Craft beer cheaper without 3 tier system?

@Sixpoint that is seriously the most interesting and informative link I've seen someone post. No get yer ass to Missouri, cause we be 49!

 

Yeah, possibly, except that remember that the current incentives are only available to a distributorship that sells 98% (or something in that neighborhood) ABInBev products. The last incentive program was a dismal failure for them. But if ABInBev had not poured millions into GI to allow them to increase capacity there'd have been none of those beers in Florida still regardless of any incentives. Can't sell it if you aint got it. :-)

Also, keep in mind that if ABInBev and its incentives were as powerful and dominant as most people seem to think there'd have been no craft beers seeing multi state distribution (e.g., Sierra Nevada, Boston Brewing, Anchor, etc.) in the first place. So it looks to me as tough the horse has left the stable and ABInBev is playing catch-up in the US while turning their attention to Africa as a place for growth of sales with their purchase offer for SABMiller.

 

Sierra Nevada is in a state that allows self distribution. They distribute in Chico. They have distributors that handle the rest of the state. Something about investing in warehouses, fleets of trucks, and all those reps.

 

Nc is kinda shitty in that it allows self distribution as long as you dont exceed a pre determined limit. Exceed that and you have to use a third party to distribute. So your choice is if your close to pull back on the volume or to go full blown and turn your distribution business to someone else. It should be illegal to interfere with smaller businesses, so guys like Tryon, and Barringer gave politicos shilling them the business. It's why I can't get Old Mecklenburg any more, they wanted to increase production but it would have pushed them over the limit, so they said fuck you, we'll just pull back and service Charlotte. It's a shame.

 

Its no coincidence at all that Missouri and Wisconsin have some of the lowest beer taxes in the country. These were long-established headquarters of Anheuser-Busch and Miller Brewing Company. Massive clout!

 

Umm...AB-InBev has also been selling off distributors too....

As an FYI, I actually read a bunch of details on this program last week, there are a few tiers of the incentive program, only the top one is the 98%, there's a bunch of lower tiers. It's also the one mentioned in media reports because it sounds big and scary.

To actually answer the question, overall, I think the answer is no. From an economic perspective, craft beer is a luxury good, which is relatively price inelastic and may even be negatively price elastic (it's generally an aberration in data and a relationship that is correlation and not causation) but there are beer packages in some markets which sell more volume as the price increases.

The big challenge with the actual distribution of beer is that the stuff is effing heavy, bulky and a PITA to move around. The interesting question is: what would it cost a brewery to ship cases/kegs any other way, like fedex/ups? Looking at the pricing I have for a relatively popular craft beer, the wholesaler gets roughly $45-$50/half barrel. I'm not intimately familiar with FedEx shipping costs but I'm not sure anybody can ship a 162 lbs of anything halfway across the country for $50. Looking at a case of bottles for this particular craft beer, the distributor pockets around $10-15/case. I've shipped beer for trades before and even with an epic bulk discount, I can't imagine hitting $10-15/case and that's the break even between the current distribution system and just shipping stuff to accounts who order it.

The other thing that people are forgetting is that wholesalers actually go out and sell in the beer to accounts. How is Joe's Bar and Grill going to know to order new beer X from the brewery? While the ability to free-for-all order beer from all over the country and have it delivered to our front door is our wet dream, it doesn't make any sense at scale.

 

little off topic but I find it weird that PA was the 46th lowest beer taxes per @Sixpoint link but some of the highest retail prices I've seen.
Distribution systems you crazy

 

What is being referred to is called disintermediation. The biggest potential benefit of it is reducing costs, and therefore increasing profits for the producer. Breweries in Washington (mentioned earlier in the thread as a poster child state) that do some self distribution, as a general rule, charge the same prices for their beers as everyone else. Why would they discount the price when they now have to pay an employee to handle the beer, even potentially delivering it? Especially if the goal of self-distributing is to keep more of the $ for themselves. In fact many breweries in Washington try to charge the same prices for beers in their taproom (to go or by the pint) as the surrounding bars and restaurants so they don't undercut their prices and steal their customers. Bars tend to get cranky and drop beers if the taproom is taking their customers. There are a lot more reasons why, but the answer is no... bypassing distributors does not lead to lower prices.

 

I think the answer is more involved in the mandatory three tier system. Mandating it probably keeps innovation and competition from lowering the price of beer. Distributors as others have said can do it cheaper than a ton of breweries doing there own thing.

 

There are two types of distributors in PA: Retail Distributor and Wholesale Distributor. The business that you buy your case of beer from is the Retail Distributor. That Retail Distributor purchased their beer from Wholesale Distributors.

Cheers!

 

yeah we Pennsylvanians are an example of how a 3 tier system only leads to reasonable costs when buying case or more and even then we pay more for a lot of things.

The burr in my side is how 90% of the country pays $28 for a case or Sierra Nevada and we pay $38. Three tier system in effect. We were the first state east of the Mississippi to get Sierra Nevada and we still pay like its being shipped across the country and not brewed in Mills River, NC. The three tier system(or at least on tier involved) is responsible for this.

 

You can also buy cases from Wholesale Distributors if they have both kinds of licenses so its not black and white.

 

California allows for self distribution and of the breweries that I know do it, they're not any cheaper. Granted, it might be worth asking how it'd look if it was a really free system where you could have specialists in the middle tier that had to compete for business. I tend to doubt that'd reduce prices either. Prices are what they are, I don't think much will change that.

 

In my opinion the high(er) prices charged by PA retailers is due to the laws/regulations concerning the state issuing licenses. There are a limited number of retailers (both beer distributors and 'deli license' retailers) where you can buy your beer so their is limited competition. Imagine that you could purchase beer from every supermarket (not the pubs inside the supermarkets) how much cheaper the beer would be because of competition. The supermarkets would regularly run sales to promote beer just like they do with food items. What a wonderful place that would be!!

So, feel free to write your legislators and Gov. Wolfe on why you would like reform of PA alcohol laws. I have written my two legislators on this topic.

Cheers!

 

Look at the self distros in VT and MA. Where you need to pick it up yourself. Cheaper? Not what I've seen.

 

But the case of beer you are buying is from a Retail Distributor. For example Shangys has two licenses and the Retail Distributor business is co-located with the Wholesale Distributor. Where you walk in the door and make a purchase is the Retail Distributor. The Wholesale Distributor is in the back and you are not permitted to go there. Two separate businesses in the same building.

Cheers!

 

I disagree. In my opinion it is due to lack of competition due to restricted licensing which creates less market competition. See my above post.

Cheers!

 

How does that explain that when I was in PA in November, I was able to visit a craft beer store where I could buy six packs as well as mix-sixers? And they had quite a variety, plus they were selling beer by the glass & growlers. I didn't notice that they had food, but then, I wasn't really looking for food.

 

I'm not sure I understand your methodology, by licensing do you want more wholesale/retail? Where I am I can buy beer from almost every supermarket and soon to be WaWa but I don't see this competition leading to cheaper prices. At best I can get 6 packs/4 packs for the same price as a case breakdown. This increase in competition isn't going to get Sierra Nevada down to $28 a case.

In fact the places with the best prices seem to have the least competition.

 

I've always heard a bigger factor than the (relatively small) state excise taxes in the different prices of beer from state to state, is the typical mark-up of the different types of stores where beer is sold. Grocery stores typically have very small mark-ups for their products, for instance, so beer is sold cheaper than elsewhere. Liquor stores typically have higher markups for spirits and wine than for beer, so beer may be sold cheaper than in a state next door. In PA, a retail beer distributor must make most of his income off of beer since (besides pop and snacks) that is their primary product.