Saturday, 1 November 2014

Supermarkets and beer

It's the first of November. Yay! Christmas is nearly here!!

Today starts the first day of a very exciting promotion we are running with Booths supermarket in the run up to Christmas. Continuum, Code Black and Azimuth are all £1.25 per bottle. That's a lower price than we sell it direct to consumers at our brewery door. It helps get our beer out to more people, in more places and at a lower price. We are able to do this with Booths as we have worked hard at the partnership to bring down the costs of getting beer onto the shelves.

Stunning Craft beer at stunningly low prices at some of the best food and drink retailing stores in the North West. This, I hope, is only the start of what might become a better retail distribution; we've been talking to other supermarkets recently, with some positive news next year I hope. This will of course be limited to one or two lines, leaving the best independent bottle shops to do what they do best; provide diversity. Getting our beers into supermarkets will help bring much more efficient national distribution of Hardknott beer, getting it to more people in a more economic way.

I can hear the cries now "You're just helping the supermarkets close pubs" and no doubt some of you will want to say "The supermarket is selling at below cost just to get the punters in" There is the point that some people can't go to the pub. They have young kids, perhaps, or it's a drive to get to the closest pub, or even there isn't a pub anywhere near that has Hardknott beer. Besides, selling our core brands to supermarkets helps pay for us to do some of the more fun stuff that probably makes us very little money.
Azimuth, on a stunning snowy West Cumbrian fell

However, I'd like to address some of the fairly false myths associated with beer in supermarkets. 

Owning a bottling machine brings new opportunities and challenges to a brewery like ours. On the one hand we can put any of our beers into bottle just about anytime time we want. We can do as short or as long a run as we want, provided we have the beer, and we have no transport costs associated with moving tanks of beer or finished bottles back to us. Sending beer to contract bottlers has all the issues associated with transport costs, minimum run lengths, scheduling time on the line to coincide with brewing schedules and many other issues. Moreover, it is less likely to go wrong as the beer is handled less, and if it does go wrong, at least we have full control over the problem1

However, we have a big fat loan associated with the purchase of our machine. It doesn't run quite as often as I'd like it to do, or pay enough to service the loan interest. I've been doing a lot of sums lately, comparing costs associated with making cask beer, keg beer and bottled beer. I've also been comparing various advantages of selling beer in these formats.

My top option, from a commercial point of view, based on the fact we have a bottling machine, is bottle. Of course, this works only if the price is right, and every deal has to stand on its merit. However, having looked at various routes to market, and the costs associated with them, supermarkets are far more commercially attractive than you might think.

Having looked carefully at the costs associated with getting beer, in cask, to pubs, we find that bottles, even at supermarket prices are more attractive due to the much lower cost of logistics. Margin per litre of beer is actually a little better when supplying to supermarkets compared to cask.

As for supermarkets selling beer at below cost, this is certainly not true from my perspective. The promotion we are running is entirely funded by us and the supermarket is still maintaining the same percentage margin. Furthermore, we are also looking at some much bigger contracts with supermarkets that have many more stores. Contracts that might see 200 fold or more increase on the Booths contract. Bulk logistics makes the eye watering discounts we might have to consider much more attractive than they seem at first sight. Having looked at the supply price we might be considering, and the eventual retail price, I can promise that they are not selling below cost, and neither are we.

It's not a one way street however, as the minimum order quantity (MOQ)  has been increased, for instance, to ensure our costs are reduced. For this reason, the MOQ thing, we cannot even sell it at the brewery to the public at this price. You see, we're not set up for efficient retail at the brewery, and stopping what we're doing to be nice to a member of the public can be a little distracting to brewing, or bottling, or packing thousands of pounds worth of beer onto a pallet to send to a supermarket.. We'll sell you beer, but we'd prefer you went to Booths, an independent bottle shop or to our bar.

As for the closing pubs thing, and even the whole cask versus keg issue. We've looked at the costs associated with cask, transport to local rural pubs, or eCasks and palleting out to wholesalers at necessary discount and decided a long time ago that we needed bottle to secure the commercial future of our brewery. This is why we bought the bottling machine in the first place. Less people are drinking in pubs than they used to. This is a shame, and we can discuss this all day until the cows come home, but it wont change the market statistics. Putting beer into bottles and making it suitable for supermarkets makes perfect commercial sense. When putting beer into bottle it is also easy to put the same beer into kegs at the very same time. You can't rack the same beer into cask at the same time and indeed it is better to brew specifically for cask.

Although I'll admit to feeling slightly guilty about not being in a position to sell more beer to pubs, and avoid the whole bottle thing, it's not us that is causing the damage. It might be the supermarkets, although in turn it could be argued that they are only responding to customer buying habits. It's not one of them, and no single business can succeed by taking an altruistic stance as someone else will surely take their place.

Equally, if we don't sell our craft beer to supermarkets, someone else will. We think drinkers should rejoice in the fact that many of these places are now actually waking up to the fact that they have to have some sort of craft beer. There appears to be three main categories of beer in supermarkets. Big brand, like lagers, Guinness and "Smooth" bitters, then premium bottled ales, which largely consists of traditional beer and now there is a growing section of craft beer. It's true, it's there and it is "signposted" with Sierra Nevada, Goose Island, Chimay and some Scottish brewery or other, I forget the name. I'd love Hardknott to be there too.

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1And, I can feel better as I'll know exactly which Scott to shout at. Unless it is my fault, which obviously is very unlikely, but not impossible. In that case I'll probably just take myself to one side and give myself a good talking to.

7 comments:

Phil said...

I can hear the cries now "You're just helping the supermarkets close pubs" and no doubt some of you will want to say "The supermarket is selling at below cost just to get the punters in"

The cry you can hear from this direction is "Where's Booth's again?"

Fantastic news - I'll load up.

Ed Davies said...
This comment has been removed by the author.
Ed Davies said...

How far West do I need to go to find this booths?

Dave Bailey said...

Click for a list of stores

Ed, looks like Penrith for you.

Unfortunately we are not in all the stores. I do have a meeting with the beer buyer in early December, so let's hope we get into all of them after that.

Obviously, asking for Hardknott in any store where we have not got a presence will only help increase the chance of us being listed.

Pastey said...

This is fantastic news, and for a lot of the reasons you state.

Not everyone can get to a decent pub, and not everyone has a decent bottle shop nearby.

It's not as though you're going to stop selling to pubs.

What is a bit disappointing perhaps is the need to write an almost apologetic explanation of why you're doing something like this.

But good pluck with it!

Cooking Lager said...

£1.25 you say? Might treat myself.

Ed Davies said...

Cheers Dave, hopefully Ripon store will have them in for me. Perfect stock up for Christmas.