Food Service & Agriculture, Manufacturing, and Retail

Beer distribution is all about timing and loads

Founders finds keeping close tabs on consumption essential.

February 1, 2013
| By Pat Evans |
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Beer distribution is all about timing and loads
Mike Stevens, left, and Dave Engbers are the co-founders of Founders Brewing Co. in Grand Rapids.
There’s a roadblock that comes with that, however; beer requires at least a two-week lead time. And in Founders’ case, that lead time averages 22-24 days, according to Brad Stevenson, vice president of operations at Founders.

As Founders’ capacity almost has tripled in the last few years, so too has its desire to keep its customers stocked.

“When we were smaller, every time an order came in, it got cut,” Stevenson said. “You can ask for 100 cases, but you’ll get 60. Now, with lead time, we can guarantee you’ll get what you ask for.”

Making sure all the customers get what they want isn’t an easy task. Founders now is in 23 states through 65 distributors. Keeping those distributors and their customers — like big footprint stores such as Meijer — happy is important.

“A customer like Meijer, they will not tolerate being out of stock,” Stevenson said. “They don’t get angry; they just remove it from the shelves.”

With year-long, seasonal, specialty and backstage series beers, it takes a lot of balancing to ensure customers get what they want, when they want it. Aside from the backstage series, with proper lead time, Stevenson said the orders will be filled.

There is a fine balance in scheduling the beers to be brewed, lead time in the fermenters and the impact on the packaging line, Stevenson said.

“You can’t just make Dirty Bastard for a week,” he said. “There has to be a supply of everything we brew in the warehouse.”

To help with that, Founders monitors web portals set up for the customers that allow it to analyze and crunch data that will establish a goal for the next shipment.

Distributors also have a database system — VIP — that records sales, and breweries can then look at specific numbers and see what goes out to stores and bars, which is indicative of real demand.

 Since freight is expensive and distributors pay for the distribution, they’ll often overbuy to save on freight. The freight expense is a big reason West Coast breweries, such as New Belgium and Sierra Nevada, are setting up East Coast operations — those two in Asheville, N.C.

Stevenson said breweries help plan the freight load to find a sweet spot so the beer doesn’t just wait in a warehouse.

“There’s a freshness factor. It can’t just sit around and get old,” he said.

Founders aligns distributors by size, and each month about 110 outbound shipments leave the brewery’s warehouse. Some distributors take one a week, others one a month, and some are partial loads.

“What we can’t do is just ship what they want,” Stevenson said. “We need to queue up a truck with a little bit of everything. It’s a never-ending cycle.”

It’s not just outgoing, either. Founders owns its own kegs, which make up 40 percent of the orders. Those kegs must be returned, which poses a problem.

“Say we go all the way to Maine,” Stevenson said. “There we might make four stops and fill up a truck full of kegs and bring them back.”

Stevenson also needs to estimate how much of each ingredient Founders will need in a given year. He used Centennial IPA as an example. Each year he heads to Washington to buy an allotment of Centennial hops, without knowing what the exact demand will be.

“I still have to go out and pre-buy a scarce material,” he said. “Basically, we end up overbuying.”

Founders has a system that can trace each ingredient in a brew to a specific lot.

“If someone calls and says there’s something wrong with a porter, if they have the batch number, we can go back and look at the ingredients,” Stevenson said.

Although there’s a push at the legislative level by the Michigan Brewers Guild to help ease the third-party distribution laws, large breweries like Founders enjoy the help from distributors.

“Distributor margins are healthy,” Stevenson said. “On the other hand, we know how to make beer. We don’t know how to distribute.”

It’s the little breweries — with an annual production of less than 2,000 barrels — that would prefer to be without distributors, Stevenson said. He said when a representative goes to a bar and has 25 breweries the distributor represents, including a macro-brewery such as Budweiser or Coors, the little brewery may get only one mention in the meeting.

But like any other industry, there’s a limit capacity that has to be surpassed.

“As soon as a customer hears there isn’t any product, they’ll always remember that,” Stevenson said. “You have to find that unlimited capacity.”

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