Category Archives: Jolly Good Beer

Keg: All Tied Up

Posted on by
Tied Keg Tap

Tied tap

An impromptu #BeeryLongRead inspired by a little Twitter exchange earlier today. It’s a bit of quickly typed up “brain dump” really… little time for finesse with such things these days. I’m very keen to hear any other views on these things. Always learning, ever adapting…

I’ve spent the last year selling good beer to pubs & other drinks sellers – good beer in any format: cask, keg, bottle, can… cask is by far the larger volume market for me. There is a strong “freehouse” scene in the UK, with pubs that like their variety of beer on the cask pumps. And a strong drinker following for enjoying the variety they supply. (Yes, this is a minority of the overall drinking market, but a significant one.)

So – why, when you walk into these amazing freehouses, do you find on the keg taps alongside the cask a very predictable list of ubiquitous multinational-brewed products: Stella, Fosters, Guinness, Carling… here I offer my observations on this. Take note that a) I’m a newbie in the industry and b) I’m in the industry – and fight my own corner.

Anyway, why the lack of variety? Simple: nearly all keg lines in the UK are tied – including those in “free”houses. It’s an interesting situation really… the UK keg beer market is very much like that in New Zealand described here. [I don’t have a survey or stats to quantify any of this – it is merely observation from a year of working with pubs. I’d be very interested in any real data, or just other views on the topic.]

OK – but there’s plenty of complexity under the hood! The basic principle is this:

Beer company (Heineken say) says to pub: we’ll put all the equipment you need to serve these beers into your pub, we’ll look after it for you, you just have to buy the beer from us.

An attractive offer! Single simple delivery of all your keg products, and a whole load of stuff you just don’t have to worry about. The pricing for the “premium” keg brands is also fairly reasonable, and pubs can make a slightly higher GP on them (for the often higher-volume product). So it also subsidises those pesky cask drinkers who go apecrap if their pint costs 10p more than they think it should. (Spirits are actually better still, I’ve been told by many a pub they’d not be in business were it not for cheap vodka & whisky.)

Tied KeyKeg Coupler

Tied beer line…

Until recently there was very little cause to want to do anything else with keg. There simply weren’t diverse keg beer options on the market – you want ultra-premium, you’ve got -say- Hoegaarden and Leffe… so against the rise of cask ale the big brewers and distributors got themselves very solidly embedded into the freehouse market. And it was pretty much good for everyone. (Yes, there were always a few outliers – bars with knowledgeable enthusiast landlords who get hold of special imports and carved their own niche.)

But now things are changing. Small brewers are toying with keg, led perhaps by BrewDog’s bold positioning of switching over to being keg-only. Keg has various technical advantages – which can be discussed another time – and some folk simply prefer the beer the “keg way”. Usually folk inspired by European and American brewing. BrewDog were far from the first of course – Meantime, Camden, Freedom, and others were forging themselves little keg empires of their own already – with a big focus on supplanting mainstream premium lagers.

Speaking of these lager brewers – they had the strategy that was necessary to crack into this keg market. You’re a small brewer wanting to get your beer into keg, problem: how to you get that keg into a bar? All your locals have equipment owned by BigBrewCo and none of the publicans have the 1st clue about handling kegs beyond absolute basics. Put beer in keg… easy… but what next?

Those who successfully got their kegs into bars knew exactly what: put keg lines into pubs, follow the same model that the pub already understands. We start to see Meantime, Camden, Freedom, etc branded fonts showing up everywhere (in London and the South East at any rate). But this just means more tied lines! There’s a bit more diversity than before, but it’s still mostly “just lager”. The established-keg-breweries themselves provide a little diversity – pale ales, red ales, stouts… but all the same brands and little real “fun” to the beer. “Gateway beers”? Cask is still very much supreme for a tasty pint.

BrewDog’s little keg revolution changes this though – loads of little breweries now put their exciting beers into keg. But there’s a problem: the number of pubs with free of tie keg lines and clued up landlords is relatively minuscule. So now you’ve got dozens (hundreds?) of little breweries all vying for a tiny volume of keg throughput. Mostly relying on a small number of “craft” bars to get beer in front of consumers.

“Craft bars”? To me what it takes to make a pub or bar actually “craft” in ethos is total freedom and no compromise. We see places like the Euston Tap showing up – they know what they want, they don’t want to be tied up, they invest in their own equipment. Ostensibly they’re successful, others follow suite… we’ve now got a small raft of craft venues supporting these breweries. Cambridge 5 years ago probably had zero free-of-tie keg lines, now across 4 venues there are over 30 – and more to come no doubt. But that’s four venues in a city of dozens of cask freehouses. There’s a long way to go.

Coupler Fittings

Simple plastic fittings…

So what needs to happen to keep on growing this free-of-tie “craft” keg beer market? Pubs need to invest… in both equipment and know-how. Both are seriously lacking. I keep coming across pubs that have had free-of-tie keg equipment installed. But with only half the couplers they need, they don’t even know how to change a coupler on the lines, they don’t even have pressure gauges on their gas. They’re heading in the right direction but they need a lot of hand-holding in the short term. That’s what we have to offer – myself as a distributor, breweries to their direct clients. I fully support all keg beer I sell because this is necessary. I drove 80 miles to replace a simple plastic fitting last week – that’s how dire the state of knowledge in the industry is. The tied-keg-line status quo has done a good job of keeping landlords clueless and dependent.

Which raises that point too: the vast majority of publicans really don’t have a clue. After decades of fully supported keg lines the entire keg system is a black box to them. We need to help them skill-up, and really could do with a useful manual of keg system operation. I’ve done my BIIAB ABCQ – and it’s utterly basic, it teaches a reliance on Big Beer – which is of course relevant & correct for most of the current industry. We need something a bit more technical… I believe Cloudwater may be working on something in that direction. For the most part maintenance and operation of keg systems is actually pretty simple stuff, once you’ve got on top of some basic principles.

What’s next? Publicans need to be convinced that it is worth investing in the equipment. Because if I own the equipment in a pub I’ll pretty obviously want only beer I sell going through it – this is just sensible, there’s a cost to be recovered. What I want to do is support pubs in taking ownership of their own equipment, help with installs if needed, and then as part of the service of selling them beer offer full technical support – folk like me and all breweries selling kegged beer need to do the same to make it a viable option for pubs.

We need to get smart and start doing this now. Because the alternative future will be keg lines under the control of medium sized operators. Another recent conversation on Twitter I had was about Adnams. They’re aggressively going after the craft-curious market, sticking their kit in, and creating a craft-monoculture of Adnams/Camden beer across these eastern parts. Now I like Adnams and quite enjoy their Dry Hopped Lager. But this particular practice is pretty damn close to “craftwashing”. We’re getting a growing mid-tier of pseudo-craft-bars with an unchanging range, including craft beers like Bitburger… yes, I really have seen this billed as “craft” in several bars. (Camden and Adnams both deserve a place in a craft lineup… but unchanging lines of either and nowt else isn’t where it should be at.)

From both a personal and a business perspective it is very disheartening to have a good conversation with a pub about getting free of tie keg up and running for them, then to find a fortnight later that rather than that they’ve got the same two beers from Adnams as everyone else. The offer that the likes of Adnams has for these folk is simply too good… the price of stuff like Dry Hopped Lager is good too, as you’d hope. Adnams aren’t “the enemy” per se, they’re very nicely building their own market and if an Adnams tap is replacing a Fosters tap this is a step up. But… y’know… ho hum.

I’ve considered going the whole-hog myself, simply paying to put lines in, tied to myself. But it is so against my own world-view that I’m hesitant… but it is tempting.

There’s a long way to go on this. I’ve done my first full keg install for someone this year, and hope to do more – targeting the micropub sector a bit. I’ve spent a lot of the last 6 months helping folk understand keg, obtain couplers, and handle outlier support cases like “venting” various forms of keg. (Making up for brewery screw-ups, which comes and in hand with the micro/craft sector unfortunately.) It certainly isn’t trivial.

If we all support pubs in this way between us we can build the free-of-tie keg market. Giving publicans and drinkers more options – which is what it is all about in my opinion. It’s what I’m here for anyway.

Sadly necessary disclaimers, because everyone always seems to think that anything I say is all-or-nothing or black-and-white:

  • I am NOT saying that all bars and pubs need to be “craft beer” bars/pubs. This is very very far from what I believe.
  • I do NOT think that Fosters/Stella/etc need to be eradicated from the face of the Earth. Folk like drinking these beers, they’re the largest part of the beer industry, they’re not going anywhere and they have their place.
  • I LIKE ADNAMS – my favourite regional brewer by far, and by securing lines in pubs what they’re doing is simply good business and an attractive deal for publicans. If I were them I’d do the same, and they’re actually a bit “loose” with their tie – to my benefit!
  • I don’t claim that keg is superior to cask, I’d not claim the reverse either – they’re different and I believe both have their place.
  • I simply want more diversity in a small number of pubs and bars, and I see their lack of access to free of tie lines as an obstacle to my desired level of diversity. (And yes, I have a business interest in this obviously.)
  • Another topic: microbrewery keg pricing… a sticky issue and a definite barrier for publicans.
  • And the simple fact is that fancy keg beers are a harder sell for the publican. It takes a bit more work than shifting a pint of Stella. It’s definitely not for everyone… yet look to the “craft beer bars” and observe their apparent success. Why not give it a try?

Route to Market

Posted on by

OK, I’ve got a general whinge to get off my chest. It’s about sales and route to market and the seeming immaturity (infancy?) of the wider British craft/microbrewing market. Take it with a grain of salt if you will – what would I know? I’ve only been in the market for 9 months. But as in everything I do my natural tendency to analyse & optimise is insuppressible. However, as any fellow computer scientist knows, obvious optimisations often aren’t as useful as they seem. So perhaps I’m barking up the wrong tree… I don’t feel particularly well qualified to be talking about these things… but I will anyway… I lie awake at night with all this sort of crap running through my head and I need to purge it somehow.

 

Small operators like myself are not simply shopfronts for beer. We’re very much unlike online retail for example, who have a wide customer base across the UK. To sell your beer we do a lot of legwork going out forming relationships with pubs, promoting beer at both a time and financial cost to ourselves. So if we’re doing all this hard work on behalf of a brewery and that brewery then go and sells to someone competing on the same turf it costs us – to small operators like myself it can be a huge blow to morale to boot. Bypassing the distributor and selling direct is very similar… we’ve got your beer into there, they’ve liked it, and after that effort of promotion and logistics (and financial risk) on our parts we’re cut out of the picture. Thanks folks!

I understand why bigger pubs may do this. If they get the same price from the brewer as the distributor then it cuts maybe 20p per pint from their costs, which could be as much as 60p to the consumer after being amplified by pub GPs. The onus here is somewhat on the brewery – the cost to them of effectively outsourcing sales to the distributor ought to be a sufficient discount on the beer to make it not worth a pub ordering direct. Across distribution for regions UK-wide (6 distributors, say?) the brewery is definitely saving themselves the salary of at least one full-time sales body. This secures the distributors’ route to the big customers, which in turn makes it possible for them to keep stock to shift to the wider market of smaller customers.

I’d like to see distribution valued higher by small breweries… of course I would say that though, I’m a distributor. So rather than just put that out there, here’s a couple of reasons this is good for you – the brewer:

  1. Marketing: You get an actual representative – someone keen on and loyal to your “brand”. If the distributor has the security of exclusivity then they can safely invest more in growing their business around your beers. No exclusivity contracts are needed, just a good set of ground rules laid down to define the relationship.
  2. Sales: You have a reliable go-to contact in a region that you can direct people to for your beer. If you have a willy-nilly bunch of distributors out there who can you point a potential new outlet to? All of them? Do you think pubs really want to chase your beer with 3 different contacts? Will those 3 distributors see buying a pallet of your beer as too risky in case one of the other 2 does as well?

Sure – we may start out as a relatively small account and also shifting a pallet to the chap next door may be quite tempting to a brewery keen on growth. But think long-term. Be committed in your relationship with one of them – to buy their loyalty and then ride with them as they achieve sales growth with your beer.

Further to that I’ll add why I think *I* am the guy you should go to. I care passionately about good beer, I’m no mere sales channel. I am versed in cellarmanship, beer care, and have a lot of beer knowledge. I work hard to ensure your beers go to the right venues and are served in good form. At our end everything is received and kept in temperature regulated storage until delivery – this is expensive in rent and electricity (as you as a brewer probably know).

Some breweries understand all this. Unsurprisingly if you knew which they were you’d be looking at a list of some of the most sought-after craft brewers in the UK. These guys value their route to market and through that relationship build a better sales channel. At times I resent it because I really want to be able to get beers from some of these guys to my customers but I cannot because they’re tied up with other folk in the region. But I respect this too… these guys are doing unto their distributors and I would have my suppliers do unto me.

Also, I’m a very small operator currently, only just starting out. So I can see why you’d want to sell to someone more established – the term “ability to execute” comes to mind. My small size makes my “ability to execute” low – thus I come with my own risks. (Who wants to do a Gartner Magic Quadrant for UK beer distribution?) Then again because I’m small I’ve got more personally invested, and more riding on making those breweries I work with successful for me. I’m also too small to deal with *all* the breweries I want to of course. So by all means if I can’t shift your beer look elsewhere. No worries at all with that. (I wish I could do all the breweries I actually have access to… but it is impractical at my scale unless I just want to be exist only in the crowded “guest ales” market.)

Anyway, please – take note – distribution is your sales channel to the wider UK market. Foster good relationships with your distributors, let them flourish with your brand – your trust in them will be returned by their willingness to invest in representing your brewery as best they can.

 

This is a bit of a wild thought-exercise on my part. And perhaps I just haven’t a clue. This is a most definite possibility. But something strikes me as broken about the way things work currently. I started doing this as the only one in my region focusing on what I consider the “craft sector”. Within three months 2 other distributors had shown up, both started by folk signed up to my mailing list. Both approaching many of the same breweries. Which makes no sense – why sell the same stuff? There’s loads to choose from out there! I should be flattered perhaps, I’ve clearly chosen the best… but that is a small consolation for ending up in some daft & unviable “price war”. Don’t get me wrong – competition is a fine thing, and part of how any market works. But forging stable business relationships is part of how markets work too. It’s just common sense, no?

I cannot of course separate the thought process from my own involvement so like any such a thing is it a POINT OF VIEW. And points of view are subject to bias and quite often not well grounded in fact. At the same time I have thousands of my savings invested in a business with which it thus is strongly in my interests to ponder the viability of and act to strengthen said viability as best I can. Personally I wish we could all, as much as possible, work together to grow our overall market… it’s such a tiny tiny slice of the beer pie as it is. But perhaps that’s just foolish… if there isn’t enough pie someone’s gotta starve.

I’ve made plenty of mistakes of my own in the last 9 months. Too many to list. A major one is not saying “no” often enough – so simple, but so hard. In 2015 I hope to find focus…

I may have simply got into a bung market! C’est la vie.

Who gets how much of your beer £?

Posted on by

EDIT: 2014-05-03: I have adjusted the figures in this post to not use the minimum GP I’ve been applying to beers but something more normal/average – I’ve moved it from 11.11% to 17.24% but I’ve been told I ought to be targeting 20%. As I stated I’ve seen margins spanning from as low as £5 to £15 out there and I sort of went for the middle to start with (since I’m not in London). I’m a newbie at this… on a steep learning curve.

Inspired by my new reality of being piggy-in-the-middle between pub and brewery beer pricing I’ve knocked up the following “infographic”… OK, it has minimal “info” and my “graphic” skills are suspect at best, Kat has drawn me a prettier version of the infographic now! But here we are, where does the hard earned money that you spend on a pint of beer go:

Cost of a Pint (5% Distributor)

I have clumsily tried to show the progressive beer duty here, in steps from the full relief rate through 10k, 20k, 30k, 40k, 50k hectolitre breweries to the full rate on the right. (In reality this is a gradual increase dependant on brewery production – not stepped.) These figures are based on a 4% beer and as both the price of the pint and the duty will vary with the strength one could generate a variety of different versions of the above – however I believe the general gist of the ratios shown for my “£3.60 4% bitter in Cambridge” example will hold across a broad area and range of beers.

Of course if there is a PubCo involved then there’s a massive chunk missing from this that takes a big bite out of the “pub” section. Probably up to 50% of it based on the pricing I’ve heard from tied publicans I know. (Which makes me all the more perplexed by free-houses who pop a vein over £5.)

Van load of casks

Van load of casks

The format of this is inspired by Yeastie Boys Stu’s lower-tech but far more characterful infographic shown here: What’s in my beer? Stu breaks it down further than I have, although remember he’s in New Zealand and his breakdown is focused more on the bottle market so is rather different to the UK situation. Freight costs in my case are part of the brewery’s costs in getting beer to me and part of my costs in returning empties to them, it can get more complex in the case of using eCasks too. Each of the “brewery”, “distributor”, and “pub” sections could be broken down further in similar ways. Everyone needs to rent/maintain facilities, pay for consumables, pay staff, etc. In fact Dave Bailey of Hardknott fame has contributed this level of detail from the brewer’s point of view to the Guardian: Beer: how much would you pay? I don’t think I’ve seen a breakdown for pubs but I expect high rents and high wage bills to consume a large chunk of their share.

Kegs!

Kegs!

The “distributor” chunk is based on a mere £7.50 £12.50 margin on a cask – which is what I’m using in many (but not all) cases. This varies though – and the highest average margin I’ve seen is £15 down in London. But the retail prices are higher at the pump in London too, so the higher margin probably doesn’t change the total percent taken by the distributor. (Not to mention that the costs of operating in London must be even higher than Cambridge!)

Why did I put all this together? Mainly to show the “distributor” band there. That’s my bit… and when some landlord dismissively tells me “you need to sharpen your pencil“, this is why I’m inclined to tell him to go bugger himself. Of course I wouldn’t say that … even in the face of rudeness… sorry, I say, I don’t think we can help each other. The only way I can offer lower prices is by buying cheaper beer. As it stands I’ve moved my minimum margin from 3% to being closer to a whopping 5% of your pint… or 18p of your £3.60. Reducing the publican take to a meagre £1.96 from £2.04. Eyebrows will be raised. [2014-05-03: Numbers modified slightly. Originally the numbers and graphic were based on the lowest margin I’ve used -£7.50 per cask (3% of retail value). This is too low… bear with me, I’m new to this. Also, to avoid confusion: the 5% is of the retail cost of the pint and represents a GP to me of about 17.25%.]

Weird Beard

Weird Beard

Don’t take this as a negative post, my customer base is building and I’ll continue to try and do what I desire to do… bring different and interesting beer into my area. I’m not trying to rip anyone off, I cannot “sharpen my pencil” as I’m only working with a stub of charcoal here. If you’re interested in beer and beer excites you then I think I have something to offer… in effect I work for you to get hold of the beers that the national beer scene is talking about, enjoying, and wanting to get their hands on. I have a fairly broad coverage from what’s hot in CAMRA/traditional circles to what’s turning heads amongst craft beer junkies. I feel I’ve come to know the UK beer scene pretty well at several levels and all I really want to do is spread the love. But… if beer is a replaceable commodity of no individual character or value to you then I’m afraid we aren’t going to get along.

Finally – I’m a big believer in “openness”, I have hippy commie open-source roots, I’ve spoken of many variables in the text around the infographic… so, here’s my little spreadsheet: Who gets what from your beer money? You can duplicate this and play with the numbers as you like… or spot the errors in my calculations? (If so then please let me know!) Cheers to Geoff Latham of Pope’s Yard brewery for eye-balling my spreadsheet for me – however I do take full responsibility for any errors that snuck through of course!

Know any pubs in the Cambs/Herts/Beds area that you’d like to have some of my beers at? (Yes, I need to update that list…) Think they’re the run by the sort of people who’re not after the cheapest thing on the market? Point them my way… or point me their way… :)

Summer Wine

Summer Wine

[Edit: 2014-05-03: People have pointed out that this might make the pubs look “greedy”. This is not the intention at all! Yes pubs have a high GP, but they have huge costs as well. There are some numbers on the costs of running a pub available at the link provided by Jon in the comments. It is also worth noting that for a pub a mere 5p lost on a pint isn’t completely trivial… say a pub shifts 500 firkins of beer a year, 35000 pints… £1750 lost profit. And that’s a small pub. My thinking is that in the right pubs with the right customers that 5p cost can be passed on to these beer-loving customers who are willing to pay it for a better beer and better beer variety. Not all 4% beers are made equal so why should they all be priced equally? More on this another time…]