Expert: Eric Hofer - 1/6/2012

Question
Hi

I am currently looking to export craft beer from the Midwest into Asia.  We have strong contacts in bars overseas who are very interested in serving these specialty craft beers to their expat customer base.  Unfortunately, from some quick research on brewery websites I noticed a lot of the established small brewers state that they are not willing to export their beer or even sell outside of the midwest region.  Is there another direction we should look in to find brewers that will be willing to sell their beer overseas (excluding the major brands of course)?  Other than capacity reasons what are the major reasons a craft brewer would not be interested in selling overseas through a distributor?  Is there anyway to overcome this?

Thank you!

Answer
I'm no expert in craft beer, but here's my 2 cents:-

Exporting has several unknowns which will daunt a small company without much in the way of resources or who see little return on the investment.  Aside from the know-how, there are also the regulatory and taxation concerns.  By definition craft / micro breweries are serving a small area: those in such a business probably don't list "global [brand] domination" among their immediate business goals.  I'd expect they're more into the quality of the product and face-to-face, customer satisfaction.  

If they are only producing enough to supply their current needs then exporting doesn't help them realize more cash.  Instead, adding more demand for the product translates into needing more capacity to produce (or reducing sales to existing accounts - which might lead to losing market share).  While you might take a delivery of 1 or 2 containers, they might chose to add capacity sooner than planned.  You'd have a small risk - perhaps your leads don't pan out.  They'd have expanded, committed to years of extra sales and be looking into the abyss.

There are operators that do have expansion plans.  Sometimes, what I've seen is that they want such at their own pace.  They fear that outsiders won't have their brand's best interest at heart.  Instead, they might believe somebody proposing overseas distribution is in it for the short-term profit.  (Remember, most of these people are passionate first about their product - that's why they're in the business.)  Hence, trust is an issue.  They might fear that you'll destroy their brand, under-price, advertise it differently, associate it with outlets in which they'd not like to be: perhaps silly, but again, remember, these products are their babies.  

Policing a brand, especially outside of one's comfort zone can also put off a potential manufacturer.  

Another aspect to consider is the pedigree of the group proposing the deal.  Being approached by a team that has loads of experience, deep pockets, an existing network will get a different reaction versus somebody armed only with optimism and knowing the lingo.

I hope I've shed some light on the barriers.

To your second set of questions: how would you surmount such?

One thought, it's a numbers game.  You might have to kiss a lot of frogs, but one will be interested in expansion.  

However, there're actions you can take to better the odds:-
- Have a game plan, line up some distributors, work out the general costs, process, etc.
- Show how a particular brand might play out in a new territory
- Assemble the resumes of the distributors you've aligned; set up agreements with agents, distribs, etc.; figure out how you're going to forecast sales, meet targets, etc.
- Model the number of cases / hectoliters you need/intend to shift
- Have some case studies to show where such has proved profitable previously
- Identify how you can reduce the risk (e.g. if they have to add capacity)
- Work out how you'd go to market, advertise, build and operate a promotion budget; utilize the existing marketing materials, etc.

Demonstrate that you know distribution.  Show that you've talked to distributors about the details; know:-
- what their selling systems are; how they incentive-ize staff
- whether they suffer from trade-loading; do "in and outs"; are good at forecasting
- that this product complements their existing line-up
- they have good credit terms (both with their suppliers and their customers)
- are operating in a fiscally sound market

The key: show you know where and how to sell their product such that it'll succeed.  

Hope this helps.