Three Tier System Gone Wrong

In North Carolina if you sell one case of said beer, it is franchised to you. It really is a form of equity that dates back to Prohibition Era laws changing to truly support the large wholesalers. Any brewery entering a business decision to do business in North Carolina needs to legally vet these laws to protect themselves from a bad relationship like the one Clown Shoes experienced. It is ironic that here in N.C. Clown Shoes decided to go exclusive with Total Wine, which to my thinking was foolish. Anyway, there are archaic laws all over America and some people really lord over brands, looking for cash. Business ain't for the light-hearted!

 

@ ClownShoesDreams,
As a Small independent beer retail store owner from North Carolina I'm just curious why you made the choice to be a Total Wine private label in my state as well as SC, FLA, Nevada?

 

I am fairly certain that @ClownShoesDreams has said in other threads that they plan on being statewide (and not just TW-statewide, but actually statewide) in the next 12 months or so in NC. It's entirely possible that was me creating things in my head because I want it to happen, but I thought I'd actually read that as a result of a question I'd asked them. I can't find it now though.

 

We gave Total Wine a six month notice five months ago for all of the states we go brewery direct with. Our initial agreement required only this notice, which they are honoring. The last shipment to Total Wine will be the end of this month (including some Extremely Angry Beast).

The first state we will open for full service is Florida, which we hope to happen in December. NC tops the list of the other states we would like to open, so it should occur sometime in 2015.

When Clown Shoes went national we tried 3 different routes, with the goal to learn and have a diversified portfolio of distributors.

1. Beer wholesalers who only sell beer
2. Wholesalers that sell wine, liquor, and beer
3 Total Wine Brewery direct

As we initially had limited manpower, Total Wine allowed us to send product to states we otherwise would have not been able to reach. While they offered advantages in certain areas ( bottles only, good payment terms, organized ordering process etc.), we now feel options 1. and 2. above are better for where we are as a company.

Brawleys, we hope you don't hold a grudge and will give us a shot when we arrive next year. Want to a tasting at your shop during the initial launch? We will have some of our team in the market when the time comes.

Best,

Gregg Berman

 

Does anyone know what the franchise law's period of time is in GA? This, I assume, is why Clown Shoes is fighting so vigorously with Quality.

Here in FL the franchise law is 2 years.

 

Four years

 

We have. Every day of every month of every year.

 

WTF is with Clown Shoes getting shafted? First the beer name lawsuit and now this?

Cliffs as I understand it:

* Quality owns the rights to distribute CS beer in Georgia. They say they're done selling beer. Ok, their decision.
* CS tries to find someone new to carry the brand.
* Quality wants to be greedy and sell the 'rights' to carry CS to another distributor.
* Quality didn't feel like they were going to get enough $$ for doing nothing (selling the rights contributes zero value to consumers or anyone else, it just serves to line their pockets while offering nothing of value to anyone).
* Since Quality didn't get bids high enough from other distributors for just agreeing to transfer the rights to a product they made clear they no longer wish to sell, they decide to tell CS they are going to continue selling their beer.
* Since Quality has made it clear they have no interest in beer, CS is basically screwed.

Was this just a crappy tactic to attempt to get CS to agree to take less of a cut on sales? Seems like it, but in most any other industry CS would be entirely within their rights to call their bluff and find someone new to distribute their product.

 

Did Quality purchase the distribution rights to Clown Shoes when they first started selling the beer?

If so, this is why most distributors "shop" brands, even sometimes selling the brand rights back to the brewery itself. They pay a large amount up front for those distribution rights, and typically when a brand wishes to change distributors, big checks get cut from distributor to distributor. If so, this is not at all uncommon.

 

If Quality had to pay up front for the rights to distribute then I guess I can understand them wanting to recoup that cost. Still puts CS in a hostage situation when their distributor has stated they don't want to bother selling their beer nor do they want to sell the rights to distribute it to someone else.

If this was a common theme with brewery and distributor relationships it does seem odd that the CEO of Clown Shoes would be posting this ordeal publicly online.

 

That's not what happens in GA. The brewery shops around and chooses a distributor, based on their sales staff, knowledge, etc, and sign a contract that they cannot go to anyone else unless they are released from said distributor. No one is 'bought' or sold in this process. The distributor only agrees to sell their product, at what capacity is the key and that's why it's important to shop around and choose wisely. The brewery cannot switch distro without being let out of the contract, and few breweries get to. We have seen breweries die in GA (Dogwood) from distributors holding them but not pushing their products, so they run stagnant and make no money.
The Wrecking Bar brewpub was also with Quality and have already left and signed on with someone else. No issues there. Clown Shoes, I guess being a larger, more sought after brewery right now, is worth more to Quality, so they're trying to hold them hostage. The other brands Quality carries don't move very well, so they aren't a commodity. No one is breaking down doors for Nimbus, Carolina, and Ipswitch right now.

 

@ClownShoesDreams any plans to get out of Total Wines iron grip in FL and get a real distributor?

 

Read post #24, just a few above. Yes

 

Year after year, state by state, beer/wine/ booze distributors are very influential in state and national politics.

 

Yes. We expect to ship product in January to Brown. Our TW agreement ends this November for all TW markets.

 

Looks like we have a positive outcome. Thank you all for the support! http://www.clownshoesbeer.com/uncategorized/unexpected-good-news-always-best/

 

Yay good move on Brown! Those guys are great.

 

Gregg,

It seems the TW brewery direct program served its exact intended purpose with Clown Shoes; you were able to extend your brand into additional markets in a controlled manner at controlled beer production quantities that you could meet operationally as an upstart brand, and consumers in these markets were able to discover your brand and enjoy your beers. In your case, your brand was met with enthusiasm for many reasons not the least of which is you are consistently putting out quality, flavorful beers.

Now that consumer demand has been proven in these markets, and you are operationally able to expand into full distribution agreements with distributors in these states, it's time for you to make that move. And that was the mutually agreed-upon business plan from the beginning, right?

Total Wine took an up-front business risk by purchasing large quantities of Clown Shoes beer, a relatively unkown brand at that time, and bringing it to these markets (legally within the 3-tier system). It's not a proprietary program; any retailer can do it if they are willing to put their money where their mouth is and also do the work. The risk was that should your products have failed to sell at market, TW would have had to eat all that cost, not Clown Shoes or a distributor.

But it seems the brewery direct program was a win-win-win with Clown Shoes: a win for Clown Shoes, a win for beer consumers in these markets, and of course a win for TW.

Clown Shoes has been a great asset to the TW beer program. Of course the agreement is being honored. It's been fun being part of your ride. Now we all will get to see you on many more shelves, including TW's.

Cheers,
Rob

 

That is excellent news. Georgia loves Clown Shoes! Who knows? Perhaps one day Clown Shoes will even bestow us with our own special beer. (hint, hint)

 

@ClownShoesDreams Congrats on your exit from your contract. I appreciate your response to my question and understand tough choices have to be made when trying to expand a brand on a national level. I own and operated a very small beer store for almost 12 years, two blocks from a very high volume Total Wine, and have to make tough choices regularly as well. I have been in business, operating the store myself, with my mom and until very recently, with very little help from employees. My first 7 years open I did not close a single day. Not Christmas Day, new years, thanksgiving or easter. Not because I'm a workaholic but because I never wanted a customer to be forced to go to my competition which until recently was almost exclusively Total Wine.
You can imagine my feelings when customers asked about Clown Shoes and its availability when you expanded to NC and I had to explain that it was a Total Wine exclusive. As the smallest fish in the pond we have had to deal with plenty of challenges, and predatory practices,primarily from big box stores and multinational just like this. I decided years ago if ever we were denied the ability to compete on a fair playing field, if my customers were forced to go to my competition due to exclusivity agreements that I would never support that brand again.
You seem like a very nice guy. Can't say I'm sorry your exclusivity agreement with Total Wine didn't work out. No hard feelings, but I will not be selling Clown Shoes after your exclusivity with Total Wine ends.