Saturday SideBar: Kegs and Growlers and Crowlers, Oh My!

Now that I’m at least mostly over my jetlag I’d like to pick up where I left off three weeks ago when I was talking about businesses that make beer. Indeed, my firm sponsored another Craftoberfest yesterday evening between Hysteria Brewing and Lost Ark Distillery in Columbia, MD. I recommend checking both these places out, and they’re neighbours!

Getting back on topic, there are a number of decisions you may want to consider before deciding how, when and where to enter the very competitive business of making and selling your own beer.

First, you can make beer at a single site and sell it for onsite consumption in a taproom at the same location. That’s pretty limiting, so your next thought might be to also sell it for offsite consumption from your taproom by offering kegs, growlers, and crowlers (large cans of beer poured and canned onsite) to go.

At the next level, maybe you’d like to offer kegs to other retailers who have beer on taps, such as restaurants or bars. This will naturally augment your sales and your geographic footprint from a marketing standpoint, but this also makes you a distributor. You can self-distribute, which is probably going to be a pain in the neck, or you can sell to a distributor for resale to the retailers, which will reduce your profit margins. I’m not an accountant so you’ll have to do the math on that and also consider the local market dynamics (large distributors might want to put the squeeze on you).

As you grow, you may also arrive at a point where you want to bottle or can your own beer at your manufacturing site for entry into the consumer-facing marketplace. Again, you can self-distribute, but that may not be a realistic option if you are trying to get enough product out there to make a meaningful impact in the marketplace. You’ll then also be faced with pressure from your distributor as well as indirect pressure from the larger retailers, which they will apply to your distributor and therefore you. And of course, you’ll have some greater regulatory overhead if your product is being sold by retailers to consumers. Not to mention that if you are going to be shipping interstate – which you probably should be if you’ve gone this far – then you have to be mindful of manufacturing and labelling requirements such as those I mentioned two weeks ago.

All of these various activities may require some combination of federal, state and local licenses. At the local level, there are different types of licenses depending on whether consumption of your delicious beer is limited to your taproom or includes offsite sales. If you are going to be a wholesaler to your distributors, there will likely be different or additional criteria you have to be prepared to meet, and if your product is being sold as packaged goods by retailers to the consuming public – well, should your licenses be all-encompassing out of the gate?