Port Brewing, The Lost Abbey Terminate Distribution Deal with Stone Distributing

After 15 years, Port Brewing LLC (Port Brewing and The Lost Abbey) notified Stone Distributing last week that it was giving 60 days’ notice and terminating its distribution contract without cause.

In a statement shared with the trade press today, Port Brewing co-founder and chief operating officer Tomme Arthur said his company exercised its contractual right to end its distribution deal with Stone in Southern California. The two companies had been linked since Port Brewing’s launch in 2006.

“Our relationship with Stone Distributing is coming to an end,” Arthur wrote. “In exiting this relationship, we do so respecting the vision, team members and ethos under which this group has represented our brands. We thank them for assisting us all these years in the crowded Southern California craft beer market. Today, we must also look to the future and imagine new opportunities for Port Brewing and The Lost Abbey to find success in this competitive landscape.”

Arthur cited declining sales over the last five years along with key personnel turnover at the wholesaler as “the biggest reasons” for the move.

“It is no surprise to brewery owners that the landscape of distribution is shifting and being driven by the winds of a new consumerism and the brands they are selecting in the market,” Arthur wrote. “Current COVID pandemic hospitality operations also have every company exploring their future sales and a shifted landscape necessitates making changes.

“It is our hope moving forward that Port Brewing and The Lost Abbey brands will continue to find ways to connect with the passionate consumers seeking world class beers from a small independent producer.”

Reached for comment, Arthur said he spoke with Stone Brewing co-founders Greg Koch and Steve Wagner last week about the decision, and each party realized that their 15-year relationship “may not do the things that it used to do.”

“There’s no hard feelings,” he said. “Stone’s been very gracious.”

Arthur declined to name a successor wholesaler for the Port Brewing and Tiny Bubbles brands, as the contract has not yet been finalized. The Lost Abbey brand will likely be self-distributed going forward. Arthur expects those moves to take hold within the next month.

As part of Port Brewing’s exit, the company will buy back its distribution rights from Stone.

Wine Warehouse distributes The Lost Abbey and Port Brewing in Northern California, as well as Arthur’s other brand, The Hop Concept, statewide.

Arthur said he is looking for a successor wholesaler that can be “nimble” and “small enough to focus on” smaller suppliers.

“I think that’s a challenge in the scheme of things because most distributors are built on volume, and most of them are built on getting a lot of a lot of beer delivered in a small place, in that footprint,” he said.

Arthur explained that as Stone Distributing grew in recent years, the wholesaler became more velocity focused. That led to more restrictions on which products it was willing to bring in terms of units and a waning willingness to hold onto product on hand without certain run rates.

“As a small niche producer on the Abbey side, we just got handcuffed on a lot of stuff,” he said. “These days, Mongo [double IPA] has become our best seller on the Port Brewing side, and it’s got a lot of grocery and independent placements that are creating velocity. I think 45% of our total sales with Stone right now are with Mongo draft and cans. So that really doesn’t give us a lot of room to do much else.

“We were getting organic growth there, but there was no programming against the best-selling beer in our portfolio,” he added.

In 2020, Port Brewing shipped 8,800 barrels of beer, down from recent years when the company would produce between 10,500 and 12,000 barrels, Arthur said.

“We picked up a decent amount of volume in cans this year when the pandemic hit,” he said. “But the draft business we lost was pretty substantial. I think we were leaning closer to 60-40 than 50-50. I think that we probably were high fifties in terms of draft and mid- to low-40s on package volume. Obviously, like many places, that flipped pretty heavily.”

Looking ahead to 2021, Arthur said the company’s focus will be on the return of draft beer when possible. He believes that volume will return in California as the on-premise opens up more. The company will also look to build points of distribution for Mongo double IPA and give Tiny Bubbles, a canned sour beer offering, a proper launch after the pandemic scuttled last year’s plans.

“I expect that if the world turns back on come June, July-ish that we could put some pressure on Tiny Bubbles to find homes and lift and things because people might start looking for fun again,” Arthur said. “That’s something we’ve talked about a lot is that when we come out of this, that people are going to be associating outdoors and safe options and indoor safe options with fun. So let’s talk about Brutus being a fun loving guy.”