For Pennsylvania beer distributors, split decisions paying offRegulatory change in beer packaging enables consumers to try beers from small-batch craft breweries, including those in their own backyard
Less is proving to be more this year.
Thanks to a change in state law that took effect in the beginning of the year, distributors can now sell any size packaging they want, down a single bottle or can. Splitting up cases means more work, but it can also be more profitable as consumers are more apt to buy higher-priced beers that they were meaning to try but couldn’t afford.
The regulatory change also is encouraging consumers to try beers from small-batch craft breweries, including breweries in their own backyard that may be hoping to grow. Those small beermakers could see a boost in production as six-packs, and even smaller packages, become the norm at distributors.
“This really benefits the local craft brewer,” said Jon Norman, co-owner of Lehigh County-based Funk Brewing Co., which expanded to Elizabethtown in 2015. “It makes it 100 percent easier to try (craft beer).”
Last month, Funk added 10 counties to its 11-county distribution area, bringing its beer to the southcentral region and up into the Williamsport area. Breski Beverage in Swatara Township is among the new locations where people can now buy cans of Funk’s brightly colored Silent Disco India Pale Ale and its Citrus IPA.
A four-pack of Silent Disco at Breski costs $11.99. At that price, more people will probably try it. A full case is more than $60.
But it’s not just a lower price that attracts some buyers. A unique design on a craft can or bottle can help a beer stand out. The packaging is like a billboard, Norman said.
Regardless of what brings in buyers, the more places they can find Funk’s, the more likely people are to visit the company’s taprooms.
“It’s got to be helping their business,” said Tom Mehaffie, longtime owner of Breski Beverage, which undertook significant changes this year to expand its beer options.
The store added new shelving and racks to accommodate smaller packaging, which also meant more barcodes to scan at the registers.
Mehaffie also put in a 12-tap filling station for growler and crowler sales of specialty beers, where beer is sold in 32-ounce and 64-ounce containers. That change is broadening purchases for consumers who came in for other takeout beer.
“The whole segment has changed,” Mehaffie said, citing more interest in not just U.S. craft beers but also expensive imported beers, large single-serve cans of domestic beers and malt liquors. “People who don’t drink a lot have a lot of available options.”
Worth it so far
All of the improvements have added to the cost of doing business because they eat up more time and require more employees. But the investments have been worth it so far, Mehaffie said, though he did not disclose how much he spent.
His customer base seems to be growing, along with his sales.
Mehaffie is now planning to expand his Eisenhower Boulevard operations, which span about 10,000 square feet, to include more retail and warehouse space.
But not everyone in the beer distribution business is in the same situation.
The barrier to entry for smaller breweries looking to distribute outside of their own brewpubs and tasting rooms has become much higher.
Space was already tight for many distributors before the law changed, though they reconfigured some areas to make room for coolers and shelves to add more beer.
Many can’t add to their buildings to make space for more brands and would likely have to replace something to take on a new beer.
“It was easier before to get (new brands) into a market,” said Frank Pistella, who owns a Pittsburgh distributor and serves as president of the Malt Beverage Distributors Association of Pennsylvania. “We have more SKUs than we’ve ever had so there is less shelf space available.”
With the expansion of takeout wine sales in Pennsylvania under other legislation passed last year, Pistella said he also sees less beer space in grocery stores.
However, some beer distributors are finding it hard to compete with supermarkets on price and one-stop shopping.
Beer distributors now have to take a hard look at what is actually selling and adjust, he said. That may mean even less space dedicated to 12-packs and cases of beer.
“Right now, we’re still getting our feet underneath us,” Pistella said. He expects to redesign parts of his store again this fall.
Rich Pluta, the owner of Newport Beverage in Perry County, agreed that there is an adjustment period, though he is still selling a lot of cases of big domestic brands, including Miller, Coors and Budweiser.
Other formerly strong sellers, including 12-pack craft varieties, have faded this year.
“They have suffered hard because people can do their own mixes now,” he said. Newport Beverage is one of many distributors to offer mix-a-six selections.
Specialty and rare beers did not regularly sell by the case before, he said. Steep price tags that pushed case over $100 and $200 were the main reason.
But four-packs and larger single bottles of those same higher-priced niche beers are now enticing consumers, Pluta said. “My dollars are up for the year.”
Asked whether he’s selling more beer by volume, he’s not sure.
“We’re selling better beers and the consumer has loved this,” he said.
So the size of the pie may be the same. It’s just being cut differently in favor of smaller craft brands. With more liquor licenses being sold to supermarket and convenience-store chains, especially expired restaurant licenses auctioned off by the Pennsylvania Liquor Control Board, the market will continue to evolve.
“I think craft brewers in Pennsylvania are really excited to see what happens with Sheetz, Wawa and Rutter’s,” Norman said.
It’s also possible state law will change further as lawmakers in favor of a private-sector alcohol market look to chip away at the state-run liquor system with additional reforms.
Lawmakers have floated legislation allowing takeout sales of hard liquor at places that now sell wine and beer, along with wine to-go at beer distributors.
In addition, there has been chatter about creating a new class of liquor license for large retailers, potentially called a “G” license for grocery stores, to help control the cost and availability of licenses for small restaurant owners.