Prost! Selling German Beer to Americans
Given the confusing nature of the US distributor system it’s no surprise that brewers often need an intermediary when trying to export their beer to the US market. This is where Dornbusch steps in to help. The chain of delivery is fairly simple. The brewer hands their beer to an importer who has it shipped from the brewery and across the US border. Then the importer hands the beer to the distributor who warehouses the beer and delivers it to retailers.
One of the big problems that the brewer faces in this system is that they loose control of their product from the time it leaves the brewery. Pure beer has a relatively short shelf life and is easily bruised. The temperatures that it can encounter during shipping are enough to ruin beer. Other issues that may arise are time and exposure to light. All of these elements seem to conspire to ruin beer.
Ruining a shipment of beer can do more harm than simply rendering a few cases undrinkable, especially if the brand is relatively unknown. Consider the consumer who sees a new German import on the store shelves and picks it up. While she may be expecting a glorious German beer experience, she finds instead a stale, skunky beer. She is not aware that it might have begun as the beautiful beer she was expecting; she just knows that the beer is now terrible. “The brand is destroyed,” Dornbusch explains, “But you see the distributor/importers don’t give a damn because brands are interchangeable. As long as that distributor has about 3 feet or 8 feet of warm shelf space in a given store they can just cycle brands.”
Indeed, the importer and distributor do not have to be particularly interested in preserving the quality of the beer and promoting the brand.
Their goal as often as not is to squeeze profit from the single transaction rather than building a long term relationship with the brewer. In fact, Dornbusch says that he has seen brewers not only lose the initial investment of the beer and realize no profits from the transaction, but also receive bills from the US companies for marketing and other considerations. He remembers one brewery that saw an estimated profit of $12K turn into a bill for $5K!
Another challenge faced by foreign brewers, and shared with craft brewers trying to get off the ground, is that many of the 2500 distributors in the US today are what Dornbusch calls brand collectors. With no real interest in selling the breweries’ beer to retailers, these distributors will sign an agreement with the brewers and order a few thousand cases of beer. Once the contract is signed it is very difficult for brewers to leave the distributor; however, the law makes it easy for the distributor to walk away. So some distributors will deliberately collect brands by signing them while they truly have no interest in them. This may be a way to protect their existing successful lines, or it could be that the distributors are waiting for demand for the brand to grow without them having to put any effort into it. Whatever the distributors’ motives, this is obviously a troublesome situation for the brewers. Though it is difficult for brewers to get out of the contract they can usually buy their way out. The cost of the buyout is often based on the number of cases bought by the distributor, usually around $25. So, if the distributor agrees to take 3,000 cases of beer, the brewery has to pay $75,000 to get out of the agreement and try to look for another distributor who may or may not give it the same treatment.
Dornbusch has developed a reputation for protecting breweries from such tactics. Besides going head to head with distributors and importers over such issues, he is also developing a new way for brewers to get their product to the American market. Working with a consortium of five Bavarian brewers, he has worked out agreements with an importer and a distributor that will respect beer’s needs during shipping and storage. He calls the new arrangement Cold Track. The beer will be kept cool from the time it leaves the brewery until it hits the retailers’ shelves. Beer brought into the US from Germany using the cold track system will carry the Cold Track trademark, a penguin carrying a tray of beer. It will be his promise to the consumer that the beer will be in the best possible condition for drinking after making its journey.
One of the big problems that the brewer faces in this system is that they loose control of their product from the time it leaves the brewery. Pure beer has a relatively short shelf life and is easily bruised. The temperatures that it can encounter during shipping are enough to ruin beer. Other issues that may arise are time and exposure to light. All of these elements seem to conspire to ruin beer.
Ruining a shipment of beer can do more harm than simply rendering a few cases undrinkable, especially if the brand is relatively unknown. Consider the consumer who sees a new German import on the store shelves and picks it up. While she may be expecting a glorious German beer experience, she finds instead a stale, skunky beer. She is not aware that it might have begun as the beautiful beer she was expecting; she just knows that the beer is now terrible. “The brand is destroyed,” Dornbusch explains, “But you see the distributor/importers don’t give a damn because brands are interchangeable. As long as that distributor has about 3 feet or 8 feet of warm shelf space in a given store they can just cycle brands.”
Indeed, the importer and distributor do not have to be particularly interested in preserving the quality of the beer and promoting the brand.
Their goal as often as not is to squeeze profit from the single transaction rather than building a long term relationship with the brewer. In fact, Dornbusch says that he has seen brewers not only lose the initial investment of the beer and realize no profits from the transaction, but also receive bills from the US companies for marketing and other considerations. He remembers one brewery that saw an estimated profit of $12K turn into a bill for $5K!
Another challenge faced by foreign brewers, and shared with craft brewers trying to get off the ground, is that many of the 2500 distributors in the US today are what Dornbusch calls brand collectors. With no real interest in selling the breweries’ beer to retailers, these distributors will sign an agreement with the brewers and order a few thousand cases of beer. Once the contract is signed it is very difficult for brewers to leave the distributor; however, the law makes it easy for the distributor to walk away. So some distributors will deliberately collect brands by signing them while they truly have no interest in them. This may be a way to protect their existing successful lines, or it could be that the distributors are waiting for demand for the brand to grow without them having to put any effort into it. Whatever the distributors’ motives, this is obviously a troublesome situation for the brewers. Though it is difficult for brewers to get out of the contract they can usually buy their way out. The cost of the buyout is often based on the number of cases bought by the distributor, usually around $25. So, if the distributor agrees to take 3,000 cases of beer, the brewery has to pay $75,000 to get out of the agreement and try to look for another distributor who may or may not give it the same treatment.
Dornbusch has developed a reputation for protecting breweries from such tactics. Besides going head to head with distributors and importers over such issues, he is also developing a new way for brewers to get their product to the American market. Working with a consortium of five Bavarian brewers, he has worked out agreements with an importer and a distributor that will respect beer’s needs during shipping and storage. He calls the new arrangement Cold Track. The beer will be kept cool from the time it leaves the brewery until it hits the retailers’ shelves. Beer brought into the US from Germany using the cold track system will carry the Cold Track trademark, a penguin carrying a tray of beer. It will be his promise to the consumer that the beer will be in the best possible condition for drinking after making its journey.
