So you’ve succeeded in your dream: gathering a team to make and sell delicious craft beverages. Congratulations! Now, you have some big decisions to make about choosing a beverage distributor. How will you choose a partner? What is important to you and your company? Will you be a big fish in a small pond or vice versa? Read on to learn about considerations you should have top of mind when picking a distribution partner.
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Lay Out Goals & Mission
You’ve poured your time, energy, and passion into creating the best brews on the market. The last thing you want to do is bring a partner into the mix who gets in the way of your vision for your company. Start by choosing a mission statement and values that represent who you are and who you’re looking for. This will be sure to attract the right people and attention to your brand. In turn, the right distribution partner should align with your mission and values.
It’s also important to think about your overall business goals when it comes to distribution. Are you looking to expand dramatically across the country? Up the East Coast? Or within county borders? Just like you want to look up directions to your destination before you get going, look ahead to your brand’s future and create a plan. No one else knows the way — you need to provide the guide.
Keep in mind that distribution isn’t one size fits all. Some beverage distributors are invested in putting your latest seasonal beer out there and adding it to their growing portfolio. Others just want your greatest hits, your flagship brew. Think about what you need in a partner while you grow your brand and look for a beverage distributor that fits the bill. After all, this partnership will free up lots of time and energy for you to focus on what you do best: running your business and spending time with your customers.
Consider Pricing & Product Strategy
An essential step of creating your partnership with a beverage distributor is knowing your worth — that’s right, pricing your products.
Compared to self-distribution, wholesale distribution provides a lower profit margin per sale, as your partner will take their share of the money coming in the door. So, plan accordingly. Distributors typically need 25%-30% of the gross profit when they sell to a retailer.
Create realistic goals that will lend themselves to successful returns on your product. This will benefit both you and your beverage distributor by making your product accessible and attractive to potential customers. Finances are of the utmost importance to any successful business. So, be sure to figure out how much money you need to be putting in the bank to make your business profitable and communicate this need to any distributor before jumping into a partnership. After laying out these goals and having honest conversations with potential beverage distributors, you should have a clear understanding of what it will take to sell your product so that you, your distributors, and your customers are happy.
In addition to considering pricing, be sure to set time aside to think about which products you’re going to distribute the most. Wholesale distributors want to sell what will make them money. Sometimes, this means selling trendy items like 2021’s rise in hard seltzers and non-alcoholic options. Other times, however, these beverage distributors want to play it safe with your best selling IPAs and lagers. So, your limited release experimental beer might not be worth it on the big market, but it can become even more special in your taproom.
This is also a perfect time to further craft your signature in the market. What are you known for? What do you want to be known for? Consider discrepancies between these questions and be sure to communicate the vision you have for your brand clearly with your partner and their sales representatives. Their reach and marketing/sales ability might be just what creates the reputation you want to have, instead of the one you actually have.
Communication, Communication, Communication
The only way to build successful relationships is to communicate — not just with your beverage distributor, but with their sales team, your employees, and other stakeholders.
First off, the fine print. Your contract is one of the most important parts of establishing your relationship with a distributor. You’re going to be bound to these terms for an extended period of time, so make sure you’re happy. Consider pricing, expansion, and marketing in your contract. Agreeing to terms that make you lose money or hurt your vision for your brand can be soul-crushing. Like we established, the last thing you want is for someone to come in and get in the way of the vision you worked so hard to create. Additionally, be sure to establish terms related to both reliability and payment. Who is responsible if products are recalled? When will the distributor pay you? What’s their cut? This may be the time to enlist a lawyer. Contracts can be sneaky and you don’t want to fall into terms that don’t work for your business.
Working with a third party means that someone else is now going to be promoting your work. Just like a child, you can’t hold their hand forever — you have more important work to attend to! Host a meeting from the get-go and have a conversation with your distributor’s sales team. They want to sell just as much as you do, but you need to ensure they keep your needs top of mind as well. Sales reps have a number of clients to work with and sell for, so they only have so much time to devote to your brand specifically. However, if you can get in front of the people selling your products, you can make them care about your vision (almost) as much as you do. Don’t forget, these people are on your side! Their job is to spread your message and vision to spaces you might not be able to get to yourself. This is an invaluable asset. Utilize your mission and goal planning here. Sharing the vision you have for your business will speak volumes to sales reps and create a sense of mutual respect that will, hopefully, lead to mutual success.
Your relationships back at home are just as important as those you’re developing in the market, and expansion is a big deal. Don’t forget to consider your employees, brewmasters, CPA, and others who have a vested interest in your business along the way and keep them posted about where you’re headed. After all, you’re providing the roadmap for your business. All of your stakeholders should be on the same page when it comes to growth.
You Found a Partner — Now What?
Congratulations on finding a distribution partner! Now, you need to stay organized to make sure everyone is happy. Luckily, technology has come a long way since brewing started in prehistoric Mesopotamia. Order hubs and other software can help you prioritize and stay organized with order requests, inventory updates, and invoices.
You’re now well on your way to bringing your dream to fruition with a wholesale beverage distributor. Keep in mind throughout this process that your time and patience are invaluable. There will be bumps along the way, guaranteed. But the geographic reach and influence that a wholesaler can provide you (plus, a few extra hours in the day) are beyond worth it. Stick with it.