In a pointed rebuke of the state’s large wholesalers, the owners of Everett-based Night Shift Brewing are launching their own beer distribution company, promising to offer breweries friendlier contracts, more personal attention, and deliveries of fresher brews.
Night Shift Distributing began operations last week at a cold-storage warehouse in Chelsea. For now, the company is only delivering Night Shift beer to local restaurants, bars, and package stores, but executives said they’ll soon finalize deals to market and sell other brands. Eventually, they hope to bring beers from as many as 25 craft-beer-makers to retailers across the state in a new fleet of refrigerated box trucks.
The new company’s pitch to breweries is straightforward: We get it, they don’t.
“Craft brewers have been able to come up with new ideas, new ways to exist as a business, fresh takes on beer styles, and so on,’’ said Night Shift president Rob Burns. “But these distributors have been around for decades. They love the status quo. There hasn’t been anyone trying to reinvent the distribution side of the beer business.’’
Burns said Night Shift Distributing will distinguish itself by not engaging in practices he and other brewers claim are common at existing distributors: favoring some brands over others, blocking unhappy breweries from switching to another wholesaler, and paying off bars to put certain brews on tap. He also touted Night Shift’s large network of existing retail customers and its quality-testing lab.
Night Shift has spent about $1 million on the new distribution operation, Burns said.
The launch is, in part, a business play meant to sustain Night Shift’s impressive growth spurt: the four-year-old company is on pace to turn out 10,000 barrels this year after producing just 700 in 2013, and plans to double production next year. Bringing other brands into what had been a self-distribution operation will help offset the cost of getting all that beer to customers.
But Night Shift Distributing is equally an outgrowth of the increasingly tense and bitter relationship between Massachusetts breweries and distributors.
“This is a direct commentary on the state of the industry right now,’’ Night Shift co-founder Michael Oxton said. “We’ve seen too many brewer friends suffer under poor distributors . . . [having] to shrink or shift their business model to stay alive.’’
Bill Kelley, president of the Beer Distributors of Massachusetts, welcomed Night Shift to the marketplace.
“We expect NSD will experience the challenges of running a multi-brand distribution business effectively, efficiently, and profitably — without giving any unfair preference to the brands from their own brewery — to the detriment of their competitors and new partners,’’ Kelley said in a statement. “While it’s peculiar to see this announcement being used as a vehicle to attack the very industry they are entering, we are hopeful that one day NSD achieves sufficient growth and success to be considered for membership in this association.’’
Wholesalers’ business practices, corporate culture, politics, and overall ethos are distasteful to some small brewers, who profess to believe in quality over profits and a rising-tide-lifts-all-ships approach to competition.
Mutual resentment peaked this summer, when lobbyists for the distributors killed several legislative proposals to change the state “franchise’’ law that effectively binds breweries to their distributor for life after an initial trial period. Brewers want to loosen the restriction, complaining that distributors hoard small brands to keep them from competitors while making little effort to sell them. Distributors argue the law protects their risky investments in marketing little-known breweries.
In July, the distributors blocked a watered-down bill that simply called for further negotiations. Brewers walked away fuming.
Night Shift won’t enforce the franchise law with its suppliers. Burns and Oxton say if distributors had to compete for breweries’ business, prices would go down and breweries would be treated better.
With the franchise law still in place, Night Shift Distributing will have little ability to poach breweries from other distributors. It must look instead to partner with local breweries that haven’t signed up with a distributor, or out-of-state breweries looking to break into Massachusetts.
Though it’s unusual, Night Shift is not the first brewery to start a distribution company. Stone Brewing, in California, launched Stone Distributing Co. in the late 1990s after local wholesalers declined to carry its beer.
Today, the venture sells numerous craft beers and is a big part of Stone’s overall business, founder Greg Koch said. Still, he cautioned, it was a long road to success, partly due to competing distributors paying cash to bars to replace Stone Distributing tap handles with their own — an early example of the “pay-to-play’’ scandal currently roiling the beer industry.
“It was not unusual for bounties to be placed upon our tap handles,’’ Koch said. “There were — and still are — anti-competitive practices in the marketplace.’’
Craft Collective, a small Stoughton distributor founded last year, appears to be the only other Massachusetts company attempting a similar business model to Night Shift Distributing. Its chief executive, Adam Oliveri, said he makes a modest profit hawking brews from 20-odd craft breweries around the Northeast. He welcomed Night Shift’s new venture.
“I think it’s a good thing . . . that people are trying new things,’’ he said. “People want to try new beers, and you’ll get more of that if there are more smaller distributors scouring the region and the country looking for brewers doing awesome stuff.’’
Oliveri said he’s received calls from several breweries asking if they could get out of agreements with distributors. While allowed if a distributor has broken the law, the process is cumbersome and rarely invoked.
“It suggests breweries . . . would leave if they had the option,’’ he said. “It’s a cultural mismatch, and that’s where companies like ours can step in.’’
Dan Adams can be reached at firstname.lastname@example.org. Follow him on Twitter @Dan_Adams86.