But how can we enable small breweries, wineries and distilleries to do business with other small businesses—grocery stores, bars and restaurants—where there are thousands and thousands of them, without a giant company in between?

We built a two-sided web platform. For the maker, what we call our supplier, they can go in and put of all their materials online. … As a distributor, we collect the money. We pay the maker. We pay the taxes. We do all the things we have to do as a distributor. We take half the margin—that’s anywhere from 15 to 20 percent of whatever product you’re talking about. The maker is responsible for delivery.

It’s been really interesting so far. A couple of the breweries that we have, they were self-distributing. But now we’ve kind of brought them back into the three-tier system, because we’re taking care of a lot of the things that they don’t want to do: They want to go out and sell their brand. They want to make their beer. But they don’t want to collect. They don’t want to invoice. … We’re trying to make it easier for those guys, and we’re making it easier for the account side, because the accounts like to carry small-production craft products. But they don’t want to write 100 checks every month.

Small craft products don’t necessarily fit with the current model of distributors. (Distributors) are not going to make enough money on your brand, so why would they care? In working with us, you can have that direct fulfillment, but then still have the backend of the distributor—with one invoice and one check.

So, in essence, brewers are saving money and are able to get into more locations, without having to do the self-distribution work.

Exactly. A lot of breweries want to fulfill, because they want to have that complete control—over the temperature, over everything. But they don’t necessarily want to do all the other stuff the distributor does.

What’s your biggest group so far? Would it be restaurants, or bars, or retailers?

So far, it’s bars and bottle shops. We’re working on a couple of big deals. There’s a stadium that’s interested in working with us and having us get 15 or 20 taps—just totally unique, small-craft-beer stuff.

Have distribution companies taken notice yet?

Yes! I was very nervous about the wine and spirits folks, that they may not be happy about this. But for the most part, they’ve been pretty accepting. They recognize that with this consolidation, their bread and butter is their bigger suppliers. … Some of the little guys take away their time and effort from where they really make their money, so they like the idea.

How do you think you may ultimately affect the big beer buyouts? (Many small brewery owners are citing distribution struggles in their decisions to sell.)

There are so many small companies that need help with their distribution. I’m going after what I call the long tail of the industry—the (breweries) that couldn’t get distribution, even if they wanted it.

This is a totally different vertical, but do you consider yourself to be in any way similar to Airbnb?

In terms of posting your things once, and having people from all over the world able to see it, yes. It’s definitely like the Airbnb of alcohol distribution. It’s funny: (Venture capitalists) around here will tell us, “Don’t tell us you’re the Airbnb of anything.” But it gives people an idea. You can go in; you post your product; and buyers can see it and purchase it legally.

Published in Beer