Rumor Mill: The Distribution Merger

At last night's inadvertently well-timed Brewer's Guild event, I had the opportunity to chat up some folks about the Columbia-Mt. Hood merger. What I have to report doesn't exactly rise to the level of real reporting, but I think it's good enough for blog work. The news was too recent for people to have formed solid opinions about it--and of course, no one knows the actual effects yet--but there were some unexpected observations. No one wanted to go on the record yet (one brewer, adopting a comically glassy-eyed look and robotic smile, said something like, "I am perfectly happy with our distribution and look forward to a long and fruitful relationship with them"--evidence, if any was needed, that these relationships are a bit tetchy), so that's why I'm calling this stuff rumor. Take it for what it's worth.

Assumptions
Based on my previous post, you can imagine that I went in thinking this merger was going to be bad--at least for small breweries. I figured that a broader distribution network would streamline systems, create efficiencies, and further homogenize the market. I could imagine some benefit for mid-sized breweries that had already gotten some city market-share, like Caldera and Terminal Gravity, but it seemed that breweries like Roots--which is about to install a bottling line--might be screwed.

Craft Glamor
Well, it turns out that there are some currents in this distribution game I didn't anticipate. Craft breweries are hot right now, whilst the macros are dull property, flatlining or contracting (especially in Oregon). Distributors looking to increase their business have nowhere to go but craft beer. This has led to an interesting phenomenon where Maletis, erstwhile A-B distribution behemouth into whose wide channels Widmer once bought, now represents such wee players (and I mean that only in terms of volume, not quality) as Ninkasi and Old Lompoc. So it's possible that a shakeout won't cause breweries to fail so much as realign.

CoHo Was Already Big
In the old prescription, Mount Hood was the little guy, Columbia the "mainstream craft" distributor, and Maletis the big dog. But Mount Hood now has contracts with Sierra Nevada, BridgePort, and Full Sail. It also has macros Coors, Miller, Pabst, and Henry's. Columbia has Pyramid/Portland, Anchor, and a bunch of imports and smaller players. It also has Miller's line. In other words, these two were already big business.

Gas Prices?
Someone pointed out that diesel prices may be a factor here. Diesel is currently selling at just south of five bucks a gallon, which means higher costs which likely disproportionately affect the smaller distributors. (If I'm wrong on this, I suspect the good professor will clear up my misunderstanding.) In any case (I think my econ is on solid-er footing here, any efficiencies that can be gained in the system will reduce miles and costs. This merger will create a two-state network, and must surely reduce the overall miles beer travels.

That's the scuttlebutt for today. I've included my email above, so if you're reading this and you have any inside info and want to talk on or off the record, drop me a line. I'm keeping my ears open, and I suspect the real reporters will be giving us some news soon.