What’s just as important as making good craft beer? Making sure it’s available to as many people as possible.
The three-tier system was established after the repeal of Prohibition in 1933 and not much has changed. An organization called Liberation Distribution (LibDib) is offering what it calls the first three-tier compliant web-based platform. LibDib creates an opportunity where makers and buyers can work directly together, thus giving restaurants, bars and retailers access to a larger variety of boutique craft libations.
Launched on March 22, the San Jose based company has over 250 accounts in California so far, and have moved onto New York.
I spoke with Cheryl Murphy, LibDib’s founder and CEO:
What prompted you to start LibDib?
It’s really crazy, just all of the industry consolidation that’s happening across all three, ya know, wine, beer and spirits; on the distributor side, that’s kind of what got me into doing what I’m doing here. I spent 20 years in the wine business; managing wholesalers…could never get their share of mind. And understandably so, they, especially when consolidation happens, they gotta’ pay attention to where their money is coming from and my winery was not big enough to really matter.
So, every year I would make numbers or a distributor of mine would go out of business or they’d get acquired and then we would be at the bottom of the wrung at a giant distributor. It was like pulling teeth and I kind of had a little too much to drink one night when I was with my dad, who was my boss at the time. I was working at our family’s winery.
And I said, ‘ya know, I cannot – you can’t do this based on the industry’s conditions. How can we be successful?’
When you take control of your own destiny, as a sales person, as a brand, is when you can be successful. But the problem is when you have a distributor, in between is beholden to larger companies, you can often, even though go out and get your own places and get your own sales, sometimes the distributor is beholden to other people so it’s not going to be top of mind to keep those placements or take those orders.
My whole goal is how can we facilitate legal three tier sales, I want to make sure that’s really important, we are part of the three tier system…But how can we enable small breweries, wineries, distilleries to do business with other small businesses, grocery stores, bars, restaurants, where there’s thousands and thousands of them, without a giant company in-between.
The way my model works is that we built a two-sided web platform for the maker, what we call our supplier, where they can go in, put all their materials online, sales materials, POS, videos, social media links, everything about their brand…then they can buy right then and there.
As a distributor, we collect the money. We pay the maker. We pay the taxes. We do all the things we have to do as a distributor. We take half the margin. So, that’s anywhere from 15-20% of whatever product you’re talking about. And the maker is responsible for delivery.
It’s been really interesting so far. A couple of the breweries that we have, they were self-distribution. But now we’ve kind of brought them back into the three-tier system because we’re taking care of a lot of the things that they don’t want to do.
They want to go out and sell their brand. They want to make their beer. But they don’t want to collect. And they don’t want to invoice. And they don’t want to do all the things that are just a pain to do. So, we’re trying to make it easier for those guys, and we’re making it easier for the account side, cause the accounts like to carry small production craft products. But they don’t want to write 100 checks every month….
Small craft products don’t necessarily fit with the distribution, the current model of distributors. They’re not going to make enough money on your brand, so why would they care?
In working with us, you can have that direct fulfillment, but then still have the backend of the distributor with one invoice and one check.
So, in essence, they are saving money and able to get into more locations easier without having to do the self-distribution work.
Exactly. A lot of breweries want to fulfill because they want to have that complete control, over the temperature, over everything. But they don’t necessarily want to do all the other stuff that the distributor does.
How many craft breweries are on your system?
Well so far, there’s some compliant stuff, so it takes longer, but so far we have two breweries that are local around here. We have one from Alaska coming on…
What’s your biggest group so far? Would it be restaurants, or bars, or retailers?
So far, it’s bars and bottle shops. We’re working on a couple big deals. There’s a stadium that’s interested in working with us and having us get 15 or 20 taps, just totally unique, small craft beer stuff…
Have distribution companies taken notice yet?
Yes! I was very nervous about the wine and spirits folks, if they not be happy about this. But for the most part, they’ve been pretty accepting. They recognize that with this consolidation, that they need – their bread and butter is their bigger suppliers. And some of these folks, some of these little guys take away their time and effort from where they really make their money, so they like the idea maybe I can be like a incubator model for them…so far so good…the way that I’m starting to see trends happening on the spirits side too, and I think it will come with wine eventually, out of all of these giant companies, that they’re buying craft breweries. They know they need that to keep their market share. It’s going to happen in spirits too…
How do you think you’ll ultimately affect the big beer buyouts?
There’s so many small companies that need help with their distribution. I’m going after what I call the long tail of the industry. The people that couldn’t get distribution, even if they wanted it…if you want to pick up and leave, you can go, pick up and leave.
This is a totally different vertical, but do you consider yourself to be in any way similar to AirBnB?
In terms of posting your things once, and having people from all over the world, and having hundreds of thousands of people be able to see it, yes. It’s definitely like the AirBNB of alcohol distribution. It’s funny, VC’s around here will tell us, don’t tell us you’re the Airbnb of anything. But it gives people an idea. You can go in, you post your product, buyers from our legal market can see it and purchase it legally.