A Little More About Our Craft Beer Cooperative
A Little More About The Craft Beer Cooperative
A cooperative (also known as a co-op) is an autonomous association of people united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned and democratically controlled business. There are many types of cooperatives. One of them is a purchasing cooperative or purchasing group – a type of cooperative typically made up of businesses who have agreed to aggregate demand to get lower prices from selected suppliers – although they often offer members a lot more than just savings. The Independent Brewers Alliance is a craft beer cooperative, or more specifically a craft beer purchasing group. We often refer to the IBA as a “purchasing alliance” since it reflects the soul of the group – brewers helping brewers.
Independent entrepreneurs – like craft brewers – are the cornerstone of the American economy. Cooperatives are a proven way to help independent businesses including craft brewers stay strong and independent. There are an estimated 29,000 cooperatives currently operating in the United States with over 350,000 members. Some publicly under a shared brand name. These include Ace Hardware stores, Ocean Spray cranberry farmers and Cabot Creamery dairy farmers. There are thousands of other businesses that are working together as part of cooperatives – but quietly and without a shared brand name. These are businesses that you would never know are part of a co-op – perhaps your local bakery or veterinarian. Brewers who are part of our craft beer cooperative can work the same way – staying completely independent but taking advantages of our craft beer purchasing group’s savings programs.
Why a Craft Beer Cooperative
So, way back when – more specifically in the Spring of 2016 – when there were only some 4,000 craft breweries according to the Brewers Association, a group of people – both brewers and cooperative experts – wondered why there were no craft beer cooperatives. It certainly looked like the industry could use one. Craft beer was growing fast but there was the lurking threat of big beer, industry consolidation and the craft beer industry cannibalizing itself. Specifically big beer and investors were starting to buy up some of the more successful craft breweries (Goose Island, for instance) – and/or starting their own faux craft breweries (like Blue Moon). And more than a thousand new craft breweries were opening up each year making taps and distribution harder and harder to get for everyone else.
In short, it seemed like the perfect time and industry for a craft beer cooperative – or craft beer purchasing group.
But starting any cooperative is hard, let alone a craft beer cooperative – an industry known for proud independence and entrepreneurial spirit. That aside, any new cooperative, like the Independent Brewers Alliance, faces a classic Catch-22 situation. A successful craft beer cooperative – or craft beer purchasing alliance – needs brewer-members to give suppliers an incentive to offer discounts and savings programs. But it’s hard to recruit brewer-members without any savings programs to offer them.
So, at CBC 2016 where we first pitched a craft beer cooperative to brewers, we had to rely on brewers and suppliers who had the foresight to see what a craft beer cooperative could become rather than what it was. And the pitch went something like this:
“In an industry facing big beer, consolidation, slowing growth, and thousands of new craft breweries entering the market each year – how can an independent brewery stay strong and competitive? Well, you can’t just count on making great beer anymore. You have to have a great business plan too. And part of that plan could be – should be – joining the IBA, the industry’s first member-owned craft beer cooperative. You can drop the money you save to your bottom line, or invest it in the programs that help you grow and stay strong. And do it all while staying 100% independent.”
Building the Craft Beer Cooperative
That gave us a few members and a few savings programs. And from there we relentlessly followed a simple strategy of trying to do three things:
- Using what we had to recruit more brewers – ones who either believed in the idea or saw real opportunity to save, and ideally both
- Finding more craft beer suppliers willing to offer co-op members some combination of meaningful savings on raw materials and operational expenses, guaranteed access to supply and year-end volume rebates
- Encouraging member-brewers to participate in as many savings programs as possible and rewarding them for doing so
Note that our craft beer cooperative never requires member-brewer to change suppliers or to participate in any savings program. But it is important that members understand that their participation is what gives us the leverage to strengthen current savings programs and to create new ones with new suppliers. And the greater the spend in a particular program the larger any year-end volume rebates we get from suppliers. That’s important because year-end rebates fund any annual profit-sharing distributions to members. And annual profit sharing distributions – on top of day to day savings – can be hugely rewarding for brewers. Learn more about how the craft beer cooperative works.
Growing the Craft Beer Cooperative
Well, let’s start with three of key milestones that got our craft beer purchasing group where it is today.
Our Can Savings Programs
Starting in 2017, we introduced savings programs on printed and sleeved cans, brites and ends – and then expanded this program over the years to include multiple suppliers, both international and domestic – just in time for the great bottle to can migration, and the subsequent can shortages and cost increases. This helped and is helping a number of members get access to needed supply and lower minimum order quantities – while giving them some protection against cost increases. We’ve done this in other categories facing supply chain challenges – most recently custom tap handles and glassware.
Adding More Savings Programs to Our Craft Beer Cooperative
The craft beer cooperative has gradually added – and will continue to add – a number of other craft beer savings programs across a wide array of materials and other expenses – sometimes from multiple suppliers to address east and west coast freight issues. These include but are not limited to:
Kegs – Sales, Parts and Recyclable Kegs
POP – Signage and Displays
Custom Tap Handles
Dry Yeast Strains for Ale, Lager and Cider
Recycled Wood Barrels
Labels – All Kinds
Certain Hop Varietals and Extracts
Fresh Fruit Purees
Branded Apparel & Merchandise
Engineering Consulting and Brewing Equipment
Water Treatment Programs
Safety Consulting and PPE Equipment
Business and Health Insurance
Lab Testing Services
Payroll Processing, HR Support from ADP
Hardware from Ace Hardware
Office Supplies from Staples and Office Depot
Freight and Freight Auditing – Small Parcel, LTL, Truckload
For an always up-to-date list of craft beer cooperative savings programs go here.
Creating a Second Class of Members – the Affiliate Program
At first, joining the craft beer cooperative required brewers to join as what we call a “Member-Owner.” This requires a one-time stock purchase for $1,000, annual membership dues of $2,500 plus $.05 for every barrel produced the previous year. This gives them ownership in the co-op, voting rights, full access to all savings programs and makes them eligible for profit sharing opportunities.
For some brewers, particularly those unfamiliar with the power of a craft beer cooperative, this was a tough sell. So, in 2019 we created the Affiliate program which allows brewers to participate in savings programs dues-free, no stock purchase and no barrel fee, but with lower savings, no ownership, no voting rights and no eligibility for profit sharing. In essence, this lets brewers ‘test-drive’ the co-op for free before deciding to become a Member-Owner (which many have). This was an instant success (see member growth chart below) and access to the IBA’s savings program helped a number of brewers soften the blow of the pandemic.
Where’s the Craft Beer Cooperative Headed?
More members, more savings programs on more materials – and more financial benefits for members. The more members we sign, the greater the craft beer cooperative’s leverage to negotiate new and better savings programs with suppliers. And the greater our profit sharing distributions to members. There’s never been a better time to join. Learn more about your membership options.