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Are PA beer distributors unable to tap full potential of craft beer surge?

geneseeBy Andrew Staub | PA Independent

There was a time when Joe Greco and his buddies would all buy a different case of beer, then swap with each other to get a better variety of brews.

They haven’t had to do that the past three years, not with the advent of mix-and-match six-packs that let consumers pick their own grab bag of craft beer and ensure they don’t have an entire case of something they don’t like wasting in the fridge.

“The last case I bought, I still have two six-packs left, and I’m like, ‘Why did I buy a case?’” said Greco, who lives in Upper Hanover Township in Montgomery County.

Greco is the type of customer Pennsylvania beer distributors are missing, thanks to state law that allows the warehouse-like stores to sell 12-, 24- and 30-packs of booze, but not six-packs. They could lose more customers like Greco, too, as craft beer sales continue to surge.

Craft beer claimed an 11-percent volume market share in 2014, the first year it reached double-digits, according to the Brewers Association, a trade group for small and independent craft brewers. That was up from 7.8 percent in 2013 and 6.5 percent in 2012. Craft brewers want to hit 20 percent by 2020.

They are definitely on the upswing, as people crave the fuller flavors and varieties that craft beer offers, said Bart Watson, an economist for the Brewers Association. Then, there’s the 21-to-34 age group, which has placed a greater emphasis on buying local and wants to drink a beer across the bar from their neighborhood brewer, he said.

“Millennial consumers in general are much more interested in understanding the companies that they’re purchasing from and interacting with those brands in a way that the previous generations didn’t care about as much,” Watson said.

Market research has also found that six-packs are the best-selling package for craft beer. Sam Adams Seasonal six-packs topped the list, with Sierra Nevada Pale Ale and New Belgium Fat Tire Amber Ale six-packs following in second and third, according to data provided by Watson.

The top 15 best selling packages for craft beer broke down to seven brands of six-packs and eight brands of 12-packs, but six-packs always outsold their 12-pack brethren. For example, Shiner Bock six-packs performed better than Shiner Bock 12-packs.

Conspicuously absent in the top 15 were 24-packs, the national standard for cases.

Yet, the Malt Beverage Distributors Association of Pennsylvania, which represents more than 400 distributors across the state, has opposed those privatization efforts on the grounds it would cater to large chains and drive mom-and-pop shops out of business.

It’s fair to question whether that stance is wise, given the popularity of craft beer and the fact six-packs of it sell best. Plus, beer distributors already are facing an onslaught of competition from grocery and convenience stores that can sell takeout beer.

There’s evidence that shows beer sales are staying flat or rising in states where craft offerings have a larger cut of the market share, Watson said.  Consumers want the product, and they’re just drinking less if they can’t find it, he said.

“Asserting causality is a bit more difficult, since there are a ton of confounds, but it’s logical that a more friendly regulatory environment in terms of consumer convenience and for local producers would help sales,” Watson said.

The Pennsylvania Liquor Control Board opened the market a little this year when it allowed distributors to sell 12-packs. Logically, six-pack sales would be next.

Tiffany Snedegar, manager of the Queensgate Beer Barn just outside York, said 12-pack sales have been going well, but it was a challenge to update systems and rearrange inventory in the store.

So six-pack sales, she said, would be “interesting,” but perhaps worthwhile as new craft beer appears every week.

“I guess we would have to go for it,” Snedegar said.

Ben Evert, the manager at Robert’s Beverages in Altoona, echoed the concern about inventory challenges. The store could add a cooler for six-packs, but packing more products on limited shelf space could come at the expense of a local microbrew.

“If you only sell a case a two a month of that, and you need room for your Miller Lite six-pack, guess what’s going out the door?” he said.

Plus, Evert still thinks there’s a different clientele that prefers cases over six-packs anyway.

Some distributors see a pressing need for their business model to evolve.

Earlier this year, Newport Beverage owner Richard Pluta told Watchdog he favors privatization, even if he’d have to compete with grocery stores and other places that sell beer, wine and liquor. He wants to sell six-packs, too, saying customers often ask about them.

“It was incredible the number of times we had to say no to a customer,” Pluta said earlier this year. “I try to be a businessperson. We don’t say no to our customers. We try to find a way to say yes, but the state forces me to say no.”

While Greco said competing against grocery store chains would be a challenge, distributors will have to make a change to attract customers.  Unless he’s hosting a get-together, Greco rarely buys a case of beer anymore, he said, and sees grocery stores as prime spots to buy now and in the future.

“Most of my buys now, when I am not bellied up to the bar, are at a local Wegmans that has a great selection of six-packs and bombers,” Greco said. “I also have a nearby six-pack shop that has taps and growlers, too. But I am looking forward to my local Weis opening up a Wegmans-type beer shop.”

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  • If govt run liquor stores are such a great idea why does everyone in their right mind cross the bridge to buy booze from stores based on, perish the thought, capitalism and the profit motive? Discuss.

  • The MBDA has been doing such a great job over the years with their platform. There were over 1800 distributors and now there are about 1150 active licenses – a decrease of over 40%. Of those remaining only about 40% belong to the MBDA so what does that tell you?

    If the MBDA had been working on adaptation instead to stagnation they might be in a better position to cope with changing consumer wants. Now they are just waiting to die off a little more with every “R” license sold to a grocery store

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