Beer Distribution 101 - or - Why we don't have "X"

I got a comment from Bridger on a previous post inquiring about distribution practices. Rather than just bury my response on a comment page I thought it would make a good topic for a post of it's own.

Bridger's comment/question:

Chris, perhaps you've noticed that beer distributors get a big chunk of the profit from bottled beer (I'm sure you've noticed). In Portland lots of the best beer is made in the neiborhood, maybe this resrictive relationship could be bypassed. I'm sure you deal with this everyday, and I don't know much about the busines contracts that many brewers probably have with their distributors, but it would be cool if you guys sold bombers from Laurelwood, Lucky Lab, Walking Man, Tugboat etc. that might not have distribution contracts setup. Maybe economies of scale inhibit small, local distribution, but it would be cool to be able to choose among local microbrew bombers at one shop, and the distributor's usual cut could pay for gas on a weekly drive around Portland.

Here's my response:

As much as I'd love to carry beer from Lucky Lab, Roots, etc, it's pretty much impossible until they meet three requirements.

1. They need a bottling line. Unless the bottle is "counter-pressure" filled on a bottling line (meaning preflushed with CO2) it will go stale in less than 5 days. When places like the Lucky Lab fill bottles from the tap they get a bunch of oxygen in the mixture and the beer loses its flavor and starts to taste crappy within 3-5 days.

2. Labels. If we want to legally sell beer from places like the Lab and Roots they have to get "real" labels approved by the BATF and have the beer approved for sale by the OLCC. If you include the cost of paying the artist, printing the labels, and all the legal fees associated with the approval process it can end up costing $500 or more per label. They'd have to sell a couple hundred cases of each brand/style to justify the added cost.

3. They have to produce less than 1650bbls/year. OLCC regulations state that any brewery with an annual production of 1650bbls (3300 kegs) or less can "self distribute". Anyone who produces more than that HAS to use a distributor. I don't have numbers handy, but I'd wager most of the breweries in town are over that number (Mash Tun and Tugboat being 2 known exceptions), so even if they did bottle I'd have to buy it from a distributor. One other related, minor issue is transportation. If they don't use a distributor they have to hire a driver, buy a truck/van, insure the driver and vehicle, and pay $3/gallon in gas to deliver it to us.

I work hard to support local breweries when they become available, and I'm proud that we were one of the first places to carry Alameda's beer and Hot Lips' soda (brewed by Roots), but the brewery has to do some legwork on their own before I have any choice in the matter.

Hopefully this clears up some of your questions regarding why we carry certain products and not others. If anyone has any more insight on this topic, especially brewers, I'd love to hear it. My knowledge is limited to what I've read from the OLCC regs and conversations I've had with a couple brewers in town, so I wouldn't be surprised if I got one or two facts wrong.