Shelf wars 

Small breweries find big challenges distributing beer

Jim Lueders holds his seven-month-old daughter Leika in a carrier on his chest as he walks the floor of his Stevensville brewery and talks about trust, responsibility and his worries for the future. He's not talking about Leika, but rather the future of Wildwood Brewing and, more specifically, the smaller brewery's plans for wider distribution.

Wildwood is barely 18 months old and occupies a restored Wisconsin barn set alongside Highway 93. Inside, the modest taproom is overwhelmed by the giant production tuns. A handful of tables dot the walls. The surrounding grounds are currently full of weeds and dry grass, but Lueders envisions turning the property into a small farm complete with rows of vegetables, a few animals and hops for brewing. With an eye toward sustainability, he plans on feeding his spent grains to bacterial ponds behind the brewery from which he'll capture methane to fire boilers heating his wort.

To make this grand vision happen, Lueders says he has to sell more beer than what currently flows from his taproom and what he can hand-deliver to local bars and grocery stores. To expand, he needs to sign with a local distribution company.

"It's a big choice for me," he says. "I've invested a lot of time and a lot of money. This is my passion and I'll be damned if I'm going to sign a contract and put my faith in their hands after all the hard work I've done."

For an up-and-coming brewery like Wildwood, choosing a distribution strategy can be a stressful process. If he decides to switch from his current DIY setup and sign with a local distributor, he can potentially move higher volumes of beer into previously unreachable markets, but lose his direct contact with customers and ability to monitor quality control. His workload would increase to bring up production, but profits aren't guaranteed to follow. More than anything, Lueders wants to avoid becoming just another beer to a distributor working with hundreds of different brands.

"After a month of honeymooning they're done with you and you're left floundering on the shelf," says Lueders. "Then they move on to the next big thing."

Lueders' alternative of sticking with his hand deliveries isn't much better. Under current state law, small breweries can self distribute, but a few big stores won't carry product that isn't represented by a distributor. Even if a store does carry Lueders' beer, he faces the issue of fighting for shelf space. The Wildwood founder says he's put his beer in coolers and hung signs, only to return to the store and find the beer moved and the signs taken away, allegedly by a distributor. Another time, he says, a distributor told mutual clients that Lueders didn't have a license to distribute his own products. The last straw was when a client told him a deliveryman boosted the gas on Wildwood kegs, causing them to pour all foam. Lueders says he confronted the distributor only to be told it was an anomaly.

click to enlarge Wildwood Brewing owner and brewmaster Jim Lueders wants to sign a contract with a local distributor but, like other craft breweries, is worried about how it could change his business. “This is my passion and I’ll be damned if I’m going to sign a contract and put my fate in their hands after all the hard work I’ve done,” he says. - CATHRINE L. WALTERS
  • Cathrine L. Walters
  • Wildwood Brewing owner and brewmaster Jim Lueders wants to sign a contract with a local distributor but, like other craft breweries, is worried about how it could change his business. “This is my passion and I’ll be damned if I’m going to sign a contract and put my fate in their hands after all the hard work I’ve done,” he says.

"They're courting me to my face but they're sabotaging me behind my back," Lueders says. "I'm close to picking a distributor but it's a very difficult choice."

Lueders isn't alone in wrestling with the distribution question. After a few years of methodical growth, Draught Works owners Paul Marshall and Jeff Grant are now planning the next phase of expanding their Northside business: increasing production and beginning to distribute kegs.

"We've been spending money like crazy lately, but this is a decision I lose sleep over," says Marshall. "When you sign one of these contracts you're married to the distributor but getting out of it is harder than a divorce."

If a brewer is unsatisfied with their distribution contract, they can only escape it if they prove "just cause." Marshall and Grant say it's a notoriously long and drawn-out process that often leaves a court deciding between the brewer's word and the distributor's, and they worry the law disproportionately favors the distributors.

"We're sheepish about this," says Grant. "When you have to prove that the people you're doing business with are not meeting your needs and that still might not be enough, it's a scary proposition. Yet it's exactly how the law's written in Montana."

The concerns and risks also apply to the distributors, says Zip Beverage General Manager Harry Watkins. If a particular brand doesn't sell, Watkins says it occupies warehouse and retail shelf space that could go to a brand that would.

Missoula's two largest distribution companies are Zip and Summit Beverage. Zip, which contracts with Anheuser-Busch, also distributes local craft brews from Big Sky Brewing. Summit, which contracts with MillerCoors, boasts "over 149 beer brands," including locals Bayern and Kettlehouse.

"[Small brewers have] a legitimate concern, but we're cautious too because we don't want to fail somebody," Watkins says. "To be successful it's gotta be a partnership. Alone they maybe do well in a small market, but we can give them big-market access."

That access is what ultimately leaves Lueders leaning toward a decision to sign a distribution contract. After all, he says, "exposure is the name of the game."

"I'm down here in Stevensville—how else can I reach thousands of people? If you don't play under their tent you can't get in."

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