Legal Blog

Saturday SideBar: Kegs and Growlers and Crowlers, Oh My!

Now that I’m at least mostly over my jetlag I’d like to pick up where I left off three weeks ago when I was talking about businesses that make beer. Indeed, my firm sponsored another Craftoberfest yesterday evening between Hysteria Brewing and Lost Ark Distillery in Columbia, MD. I recommend checking both these places out, and they’re neighbors!

Getting back on topic, there are a number of decisions you may want to consider before deciding how, when and where to enter the very competitive business of making and selling your own beer.

First, you can make beer at a single site and sell it for onsite consumption in a taproom at the same location. That’s pretty limiting, so your next thought might be to also sell it for offsite consumption from your taproom by offering kegs, growlers, and crowlers (large cans of beer poured and canned onsite) to go.

At the next level, maybe you’d like to offer kegs to other retailers who have beer on tap, such as restaurants or bars. This will naturally augment your sales and your geographic footprint from a marketing standpoint, but this also makes you a distributor. You can self-distribute, which is probably going to be a pain in the neck, or you can sell to a distributor for resale to the retailers, which will reduce your profit margins. I’m not an accountant so you’ll have to do the math on that and also consider the local market dynamics (large distributors might want to put the squeeze on you).

As you grow, you may also arrive at a point where you want to bottle or can your own beer at your manufacturing site for entry into the consumer-facing marketplace. Again, you can self-distribute, but that may not be a realistic option if you are trying to get enough product out there to make a meaningful impact in the marketplace. You’ll then also be faced with pressure from your distributor as well as indirect pressure from the larger retailers, which they will apply to your distributor and therefore you. And of course, you’ll have some greater regulatory overhead if your product is being sold by retailers to consumers. Not to mention that if you are going to be shipping interstate – which you probably should be if you’ve gone this far – then you have to be mindful of manufacturing and labeling requirements such as those I mentioned two weeks ago.

All of these various activities may require some combination of federal, state and local licenses. At the local level, there are different types of licenses depending on whether consumption of your delicious beer is limited to your taproom or includes offsite sales. If you are going to be a wholesaler to your distributors, there will likely be different or additional criteria you have to be prepared to meet, and if your product is being sold as packaged goods by retailers to the consuming public – well, should your licenses be all-encompassing out of the gate?

For more information on this topic, please contact Scott Lloyd at slloyd@offitkurman.com.

 

ABOUT SCOTT LLOYD

slloyd@offitkurman.com | 301.575.0357

Scott Lloyd is a registered patent attorney who specializes in intellectual property counseling and commercialization work. He has served as a technology commercialization specialist and advisor to companies in a diverse array of markets, including biotechnology, pharmaceuticals, medical devices, food and beverage, specialty chemicals, technology, and engineering. In addition, Mr. Lloyd spent ten years as in-house general counsel to small and mid-sized companies, where he managed corporate matters and resolved commercial disputes in addition to intellectual property strategy, and now serves in the same capacity for entrepreneurial clients. He serves as counsel to small and mid-sized business owners seeking to implement growth strategies and succession plans.

While in house, Mr. Lloyd has also contributed to the successful formation of international affiliates of domestic businesses as well as a $400,000,000 business acquisition.

 

 

ABOUT OFFIT KURMAN

Offit Kurman is one of the fastest-growing full-service law firms in the United States. With over 200 attorneys in 14 offices that stretch from New York to North Carolina, we represent privately-held companies and families of wealth throughout their business life cycles. Our mission is to provide our clients with “The Better Way” to grow their organizations, protect their businesses’ and families’ wealth, and resolve their most challenging legal conflicts. In addition to our quality of attorneys and breadth of legal services, Offit Kurman is distinguished by our unique operational structure, which encourages collaboration rather than internal competition. The same approach that makes our firm attractive to legal practitioners gives clients unlimited access to experienced counsel in every area of the law. Trust, Knowledge, Confidence—in a partner, that’s perfect.

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