Tuesday, January 15, 2008

Start a Beer Distributing Company

So you came up with a wonderful idea on how to get rich by starting a beer distributorship. Are you crazy? Are you drunk? Or.... do you have what it takes to work 16 hour days, seven days a week to be your own boss? Do you like pushing one of these things in the picture on the right? Do you enjoy setting your own goals, interacting and conducting business with many different people with multiple demeanors and diverse backgrounds, and analyzing progressive consumer trends and habits in the marketplace? I enjoy teasing the folks that think beer distributors just deliver beer and make tons of money. Nothing is further from the truth. Beer distributors are entreprenuers that evolve everyday. Change is eminent and constant. Believe me, the breweries change marketing focus and organizational structure every few months. To be a beer or beverage distributor, you have to be able to go with the flow and always do what you say you'll do.

Following is some basic information to see if you've got what it takes:

First you need a federal license to sell alcoholic beverages and a federal permit so you can store them.

Second you need a state permit for the counties you service. Once you get a state wholesaler permit you will receive a tax roll of all the accounts that hold a retail license for the area you service. This roll is important because it will be your universe to which you can sell alcoholic beverages. Its also where you will keep up with taxes collected from retailers.

Third you need an operational strategy. This means vehicles and warehouse space. You will also need a decent route accounting software system to keep up with your invoicing, distribution and sales reports.

Fourth you need products and customers. Call and email every supplier you can find...from alcohol to non-alcohol. Check the margins they offer, terms, pos, support, etc. A good starting point is BevNet.com.

Fifth you are going to work your tail off. Do you have a sales force? If you can do all this on your own...you are my hero. I consider owning and operating a beer distributorship with no employees to be the Holy Grail of the beer wholesaling profession. That is, if it could be done.

I hope that doesn't scare you off. I admire that you want to do this. It is a rewarding business and can be very fulfilling, but you have to know that it can also be excrutiatingly painful, depressing, and all-time and all-thought consuming. I know a lifetime of answers to any questions...feel free to email me at any time, my knowledge is at your disposal. For more information online, see how to start your own Beverage Distribution Business.

Now make a list of questions to ask yourself, your retailers, and prospective suppliers. Some examples:

  • FOB's and laid in's for different brands and packages.
  • Rising fuel, freight, insurance, taxes, and supplier demands and their effect on the beverage business.
  • Your location and your competitors.
  • Demographics of your territory.
  • Service level expectations and payment procedures of various retailers.
  • Laws affecting transportation and distributing alcoholic beverages in your area.
  • Credit terms with suppliers and retailers.
And now a little cheat sheet to wet your appetite:

1. Contact all of the beverage distributors in your area. Don't tell them all of your plans, just say you are conducting research. Ask about the brands in their portfolios and see if they handle the full package line from some mid-major brewers. Start with the Pabst supplier. If the distributor is not carrying some Pabst packages you can request these brands. A few other breweries to contact are Gambrinus, Pittsburgh, Cold Spring, or any small regionals in your area. It will take time to build a product line. Also, you will have to be ready to order and deliver as soon as you start getting the product....remember beer is perishable.

2. Ask about their non-alcohol portfolios...there is more margin in soft drinks and you don't have to pay sales taxes in most states. The only drawback is some retailers will ask for credit terms (larger ones) and Coke and Pepsi control the cooler sets. But sometimes we get lucky with these new niche products..many did with Snapple, Red Bull, and Vitamin Water. Try to get a few of these beverages. A couple to look at are Cocio Chocolate Milk, Hat Trick Beverage's Pumped Fitness Water, and IrnBru. Go to BevNet and research some of these brands. Don't be afraid to call or email them. They will send you samples and pricing.

3. Contact the National Beer Wholesalers Association and ask about your State Association and who the local distributors are. You can also find a wealth of information about starting a beer distributorship on the NBWA website, as well as your state association's website.

4. Never pay for any franchise from anyone in the beverage business...you get the rights from a supplier based on the expectations of your performance at the levels agreed upon in the beginning of entering a contract with a supplier. Any payment to a supplier should only be for inventory and promotional items that help you sell more product. At least, that is my conviction.

5. It would be best to start off with some non alcohlic drinks first, unless your market is heavily skewed to the on premise. Many breweries nowadays let you order small pallet quantities to help with cash flow. So do the smaller soft drink companies.

6. You need to make at least 25% margin on beer and 30% plus on soft drinks.

7. Look in to adding beef jerky, cups, or salty snacks to your routes.

8.It is imperative that you have a superior understanding of computers, the internet, excel, word, and power point. You wouldn't be able to order or sell the first case without 'em.

Hope that helps a little, at least you have a starting point now. Anyway, feel free to email me with any questions. I believe that with consolidation of more and more beer distributorships, there will be breweries and beverage companies that will welcome smaller wholesalers. There is a niche for small, nimble wholesalers...you just have to patient, hardworking, and lucky. Just remember, the beverage business is about making friends...that is forgotten when you're trying to sell 500 sku's.

1 comment:

Anonymous said...

Hello Mr. Heileman,
I am unsure if you are still responding to emails due to the fact that it has been a year since you posted this article but I figured that I would write to you anyway. My name is Aaron and I am currently a 21 year old senior in college. Though I know that college is and was the best avenue for me but I also know that my heart lies else where. Being very uncertain of things in life, besides the belief in myself, and belief in the fact that I am destined for success through being an entrepreneur. Something inside of me tells me that I'm not meant to sit behind a desk working for someone else, when I can be sitting behind a desk working for the my betterment. I have many dreams but one is of owning a beer distribution company. I have searched long and hard all over the internet only to find scams on books that guarantee success. Your article stuck me as an honest sobering look into the realities of such a business. It reflects of what appears to be a mirror image of the wise, battle hardened owner whom has experienced this fight. I write to you in praise of the article but also in hopes that you may offer further advice. I don't want to wake up one day when I'm thirty or forty, wishing I would have taken the chances and followed my heart. I want to start my life now, and I would sincerely like you to know that any help would be greatly appreciated.

Thank you for your time,