Terms like partnership and collaboration get tossed around a lot in craft these days, but here’s one of the more imaginative deals we’ve seen between two small producers in recent months.
Denver’s Stem Ciders, which recently signed a distribution agreement with Breakthru Beverage for coverage throughout Colorado, has partnered with Fort Collins-based craft beer maker Odell Brewing for sales support across the state.
Similar to a traditional broker relationship, the smaller Stem Ciders will gain access to Odell’s sales force as well as its inventory and customer relationship management (CRM) software programs in exchange for a fee.
According to Odell chief sales and marketing officer Eric Smith, the brewery will work together with Breakthru Beverage, which also distributes Odell products in parts of the state, to identify retail accounts where both brands could benefit from a coordinated sales effort.
The two companies hope to prove the model in Colorado and eventually roll it out in markets where Odell products are already sold, as well as states where both brands are not currently available, Smith told Brewbound.
The benefit for Stem Ciders, which produced just 1,200 barrels of cider in 2015, compared to about 110,000 barrels of beer for the larger Odell, is pretty clear: paying a company like Odell for access to a built-in network of sales representatives is a cost-effective method of scaling the brand without having to make a large upfront investment into personnel and software.
“We’re very excited to have Odell as our partner, and to be representing the craft cider category alongside such an iconic brand,” co-founder Eric Foster said via a press release. “As a leader in the craft beer industry in both quality and brand, Odell has been smart about growth in a way that aligns well with Stem’s own company values and trajectories.
But what’s in it for Odell?
Colorado alcohol laws prohibit licensed beer companies from producing hard cider in their breweries, according to Smith, meaning that even if a retail account expressed interest in purchasing a cider product from Odell, they wouldn’t be able to provide it without investing in and launching a totally separate business.
That wouldn’t ordinarily be much of a concern, except that the state’s largest craft beer producer, New Belgium Brewing, recently rolled out its own line of hard cider called Side Trip Ciders. Those products are produced at New Belgium’s new facility in Asheville, NC., allowing the company to creatively sidestep the stricter production restrictions in Colorado.
So, by partnering with Stem, Odell sales reps have another weapon in the ongoing fight to secure rotating tap handles and maintain space on crowded store shelves — something that has become more important now that one of its largest competitors is bringing a cider product of its own to market.
It also doesn’t hurt that Odell already works with Breakthru Beverage in many parts of the state (except for its own hometown of Fort Collins, where it self-distributes, and in the areas covered by Central Distributing and Orrison Distributing), and a partnership with Stem Ciders could help encourage Breakthru sales reps to give the Odell brand increased attention.
“We hope it might open up some doors, especially with Breakthru Beverage,” said Smith. “Their business is heavily weighted toward liquor and wine, and maybe a cider product opens the door for beer and gives them another reason to get in front of the buyer.”
Outside of Colorado, the tentative plan is for Stem Ciders to simply “fold into” Odell’s pre-existing distribution network, Smith noted, though he was careful to point out that Odell will not serve as Stem’s master distributor and that there was no guarantee that existing Odell wholesalers would sign agreements with Stem.
These kinds of arrangements are not uncommon in the craft space, however they have traditionally been negotiated between larger entities. Just last week, Craft Brew Alliance announced a reworked master distribution agreement with Anheuser-Busch InBev, one that will continue to give the smaller CBA unrestricted access to ABI’s network of U.S. distributors in exchange for a 31.6 percent stake in the publicly traded craft beer company.
And just last year, Pabst Brewing Company inked a deal with Vermont Hard Cider that gave the larger Pabst the exclusive rights to distribute, market and sell all of Vermont Hard Cider’s domestic brands.
In both of those cases, however, there was buyout language included in the agreements, and that’s something that doesn’t exist in the deal between Odell and Stem Ciders, Smith added.
Stem Ciders still only expects to produce about 2,500 barrels this year, a company spokeswoman told Brewbound. So while the immediate financial benefits to Odell’s bottom line might be small, this deal does illustrate the ongoing attempts craft brewers are making to remain competitive in an increasingly more crowded and complex environment.