Continuously Improving Your Incentive Program

By: Nichole Gunn, Vice President of Marketing & Creative Services, Incentive Solutions

The first years after launching an incentive program are an exciting time for craft beer producers: supply chain trading partners, drawn by the excitement of new promotions and an improved channel partner experience, are more responsive, more motivated and more likely to recommend the brand’s products to restaurants and retailers. During this time, craft beer producers often experience a period of rapid sales growth or improvement in other KPIs the program was designed to target, such as improved partner data profiles or increased referral business. The incentive program’s ROI grows exponentially.

  However, often after 12-30 months, growth begins to stagnate and the ROI curve starts to flatten. If left unaddressed once an incentive program’s novelty starts wearing off and supply chain trading partners become habituated to the program’s value proposition, the incentive program’s ROI may start to decline, leaving craft beer producers scrambling to find ways to replicate the program’s success.

  The good news is that by planning ahead, craft beer producers can anticipate this drop off in interest level and continuously improve their incentive program in order to sustain a competitive advantage in their channel.

Keeping Incentive Programs Fresh

(and Profitable!)

  In order to stay relevant, a channel incentive program has to be able to evolve with the interests of its participants, scale its value proposition over time and respond rapidly to the tactics of the competition. Below are several factors that craft beer producers can focus on in order to continue to drive ROI once program growth begins to stagnate:

•  Evolving incentive program technology.

•  Incorporating elements of gamification.

•  Adding new, richer reward-earning opportunities.

•  Personalizing brand interactions to build loyalty.

•  Re-launching the program with updated features and branding.

  Ideally¬, these are all elements that craft beer producers will consider from the inception of the program, with plans for program expansion at certain intervals. However, these factors can also be incorporated to bring new life to existing programs.

Evolving Incentive Program Technology

  Today, incentive programs are a technology platform, and craft beer producers should be as mindful in selecting incentive program technology as they are in selecting any B2B software platform. From an administrative standpoint, this means choosing an incentive platform that integrates with existing CRMs and other business software and provides streamlined admin tools and generates detailed reports on engagement and ROI.

  However, perhaps more importantly, craft beer producers should focus on selecting incentive software that is fully supported and will be continuously updated to improve the user experience for their supply chain trading partners. More and more, B2B customers expect a seamless B2C-style user experience. Partners will be less likely to engage with a rewards program that uses stale, outdated software, no matter how exciting the reward offering.

  Additionally, agility is key. Craft beer producers should look for incentive software that allows them to quickly go to market, adapt to the tactics of the competition and launch new promotions. These factors will offer an edge when it comes to maintaining engagement throughout the lifetime of their program.

Incorporating Elements of Gamification

  Gamification is the use of game-like elements – such as points-scoring, interactive leaderboards and other competitive components – to increase engagement with a web-based application, such as an incentive program. Gamification is a powerful tool that supply chain trading partners already seek out in their day-to-day lives, from collecting likes on their Facebook page to scoring achievements on Peloton bikes.

  When interest in the program begins to stagnate several years after launch, adding gamification features can give the program new life. Interactive trivia, spin-to-wins, badges and achievements, personalized leaderboards and limited-time point bonuses make the program more compelling and can give a sustainable boost to the program’s effectiveness over time. Additionally, by not relying strictly on reward value to drive engagement, craft beer producers can help lower program costs to increase their ROI.

Adding New, Richer

Reward-Earning Opportunities

  As mentioned earlier, one of the reasons an incentive program can lose its effectiveness overtime is that participants become habituated to the program’s value proposition. Top performing supply chain trading partners may have already redeemed for their most coveted rewards and find themselves with more points than they know what to do with. The competition may have launched their own reward program with comparable, or even more compelling, rewards.

  It’s up to craft beer producers to constantly up the ante with their program’s value proposition. For instance, launching a points-based merchandise reward program alongside an existing debit or gift card program will offer new value for participants. Elevate a points-based program by offering top performers a concierge service to redeem for custom rewards – using their points to buy a new truck, renovate their home or pay for their child’s college tuition will personalize the reward experience and boost the program’s value proposition in a way the competition will struggle to match.

  Additionally, incentive travel promotions can be added onto any program type, giving craft beer producers an opportunity to connect with their supply chain trading partners on a deeply personal level. Given recent restrictions, the demand for incentive travel is projected to be particularly high once it is deemed safer.

  If minimizing rewards cost is a concern, try setting higher qualification thresholds for these more exclusive reward opportunities. Doing so can also help tap into supply chain trading partners’ competitive drive, keeping them more engaged as they compete for a limited number of higher tier rewards.

Personalizing Brand Interactions

to Build Loyalty

  In their early stages, incentive programs are typically geared toward growth. However, if well designed, the program will be able to convert that initial interest and motivation into brand loyalty over time. Loyalty is about more than rewards; rewards appeal to self-interest while loyalty is rooted in creating mutual interest. Craft beer producers can create this loyalty by using their incentive program to provide a highly personalized experience and to help their channel partners become more effective salespeople.

  This personalization should extend through every phase of the incentive program, from designing program communication to be relevant to each segment of their channel partners to basing reward selection on participant lifestyle and interests. Craft beer producer can use engagement metrics from their incentive program to identify which of their supply chain trading partners have a high level of buy-in and which of their partners might need a little more help. They can provide enablement to their partners by providing online courses and certifications and using their incentive program as a platform to educate partners on their brand and product lines, equipping them to more effectively sell their products.

  By using personalization and focusing on partner experience, craft beer producers can build loyalty with their supply chain trading partners in ways that make extrinsic rewards less important. This makes trading partners drastically less likely to lose interest in the program.

Re-Launching the Program with Updated Features and Branding

  Finally, when the growth of an incentive program begins to stagnate, it might be a sign that it’s time to re-launch the program. A program re-launch gives craft beer producers the opportunity to step back and figure out what their prior program did effectively, as well as what they can do better. During this time, craft beer producers should also explore other pain points they would like their new program to target.

  A pause between programs can help build anticipation, as supply chain trading partners realize the value proposition of the previous program that they had begun to take for granted. Once the new program launches, with updated branding and new features, supply chain trading partners will enthusiastically re-enroll and craft beer producers will experience a renewed period of growth. Better yet, by using the knowledge gained from the previous program, craft beer producers can make their re-launched program even more effective than the first.

Planning Ahead for Program Management

  Additionally, craft beer producers can enlist the help of incentive companies to design and manage their programs. Just like crafting an excellent brew requires years of experience, so too does managing an effective incentive program. Working alongside an incentive company with a proven track record can help craft beer producers avoid potential pitfalls and take advantage of decades of experience in managing successful programs.

  Whether a craft beer producer is looking to launch their first program or improve a program that is currently underperforming, the initial investment of partnering with an incentive company can pay dividends down the road.

  Nichole Gunn is the VP of Marketing and Creative Services at Incentive Solutions (www.incentivesolutions.com), an Atlanta-based incentive company that specializes in helping B2B companies improve their channel sales, build customer loyalty, and motivate their employees. Nichole Gunn can be reached at ngunn@incentivesolutions.com.

Start-ups Take a Bite at Trying to Make it in the Hard Cider Industry

Photo Credit: Capital Cider House

By: Cheryl Gray

Hard cider start-ups are not for the faint of heart. Those in the business have as much appreciation for determination and due diligence as they do for the fruit and fermentation that give a “bite” to this popular beverage.

  Just ask Jared Fackrell, whose Capitol Cider House in the Petworth area of Washington, D.C., offers more than 150 different craft hard ciders, created both in-house and from other Mid-Atlantic producers. The wide selection emphasizes gluten-free products with modern flavors, excluding any chemicals or preservatives.

  Fackrell’s advice to hard cider start-ups is to do your homework, starting with selecting the best property for the business model you are shaping. “Visit as many properties as you can! That said, you really need to understand your business model. Are you more retail or manufacturing focused? Who’s your target customer? Where do they live or congregate?”

  As for equipment needs and space requirements, Fackrell said that it all depends on the kind of hard cider being crafted and how it will be packaged. He also recommends looking at similar concepts and getting advice from already established businesses that may offer insight on immediate equipment needs versus those that are not as critical.

  “Broadly speaking, the cider industry has done an excellent job ascribing to the ‘a rising tide lifts all boats’ mantra, so definitely reach out to other cideries if you need some help,” he said. 

  When it comes to acquiring space, Fackrell told Beverage Master Magazine bigger can sometimes be better. “Space requirements really depend on the use, but non-load-restricted floors, high ceilings, a loading dock, etc., are always helpful. And, if your budget allows, try to secure more space than you need as growth can come quickly and unexpectedly.”

  However, for some hard cider start-ups, the greater challenge is getting the proper zoning permits to operate, sometimes in the most unlikely spots. InCider, Inc., located in West Bend, Wisconsin, just outside of Milwaukee, makes Hass & Stock Cider inside a 420-square foot home garage.  Owner Daniel Hass sought permits earlier this year to begin the hard cider start-up in his available space. With help from his mother and step-father, a carpenter by trade, he transformed the garage space into a mini-production house.

  InCider already had its federal operations permit and was on track to receive its state permit, contingent upon West Bend city officials approving a conditional use permit for Hass to operate out of his garage. The arrangement ruled out a storefront because that would have been disruptive to the neighborhood.

  “We are lucky that we are in West Bend. The zoning department was extremely helpful and very informed, so we did things correctly through them,” said Hass. “We also have a very open and thoughtful zoning board willing to give us a shot. I have heard stories of other areas not being so open to new ideas.”

  In his proposal, Hass told West Bend city planners that InCider would use three small-scale fermenters to make its cider, with each of those fermenters producing a 14-gallon batch of hard cider. The turnaround time for each batch is roughly two to three weeks. To gain further support from both the city and his neighbors, Hass promised a virtually no-noise operation as well as no distracting outdoor signage.

  Equipment choices, he explained, had to be affordable, long-lasting and functional. “We are still a small scale operation, as we operate in a 20- by 21-foot space. So we needed equipment that works well in our available space,” said Hass. “We use a lot of techniques and equipment we used when just making cider for ourselves. The [FastFerment] fermenters are an upgrade from the five-gallon buckets popular in homemade cider, but we still use Cornelius kegs to create flavors and carbonate. We had to purchase Sanke kegs to transfer the finished product into, as that is what is used in the industry. Most of our equipment is used from other industries – mostly beer makers.”

  Hass said he was introduced to the idea of cider making through his friend and now business partner, Trevor Stock. After taking some classes and entering some contests, the latter of which produced some medal-winning results, Hass, Stock and Hass’s sister, Tiffany Downey, became the three-person team to launch the company. The InCider business plan calls for it to operate as a wholesale business with no sales directly to consumers. Accordingly, its customer base includes bars, restaurants and other outlets serving its different varieties of hard cider on tap and in bottles.

When it comes to selecting fruit for hard cider, relationships are key. Hass’ company relies upon nearby orchards and is working to build long-term partnerships. For Fackrell and Capitol Cider House, having a wide variety of nearby fruit is an advantage.

  “We work with more than a dozen orchards within 200 miles of the Capitol Building,” said Fackrell. “The best thing to do is visit orchards, talk to the growers about your needs and repeatedly order to develop grower-making partnerships. All cider is made like wine, but the approach can vary quite drastically, so whether you make cider exclusively with apples or with apples and adjuncts (non-apple components such as other fruits, spices, etc.) will determine who is on your supplier list.”

Challenges

  Whether it is a small batch, tap room-focused operation or a large scale package cidery, the unexpected can happen. The year 2020 has presented its own set of challenges, none more debilitating to this niche industry than COVID-19.

  A case in point is the planned grand opening of Pomona Cider Company in Milwaukee, Wisconsin, headquartered in a former 2,100 square-foot film production house on the city’s east side. Co-owner Tom Gabert said that the cidery, slated to feature a tasting room with on-tap hard cider produced in-house, decided to put things on hold rather than compromise their customer service options. 

  “COVID affected our original opening date because when we open, we don’t want to limit ourselves to what we can provide to our customers. We have discussed the pick-up window sales and whatnot, but part of what is going to make this place so great is the experience and the atmosphere of it,” Gabert said.

  For Capitol Cider House, which also has a tasting room, operating during COVID-19 became a matter of quickly re-thinking where and how to get its hard cider into the marketplace. Options included farmers’ markets along with pick-up and delivery. Partnering with some 100 retailers also helped.

  “We pivoted toward retail channels less impacted by on-premise restrictions and invested heavily in wholesale by putting our cider in 12-ounce cans,” Fackrell told Beverage Master Magazine.

  For Daniel Hass and InCider, Inc., starting in his home garage may have shielded his business from COVID-19 restrictions. “We got that conditional use permit on March 3rd of this year, then on March 17th, all the coronavirus shutdowns started. Had we been anywhere else but the garage, we would have been out of business before we started.”

  Many hard cider start-ups turn to organizations to help them navigate the unknown. The American Cider Association is one channel at the national level whose membership ranges from newcomers to more established cider makers. The non-profit organization promotes education, advocacy and membership designed to strengthen the cider industry. One of its current marketing tools is a campaign known as “Pick Cider,” intending to capture more market shares for cider and promote it as the go-to beverage for food-focused holiday events.

  The ACA also offers individuals the chance to become credentialed experts through a Certified Cider Professional program, the first-of-its-kind accreditation service for food and alcohol professionals. CiderCon, an annual conference about to enter its 11th year, will be a virtual online event held during the week of February 3-5, 2021.

  Local and regional organizations sharing common interests can be just as helpful. For example, Hass and his partners turned to the Badger State Winery Co-op, which also distributes Hass & Stock Cider products. Hass said that speaking directly with state and local administrations with oversight authority is a good idea, as is communicating directly with vendors and others with the ability to get hard cider products directly to consumers.

  “The more people you know in this industry, the better. The first vendor to give us a try was Three Cellars in Menomonee Falls, run by Gino Gaglianello. He led us to other cider makers and our graphic artist, Branden Bakken,” said Hass.

  Most experts in the hard cider industry agree that experience is the best teacher. Fackrell, who opened his doors in 2018, wants to pass on what he has learned that nothing short of being in the thick of things could have taught him. 

  “Be prepared for your business environment to not only change rapidly but also to stand ready and adapt these constant changes that normally lie outside of your orbit/control.”

West Avenue Cider House Pushes the Limits of Apple Cider

By: Alyssa Andres

Over the past decade, the cider industry in Canada has taken off, with over 150 cideries across the country and 55 in the province of Ontario. The cidery that continues to stand out amongst the crowd is West Avenue Cider House. Since establishing in 2012, West Avenue has drawn massive attention from cider lovers and connoisseurs alike, winning awards nationally and internationally for their line of ciders. The Ontario cidery not only uses traditional, slow fermentation methods and an array of Heritage apples to create their unique brand of apple cider, but owner and head cidermaker, Chris Haworth, also experiments with alternative techniques and approaches to cidermaking, creating never before seen products that are changing the way people think about apple cider.

  Haworth started his career as a chef in the U.K., working in some of London’s best restaurants, including Quo Vadis, owned by three Michelin star chef, Marco Pierre White. Haworth made the move to Canada in 2005 with his wife, Amy Robson, and that is when he started to take an interest in fermentation, brewing beer at home as a part-time hobby. As the couple got settled in Canada, Haworth noticed there were a lot of apples in Ontario, but not a lot of apple cider. It was in 2008 that he decided to leave the kitchen and make the shift into full-time cidermaking.

  Haworth takes a very traditional approach to cidermaking. All of his cider is made by traditional methods using slow fermentation. He only ferments when there are apples on the trees because he is focused on quality ingredients and authentic flavors. While many cideries can take only three weeks to get from ferment to shelf, West Avenue cider takes six months to go through the same process. Haworth believes this is what sets his cider apart. The cool ferments lend his ciders more complex aromatics and distinct flavors that are native to Ontario and cannot be reproduced anywhere else. He adds yeast from previous batches of cider to his new ferments to encourage this unique West Avenue flavor.

  Haworth’s first release, the West Avenue Heritage Dry, is a 6.5% alcohol by volume, traditional cider made from 100% Heritage apples. The cider took home “Best Cider in Ontario” at the 2014 Ontario Fruit and Vegetable Convention Hard Cider Competition and a silver at the 2014 Great Lakes and International Cider and Perry Competition. It continues to win awards each year, as does the cidery itself. West Avenue has taken home “Best Cidery in Ontario” four years in a row at the Golden Tap Awards.

  After mastering the art of the dry apple cider, Haworth started to experiment with blends, releasing West Avenue Cherriosity Cider in 2015 – a mix of Heritage apples and Montmorency cherries from Niagara. Cherriosity took home a silver at the Ontario Fruit and Vegetable Convention that year and won Best in Show at the 2015 Royal Winter Fair. The two ciders – Heritage Dry and Cherriosity – are mainstays at West Avenue Cider House and can be found in liquor stores across Ontario. 

  After experiencing such success with his first two releases, in 2015, Haworth decided to move his growing business to Freelton, Ontario, just north of Hamilton, purchasing a 75-acre piece of land and starting his own organic apple orchard. Since then, Haworth has become what he calls an “apple collector,”  planting over 6,000 apple trees and over 110 different varietals of Heritage apples on his property, with more on the way. Some of these species of apples are 200 to 300 years old and are extremely uncommon.

  Right now, Haworth’s trees are still young, but he says the quality of the fruit is increasing from year-to-year and the true characteristics of the apples are starting to come through. He ultimately wants to capture the unique terroir of his orchard and figure out which varietals thrive in Ontario and where, in the orchard, they produce the highest quality fruit. He is also learning about the different flavor profiles of his extensive varietals of apples. Some of the apples are so high in natural sugars that they can reach 35% ABV when fermented on their own. Others are extremely high in acidity.

  In the long run, Haworth wants to determine the perfect blend of apples to make the ultimate apple cider. He has started planting several other native Ontario fruits, herbs, edible flowers and shrubs on his property to use in his ciders. He currently has 10 varieties of pears and other unexpected additions like sea buckthorn, black locust, elderberry and sumac, just to name a few. He says it’s like he’s trying to create his own cookbook of sorts with a multitude of cider recipes and concoctions that he has developed over the years.

  He is able to focus more on his experimental ciders since opening a tasting room on the property in 2017. The tasting room has a growler program that Haworth says has really taken off. Guests can come and fill their growlers with the latest on-tap offerings, and Haworth doesn’t have to worry about the cost of bottling. Currently, West Avenue is producing half a million pints a year. Haworth estimates the production is 50/50 experimental versus traditional flagship ciders he sells to restaurants and retailers. He has taken full advantage of this opportunity to experiment and has an extensive number of offerings in the tasting room in various styles and flavor profiles.

  Haworth is continuously searching for new approaches to create a remarkable cider. Just as a chef continues to learn different kitchen techniques, Haworth continues his education in cidermaking. Once he masters one method, he moves on to learn another. He has also begun to study winemaking and is now experimenting with using traditional winemaking techniques on his cider. As a chef, he says it started with the idea of not leaving any waste and using all of his raw materials. When he saw wineries throwing out their pressed grape skins, he decided to take them and add them to a vat of fermenting apple juice. The result was a beautiful rosé-colored cider, with bright fruit and mild tannins that won a silver medal that year in an American competition. A lightbulb went off in his head.

  From there, Haworth started buying grape juice from local producers and creating wine-cider hybrids. Rhineapple, one of the tasting room’s current offerings, is a blend of 35% Niagara Riesling grapes and 65% Northern Spry and Snow apples. This 9.2% ABV traditional method sparkling wine-cider hybrid is bright and floral with pear and honey notes. The apples and grapes are fermented together in bottle using an in-house strain of yeast. Haworth also experiments with wild yeast that is naturally occurring on the skins of the apples. He uses it to produce ancestral style ciders. One of his latest ciders, Pommerage, uses a Meritage blend of grapes fermented in oak before being combined with apple cider. At 11% ABV, this unique hybrid is a perfect substitute for wine and pairs excellently with food.

  Haworth is also experimenting with the use of a variety of barrels – from wine to tequila to rum. Genevieve is an apple cider aged in gin barrels and blended with ginger, peach, lavender and lactose. The barrels add depth and complexity to ciders rarely found in the industry. It is obvious when visiting the West Avenue tasting room that there is a chef at hand.

  Haworth is even making “ice cider,” made in the same way as ice wine – by pressing frozen apples, so the sugars are incredibly concentrated. Northern Lights is an ice cider aged for five years in cognac barrels, producing a syrupy sweet cider with an incredible body and notes of caramel, pecan and orange zest.

  Firecracker is a dessert-style cider made using a totally different technique – a maple syrup evaporator. Instead of freezing the apples to concentrate the sugars, Haworth wanted to try using the same method as maple syrup, essentially cooking the apples over a Maplewood fire to evaporate the water. The result is a thick and viscous 8.5% ABV cider with maple, nut and smoke notes. It’s perfect for sipping around a campfire.

  It’s hard to fathom what is next for Chef Haworth. Each year, he continues to hone his cidermaking skills and try new and innovative methods. He says, ultimately, for him, the obsession is to be able to create the “perfect cider.” Just as a winemaker seeks the perfect blend of grapes, he believes there is the perfect blend of apples. He says that in five years, he should be at the point where he has figured out that perfect blend, whether it be a blend of three different apples or ten. That is something cider lovers should look forward to.

Intellectual Property for Beverage Manufacturers

By: Brian D. Kaider, Esq.

While many people are familiar with the four main types of intellectual property: patents, copyrights, trademarks, and trade secrets, often they don’t know the distinctions between them or what they are meant to protect.  This article is meant to cut through the confusion and explain these distinctions and how each property right applies to the beverage industry.

Patents Protect Ideas – sort of

  Most people have a general understanding that a patent protects an “invention” or an idea.  In a very general sense, that’s true.  But, even though the Congressional authority to grant patent rights comes directly from the U.S. Constitution (Article 1, Section 8, Clause 8), exactly what is patentable is the subject of tremendous confusion among the U.S. population, examiners at the U.S. Patent and Trademark Office, lawyers, and even judges; sometimes requiring clarification from the U.S. Supreme Court.  The purpose behind the grant of a patent is to encourage innovation by granting exclusive rights to one’s discoveries for a limited time.  In other words, it gives the patent holder a short-term (20 years from the date of filing) monopoly on his invention.  Generally, new machines, chemicals, electronics, methods of production, and in some cases, methods of doing business, are eligible for patent protection.

  But, not all ideas are patentable.  In fact, ideas alone cannot be patented.  They must first be “reduced to practice,” meaning that either you must have actually created your invention or have described it in sufficient detail that someone skilled in that area could follow your disclosure and create it themselves.  So, you can’t get a patent on a time machine, because (at least for now) no one has figured out how to defy the time-space continuum.  In addition, to be patentable, ideas must be novel, meaning that no one else has ever disclosed that idea before, and non-obvious, meaning that your idea cannot be an obvious variant on someone else’s invention.

  Given that humans have been making beer for thousands of years, one might think that coming up with something novel in the brewing process would be impossible.  Not so.  In preparation for this article, I ran a quick search of patents containing the word “beer” in the title and got 491 hits.  Some recent examples include U.S. Patent No. 10,570,357 – “In-line detection of chemical compounds in beer,” U.S. Patent No. 10,550,358 – Method of producing beer having a tailored flavor profile,”  and U.S. Patent No. 10,400,200 – Filter arrangement with false bottom for beer-brewing system.” 

  Improvements in any area of the alcoholic beverage industry may be patentable including, new types of bottles, cans, growlers, and kegs; new types of closures and caps; improved methods of separating hops from bines and leaves; new processing equipment, improved testing procedures and equipment, improved packaging, etc.  Essentially, anything that lowers costs between the farm and the consumer, improves the quality of the beverage, or enhances the consumer experience is worth considering for patent protection.

  One word of caution, however; time is of the essence.  The America Invents Act, effective March 16, 2013, brought the U.S. in line with most other countries in being a “first to file” system, meaning if two people develop the same invention, the first to file for patent protection wins, regardless of who first came up with the idea.  Also, any public disclosure of your idea (such as at a trade show) starts a 1-year clock to file or you may lose your eligibility for patent protection.

Copyrights Protect Creative Works

  The authority for copyright protection stems from the same section of the U.S. Constitution as patent protection, discussed above.  Our founding fathers recognized the valuable contribution made to society by authors and artists and, therefore, sought to encourage creative expression by providing protection for artistic works.  Examples of copyrightable materials include, books, paintings, sculptures, musical compositions, and photographs.

  Unlike inventive ideas, which are only protected when the government issues a patent to the inventor, copyrights attach at the moment the artistic work is “fixed” in a tangible medium.  So, for example, if a composer develops a new musical score in her head it isn’t protected, but the moment she translates that tune to notes on a page or computer screen, it becomes protected by copyright.  In order to enforce that copyright in court, however, it must be registered with the U.S. Copyright Office.  While it is possible to wait until an infringer comes along before filing for registration, doing so can severely limit the damages that may be available to the author of the creative work.  So, early registration is the better course. 

  In the beverage industry, copyright issues often crop up with regard to labels and advertising materials.  But often disputes arise relating to who owns the artwork contained within a label, for example.  Generally, the author of a work owns the copyright.  But, if an employee of a brewery, acting within the scope of their employment, creates an image that the brewery owner incorporates into its labels, that picture is considered a “work made for hire” and is owned by the brewery.  Where disputes often arise, however, is if the brewery hires an outside artist or a branding agency to develop the artwork.  In that case, the brewery should include language in its contract requiring assignment of all copyrights to the brewery for the created artistic works.  The same would apply for any artwork commissioned for use inside the brewery tasting room or for marketing materials.

Trademarks Protect “Source Identifiers”

  People generally associate trademarks with the protection of a brand.  In fact, I have often described trademarks as an “insurance policy for your brand.”  But, in more technical terms, what a trademark protects is a “source identifier.”  The purpose of trademark law is to protect consumers from being misled or mistaken as to the source of a product.  So, for example, if a consumer sees a pair of shoes with a certain famous “swoosh” image on the side, they should be reasonably able to assume that pair of shoes was manufactured by Nike, Inc. and was made with the same degree of workmanship and quality that they have come to expect from that company.  That “swoosh” symbol, therefore, acts as a source identifier to tell the public that the product was made by Nike, Inc. 

  What may function as a trademark can be quite broad, including: the name of the business (e.g., Triple Nickle Distillery®), a logo (e.g., the “swoosh”), a color (e.g., the Home Depot orange or the UPS brown), even a scent (e.g., Verizon owns a trademark on a “flowery musk scent” it pumps into its stores to help distinguish them from competitors’ environments).  Not everything can be trademarked, however.  Slogans, words, and images that appear merely as decoration as opposed to a means of identifying the supplier will not qualify for protection unless the applicant can demonstrate that the item has achieved “secondary meaning,” i.e., that the public has come to associate that item with the manufacturer.  As an example, in the 1970’s McDonalds used the slogan, “You deserve a break today” in its commercials and other advertising.  People came to associate this phrase with McDonalds and in 1973 they were granted a trademark registration.  Incidentally, McDonalds briefly let this trademark go abandoned in 2014, but quickly re-filed and the mark is still active today, more than 45 years after it first registered.

  In general, marks also cannot be descriptive of the product or geographically descriptive of the source in order to be registered as a trademark.  For example, one could not obtain a registration for just the words “India Pale Ale.,” because it simply describes the product and does nothing to differentiate it from every other IPA on the market.  Similarly, an attempt in 2019 to register the name “Philly City Brewery” was refused as “primarily geographically descriptive,” because the applicant could not demonstrate that people had come to associate that name with its business as opposed to the many other breweries in Philadelphia. 

Trade Secrets Protect Valuable Confidential Business Information

  Unlike other forms of intellectual property, there is no registration system for trade secrets, because, by their very nature, they must be protected from all unnecessary disclosure.  Trade secrets can be just about anything that is confidential to your business and gives you a competitive advantage.  Some examples, include recipes, client lists, manufacturing processes, marketing plans, and client lists.  These are things that, if publicly disclosed, would harm the competitive position of the company and, therefore, must be vigorously protected. 

  One of the most famous trade secrets is the formula for Coca-Cola.  This formula has been protected for more than 130 years, sometimes through extraordinary measures.  In 1977, The Coca Cola Company withdrew its product from India, because in order to sell there, they would have had to disclose the formula to the government.  They decided it was more prudent to forego sales to one of the biggest populations on earth rather than risk disclosure of their secret recipe.

  Protecting trade secrets requires constant vigilance in two ways.  First, the information should only be disseminated to people within the company, or outside consultants, who need the information in order to perform their duties for the company.  In other words, the information is on a strictly “need-to-know” basis.  Second, those few people who are given access, should sign non-disclosure agreements with harsh penalties for breach of their duty of confidentiality.  Once the information gets out, it’s nearly impossible to un-ring that bell, so there must be severe financial consequences to someone who leaks the information.

  Brian Kaider is a principal of KaiderLaw, a law firm with extensive experience in the craft beverage industry. He has represented clients from the smallest of start-up breweries to Fortune 500 corporations in the navigation of regulatory requirements, drafting and negotiating contracts, prosecuting trademark and patent applications, and complex commercial litigation.

For more information please contact Brian Kaider at…
240-308-8032; BKAIDER@KAIDERLAW.COM; www.KaiderLaw.com

Bryant’s Ciders: Creating a Niche Market in the Cider World

By: Nan McCreary

A driving force in the craft beverage market today is to create unique tastes and products—and even tasting rooms— not found anyplace else. One cider maker, Jerry Thornton, is trying to do just that with Bryant’s Small Batch Ciders in the heart of Virginia’s cider country.

  Thornton’s journey began when he inherited his family’s sixth-generation farm and orchard, Edgewood, located near the Route 151 beverage corridor in Nelson County. Thornton had a successful career in corporate finance at the time but saw an opportunity in the property, where the family had been growing apples since 1865 (except for a brief time after hurricane Camille destroyed the orchard). Bitten by the cider bug, he attended a cidermaking course through Cornell University in Geneva, New York, and returned home determined to make the farm (replanted in 1998) sustainable. He immediately converted the 40s era garage built by his grandfather into the cidery, and a nearby building into a tasting room. The tasting room opened in May 2018.

  Thornton’s goal then—and now—was to “produce authentic farm-to-table hard ciders using traditional methods while creating an organic and always evolving consumer experience.” With its rustic charm, the cidery is a throwback to pre-prohibition days when cider ruled. But there is nothing rustic about the ciders.

  Unlike the sweet ciders of yore, Thornton produces 100% sugar-free, naturally carbonated ciders with fresh, organic ingredients. Call it champagne with flavorings, or, more officially, call it a brut cider, a style growing in popularity today.

  Bryant’s apples are sourced from his “backyard,” the 45-acre orchard on the original homestead that has traditionally produced table apples for commercial use. 

  “These are quality, multi-use apples—like Pink Lady and Stayman—that make good cider,” Thornton told Beverage Master Magazine. “They have good acidity and good sugar content, and they’re not too tannic. They fit in with the style we make. We want our cider to have a neutral flavor, so we can have more leeway to make funkier stuff.”

  Bryant’s Small Batch Ciders are hand-crafted from picking to packaging. Unlike many cideries that opt for short fermentation, Thornton ferments his juice for two months to produce a totally dry cider. He then adds flavoring ingredients—always natural or organic—and lets the flavors steep for three days. To avoid spoilage, after straining and racking the juice, he quickly packages the product, be it in a bottle, can or keg. After packaging, he adds the “magic potion”—champagne yeast and priming sugar—that initiates a second fermentation. This process takes three weeks to a month, or until all the sugars are consumed. The second fermentation adds a small amount of carbonation to the product as well as character and body. Thornton does not disgorge or filter after fermentation. 

  “We leave it in the package,” he said. “Most people are comfortable with lees in the bottle, and in the cans, you can’t even tell. Besides, people in the craft market appreciate a little haze.” The finished product, a brut cider, is bone dry with an elegant finish.

  Bryant’s Small Batch Ciders fall in the mid-tier price level, costing $12 for a four-pack of cans or a limited release 750 ml bottle. “We’re going for quality, not profits,” Thornton said. Currently, he produces 1500 gallons or 45 barrels of cider per month.

  What makes Bryant’s Ciders particularly unique is the flavors. His mainstays include Unicorn Fuel, a brut cider with rose hips and hibiscus; Brite Good, the flagship Brut cider, which incorporates French oak tannins to enhance mouthfeel while leaving a true cider aroma and flavor profile; Sumthin Juicy, styled after a New England IPA and dry-hopped three times with six different hop varieties; and Red Eye, a cold-brewed coffee cider with locally-sourced beans brewed directly in the juice. Bryant’s also sells seasonal and limited release ciders, including a Star Sign Line named for signs of the Zodiac. Typically, the ciders’ alcohol by volume is 8%.

  While Bryant’s ciders are all-natural, sugar-free and in the brut style, Thornton is always on the lookout for new “funky” flavors. “Our mindset favors craft beer profiles and ideas as opposed to historic, simple cider profiles,” he said. “If we can get an ingredient, we’ll try it. We don’t make test batches; we just go for it. So far, most have gone pretty well, and we haven’t had any complete disasters.”

  One recent experiment that turned out positive results is Bryant’s line of ciders fermented and aged in used stout beer barrels. These include Satan’s Heaven, a slightly bitter cider aged in Blue Mountain Barrel House American oak bourbon barrels with cocoa nibs and cayenne pepper, and Dark Unicorn, a smooth cider featuring Bryant’s cult favorite, Unicorn Fuel, aged in Blue Mountain’s bourbon barrels with rose hips and hibiscus. “I get barrels from local distilleries and breweries for aging ciders,” Thornton said. “If I have fresh juice, I will ferment it in the barrel too.”

  While fermenting and aging in bourbon barrels are relatively new trends among cider makers, the processes harken back to American cider’s origins in New England when all ciders were fermented, aged and transported in barrels. Today’s cidermakers are seeing that oak-aging adds tannins, complexities and flavors to the juice.

  While Thornton continues his innovative approach to ciders, he is expanding his

operations to include a new tasting room near downtown Richmond. The new space, which opened this spring in Shockoe Bottom, offers seven ciders on tap and cider cocktails. The historic 1850’s building also includes a second cidery in the back, which allows Thornton to double production.

  Whether offering cider in an 1850s sheep barn on a quiet orchard or in a cozy bar close to a population center, Thornton has his local bases covered. The farm is an ideal, family and pet-friendly getaway, 45 miles from Richmond, where customers can enjoy quality cider in an isolated, mountainous setting. The Richmond location has a unique vibe of its own, with its 1850s building located in a historic part of the city with cobblestone streets and trendy stores. Thornton also distributes his ciders to high-end craft beer stores throughout the state of Virginia and is hoping to expand to North Carolina and the Washington D.C. area. With a broad range of ciders packaged in cans, bottles and kegs, Thornton’s products are designed for customers who are seeking sustainable, natural and sugar-free quality drinks. The canned ciders are a special boon for those with an active lifestyle who favor cans over glass while hiking, boating or picnicking.

  As Thornton looks to the future, he plans to maintain the legacy of the sixth-generation farm using sustainable agriculture to preserve the natural resources. He also wants to move forward by building a larger cidery and developing the property into an event space to host weddings, meetings and private parties. Currently, the farm and the Richmond location offer light snacks and grilled cheese options. Product-wise, Thornton has planted 13 acres of cider-specific apples and is launching a cider-style hard seltzer with minimal calories and 4% ABV this summer.

  While Thornton sees growth ahead for the cider industry, he recognizes that there are challenges ahead, as there are for any craft beverage. “Our biggest challenge,” he said, “is that people refer to the beverage as being sugary, but they really don’t recognize its range. Cider can be a drink that is just like a fine wine, or it can be a sugar bomb with apple juice. Here in Virginia, I think people understand that there are different niches, just like in craft beers. As people start experiencing cider, especially in bars, I think the brut styles will help grow the market. People are really into 100% sugar-free drinks.”

  While hard cider—the dominant drink in American before prohibition—is having what Thornton calls “it’s second coming,” industry projections predict more consumers will jump on its bandwagon. Thornton plans to be there for them, offering drinks that are innovative and health-conscious. “We’d like to grow, but our team is content right now to make stuff that is unique and gives a different vibe. We’re just going to go with the flow.”

For more information on Bryant’s Ciders, visit… bryantscider.com

SUPPORTING “TRADE” DURING COVID-19

By: Ryan Malkin

  Does the rulebook go out the window during a pandemic? As the Alcohol and Tobacco Tax and Trade Bureau (“TTB”) and states weigh in via guidance and industry advisories, the resounding answer is no. Still, brands seek to support bartenders with, by and large, pure intentions. That is, brands have money and bartenders may not. Bartenders and brands establish important and long-term relationships over the course of, in some cases, decades. If your friend needed a meal, you’d certainly oblige. However, when the funds are coming from an upper tier (manufacturer, supplier, wholesaler) member’s pockets, we must consider whether and how funds can go towards trade. As a threshold matter, we should consider whether the bartender is employed or unemployed. If a bartender is unemployed, arguably that person is no longer considered a retailer within the meaning of the rules. If that’s the case, the rules with regards to how a brand may engage with that person may also go out the window.

  By way of very brief background, it is unlawful to induce a retailer (an on-premise or off-premise licensee) to purchase your brand to the exclusion in whole or in part of another brand’s products. In particular, the federal and most state rules note that, subject to exceptions, “the act by an industry member of furnishing, giving, renting, lending, or selling any equipment, fixtures, signs, supplies, money, services, or other things of value to a retailer constitutes a means to induce within the meaning of the Act.” In short: unless there is an exception, you may consider the giving of any “thing of value” to be impermissible.

  That means, but for exceptions, it is impermissible to acquire or hold any interest in a retail license, pay or credit a retailer for advertising, guarantee a loan to a retailer, require a retailer to purchase a certain amount of products, or provide any items that are not allowed under an exception. Those of us in the alcohol beverage industry may not realize it, but we largely play in the world of exceptions. The exceptions are where you find it permissible to offer point-of-sale materials, conduct tastings/samplings, provide displays, offer educational seminars to retailers, and stock/rotate your products.

  Federally and in many, though not all, states the providing of the “thing of value” must also lead to exclusion. Exclusion is when the practice “puts the retailer’s independence at risk.” To determine that, the TTB will look at the practice and consider, among other things, whether it required an obligation on the part of the retailer to purchase or promote the brand, and whether it resulted in discrimination among retailers. That means the brand did not offer the same thing to all retailers in the area on the same terms without business reasons for the difference in treatment.

  Now that we’re on the same page with regards to the rules, we want to consider whether the person we want to assist is employed by a retailer or unemployed. If the person is employed by retailer (remember that means on-premise or off-premise), the brand will be more limited in how it may engage with that person. In short, follow the pre COVID-19 rules. TTB’s recent guidance on this topic specifically states that “the furnishing of business meals or entertainment to a trade buyer is an inducement under the Act” if the inducement results in the full or partial exclusion of products sold by that brand in the course of interstate or foreign commerce. In other words, according to TTB, “the furnishing of business meals or entertainment to a trade buyer is not by itself a violation of the Act.” In fact, providing retailer entertainment is quite common and many states have specific regulations that permit the practice.

  Typical states rules will require that the brand’s representative be present, that the entertainment be reasonable, and not conditioned on the purchase or agreement to purchase any of the brand’s products. Retailer entertainment rules are how you often see brand’s take bartenders and liquor store owners to ballgames, concerts and dinner.

  Given the social distancing rules, it is impractical and unsafe to get together with working trade. Instead of going to dinner and discussing business, it may be worth considering whether a brand feels comfortable doing so online via, say, Zoom or FaceTime. The brand can send drinks and a meal to the bartender. When the food and drinks arrive, the brand and the bartender can hop online and eat together. The brand representative would be as present as one can reasonably during this time. Of course, the brand should analyze this against the rules in the applicable state(s) and with its own attorney.

  However, if the bartender is no longer employed, one should now consider him or her as just a regular consumer, albeit with above average mixology skills. Now the brand may feel comfortable entering into an agreement with the person to be a brand consultant to perform any number of services. For instance, to create how-to cocktail videos or conduct virtual tastings. The brand would then pay that person whatever the two agree as reasonable. The brand should consider putting an agreement in place with that out-of-work bartender. The agreement should include basic provisions, perhaps paying particular attention to intellectual property (we own it, you’re using it with our permission and we own what you create) and representations around the unemployed bartender’s status. This compliance section should require the person being hired to acknowledge that he or she does not have any direct, or indirect, ownership in any retailer, and, at minimum, that the fee being paid is not conditioned on or being used to induce any retailer to purchase the brand’s products to the exclusion of any competitive products.

  Now that you have a solution for supporting both employed, though perhaps struggling, bartenders and those out-of-work, go out there and keep your brand alive and relevant during these unprecedented times.  Be careful out there.

  Ryan Malkin is principal attorney at Malkin Law P.A., a law firm serving the alcohol beverage industry. Nothing in this article is intended to be and should not be construed as specific legal advice.

For more information contact Ryan Malkin at…

Malkin Law, P.A.

260 95th Street, Suite 206

Miami Beach, FL 33154

Office: (305) 763-8539

Mobile: (646) 345-8639

Email: ryan@malkin.law

Website: www.malkinlawfirm.com

Keys to Creating Effective Incentives for the Craft Beer Distribution Channel

By: By Nichole Gunn, Vice President of Marketing and Creative Services, Incentive Solutions

  When it comes to improving your go-to-market strategy, incentives can be a powerful tool that craft beer producers can use to motivate distributors and wholesalers to sell their product. Incentive programs help craft beer producers build mindshare with distributors and wholesalers, differentiate their product, provide enablement to indirect sales reps and collect important data throughout their channel.

  However, it is important to be mindful of your marketing spend and to focus on designing your program to generate a meaningful ROI. Keep in mind that an incentive program is about more than just rewards. 

Keys to Creating an Effective  Incentive Program

  While the specifics of incentive program design will be as varied and unique as the craft beer producers who use them, below are several overarching principles that can be utilized to create effective incentives for supply chain trading partners:

1.  Choose a specific, measurable goal for your program.

2.  Analyze your audience and your competitive situation.

3.  Offer rewards that are relevant to your target audience.

4.  Structure promotions to target KPIs (key performance indicators) that bring you closer to your goal.

5.  Consistently market your program to stay top of mind of with your indirect sales reps.

6.  Use digital platforms to drive your program and measure results.

  By following these six steps, craft beer producers can establish effective incentive programs that give them a sustainable competitive advantage in their channel and allow them to focus more of their attention on where it belongs – crafting great beer that their customers will love!

Choosing a Specific, Measurable Goal

  In order to achieve a meaningful ROI, it’s important to begin with the end in mind. Why do you want to launch an incentive program? What do you hope this program will accomplish? How will you measure success? The more specific you are when answering these questions, the more informed you will be when making decisions to empower your goals.

  Possible program goals craft beer producers use incentive programs to accomplish include:

•    Generating brand awareness;

•    Increasing sales for a specific product or region;

•    Driving incremental growth among supply chain trading partners;

•    Gathering data to improve partner profiles;

•    Capturing market share and gaining access to new verticals; and

•    Building loyalty with wholesale and distributor sales reps.

  While an effective channel incentive program can accomplish all of these things, it’s best to start small and narrow your focus to just one or two goals. Doing so will help you sell other members of your organization on the idea of launching an incentive program and will allow you to more effectively measure the results. Plus, you can always scale your program to accomplish additional goals once you know it’s working.

Analyzing Your Audience and Your Competitive Situation

  When building an incentive program, you have to put yourself in the shoes of the wholesale and distributor sales reps you’re attempting to motivate. What do you know about their lifestyle? What are the things that excite them? What information can you provide to make selling your products easier for them? The more you understand about your target audience, the better equipped you will be to create incentives that inspire them and align your goals with theirs. 

  In the competitive craft beer channel, each of these reps is responsible for selling multiple products from dozens of brands. The battle for mindshare is fierce. Chances are, some of your competitors are already running an incentive program or using other channel marketing promotions. It’s up to you to take a look at what your competitors are doing and to create an incentive program that is more engaging and compelling than theirs.

Offering Relevant Rewards to Your Target Audience

  According to the COLLOQUY Loyalty Census, the average American household is enrolled in more than 18 loyalty programs. Of those, they actively participate in fewer than half. In order for your incentive program to accomplish its goals, you have to stand out from the competition by offering rewards that enhance your value proposition and feel necessary to your participants.

  The more closely you can match your incentive rewards to the lifestyle and interests of your participants, the more effective your program will be. However, it’s important to choose rewards that align with varying levels of performance, while fitting into your overall budget. Luckily, there are plenty of options!

  For SPIFFs, rebates or programs with a wide range of participants, debit card and gift card rewards provide flexibility, convenience and wide appeal. Online merchandise rewards are more personalized and scalable, ranging from easily-earned “point burner” items like movie tickets for part-time customers, to exclusive, high-end merchandise and custom reward fulfillment for higher-performing supply chain partners. Group incentive travel is memorable and emotionally impactful, perfect for building loyalty with your top wholesale and distributor sales reps. Although incentive travel events are currently on hold for the foreseeable future, demand for travel rewards will be extremely high when the shutdown ends. This will not last forever, and there will be compelling bargains to be had as resorts and hotels at top destinations endeavor to resume business.

  Additionally, you can use a mix of rewards and tier them for different levels of performance or segments of your channel. For instance, it might make sense to offer an online points program for individual sales reps, while running an incentive travel promotion for the brand managers at the distributor level.

Structuring Promotions to Target Strategic KPIs

Incentives work by modifying the behaviors of your wholesale and distributor sales reps. Each step these reps take that bring you closer to your goal is also known as a KPI (key performance indicator). KPIs can be measured to predict or prove program success. For instance, the more participants that enroll in your program, the more likely they are to sell your product. Enrollment bonuses are a common incentive promotion, but you can also reward points bonuses for KPIs such as:

•    Attending tradeshows or taking online certification courses;

•    Participating in product-related trivia and quizzes;

•    Providing referrals;

•    Filling out surveys or updating their contact information; or

•    Making a first-time sale of a specific product.

  However, priorities change! For craft beer distributors, it’s important to have the ability to set multiple promotions and change reward parameters to target strategic initiatives, capitalize on analytics and respond to the tactics of the competition.

Marketing Your Program to Stay Top of Mind

  Once you have outlined your strategy and structure, the next step is to spread the word. Incentive programs create an easily communicated value proposition, but it’s necessary to consistently reach out and engage with your wholesale and distributor sales reps over a variety of channels.

  From program launch to reward redemption, you should be communicating with your supply chain trading partners across email, SMS, web platforms, direct mailers, flyers and phone calls. Get them excited about participating in your program, educate them on your brand, inform them about new promotions and remind them about the rewards they have the opportunity to earn. Your incentive program provides the chance to personalize your communication with your indirect sales reps in a way that may be otherwise difficult to achieve in the craft beer distribution channel. Additionally, you can use analytics to spot opportunities for growth or which accounts you should reengage and create targeted marketing campaigns for those accounts.

Using Digital Platforms to Drive Your Program

  Finally, you have to consider the user experience of engaging with your platform, as well as the administrative functions you need to successfully manage your program. Today’s incentive programs, like most business platforms, are software-driven. Gone are the days of analog catalogs, manual processes and investing in channel marketing strategies that don’t produce measurable results.

  When exploring potential incentive program providers, craft beer producers should ask themselves questions such as:

•    Does this incentive program software integrate with my CRM and other existing platforms?

•    How will this program software help me capture the data and analytics I need to improve my channel marketing?

•    How will this program software improve my ability to communicate with my supply chain trading partners?

•    Will my reward program website present an engaging and accessible user-experience that is a strong reflection of my brand?

•    What other features, such as gamification and sales enablement tools, does this platform include to keep participants engaged and to help them succeed?

  Luckily, these are areas where the incentive industry has made exciting strides over the last decade or so. As data, analytics, automation and providing digitally connected channel partner experiences continue to become increasingly important, incentive companies have shifted their focus from just providing reward fulfillment to offering complete channel sales and marketing solutions.

  This focus on technology has made launching and managing an incentive program less time intensive. In a 2019 survey, Incentive Solutions found that 70 percent of our clients, including several notable craft beer producers, spend less than two hours a week managing their incentive program. Additionally, some incentive companies provide the option to take full responsibility for program management to free up your resources for other priorities.

  After all, chances are you didn’t get into the craft beer industry to manage channel partners and set parameters for sales promotions. You got into it because you are passionate about brewing great beer!  

  Nichole Gunn is the VP of Marketing and Creative Services at Incentive Solutions (www.incentivesolutions.com), an Atlanta-based incentive company that specializes in helping B2B companies improve their channel sales, build customer loyalty, and motivate their employees. Nichole Gunn can be reached at ngunn@incentivesolutions.com.

Cider Saviours: How the Next Generation of Craft Cider-Makers is Saving Family-Run Farms

By: Briana Tomkinson

The agriculture industry is in a period of intense change. Globalized markets are driving com-modity prices down, making it hard for smaller farms to compete. Many mid-sized operations are being snapped up by large conglomerates.

  Additionally, many of the men and women running small and mid-sized North American farms are starting to look forward to retirement. According to Statistics Canada, the average age of the Canadian farmer is 55. Yet, often their children aren’t interested in taking over the family business.

The apple business is no exception. Yet, as many independent growers are discovering, changing consumer tastes are opening up new opportunities for niche producers. For apple orchardists, pivoting from selling apples to launching a craft cider brand can be a lifeline for struggling family-run orchards.

  According to Anelyse Weiler, a college professor of sociology at Okanagan College in Kelowna, British Columbia, and a Ph.D. candidate in sociology at the University of Toronto, moving into craft cider production opens up new revenue streams and buffers producers from economic volatility in the fresh fruit commodity market—and can be an effective way to entice grown children to consider returning to the family business.

  “Apple farmers face a slew of challenges in their industry, like the toll of the physical labour on their bodies, the increasing consolidation of apple production companies into huge conglom-erates, and the effects of climate change on their crops,” she said. “Moving into cider produc-tion can help farmers maintain their rural lifestyle instead of getting out of it altogether.”

  As part of her dissertation work, Weiler spoke to 100 people working in the Pacific Northwest craft cider industry about the challenges they face. She found most young cider producers she spoke with grew up in the agriculture industry and saw the struggles their parents faced.

  “For a lot of young people who had grown up on farms, they could observe not only the eco-nomic volatility but the emotional stress put on their parents’ generation and, frankly, the phys-ical cost of being a full-time farmer,” Weiler said. “For some of them, there was no romanticism that went into this idea of farming. They went into it with eyes wide open, and in many cases, wanted to maintain some sort of connection to agriculture, but on their own terms.”

  Weiler said mid-sized farms are finding it more difficult than ever to eke out a profit. Yet smaller farms have more opportunities to sell their products directly to consumers through farmer’s markets, farm tourism, local distribution to restaurants and via online marketing. Sales volume may be lower, but customers are increasingly willing to pay a premium for high-quality “arti-sanal” products.

  “A lot of producers face this ultimatum: get big, get out or get niche,” Weiler said. “And craft cider industries are one way for people to get niche.”

  Many young orchardists in the cider business truly value the interactive service components that go into direct marketing and sales, Weiler said. They also enjoy the chance to connect with customers in a direct way that isn’t always possible when just selling fruits to the commodity market.

  “I think it draws on this emerging craft livelihood movement where young people are interested in the creativity, in the sense of being able to put their unique signature on something in ways that farming for the fresh fruit market doesn’t always allow,” she said. 

  Weiler noted that the high cost of farmland in Canada makes it hard for young people without family ties to enter the orchard business. Young people who want to get into orcharding on their own have to get creative, she said. Some have created micro-cideries using windfall fruit or harvesting from abandoned orchards, for example—even using their own labour to pick the fruit.

Cider by the Numbers

  In Canada, cider sales are booming. In 2018, Statistics Canada reported that Canadians quaffed 181 million litres of ciders, coolers or similar beverages per person—the equivalent of 21.5 bottles for every person over the legal drinking age.

  According to research by Euromonitor, the craft beer craze has sparked interest in other small-batch, artisanal food and beverage products, including cider. The amount of cider sold in Canada more than doubled between 2013 and 2018, from 29 million litres to 63 million. Euromoni-tor projects sales could jump to almost 93 million litres by 2022.

  Sales growth in this category over the past 10 years has outpaced wine, spirits and beer in Canada. Cider and cooler beverage sales had an annual average increase of 6.4% over this period, compared to 4.2% growth in wine sales, and 2.8% for spirits and 1% for beer. Sales of imported cider grew faster than Canadian-produced brands, increasing at an annual average rate of 10.2% versus 5.5%.

  Ontario is the largest apple-growing region in Canada, with over 16,000 acres of trees. Accord-ing to the Ontario Craft Cider Association, cider is now the fastest-growing category of alcohol-ic beverages in Canada. Reporting from the government-run Liquor Control Board of Ontario shows that between 2012 and 2019, sales of Ontario craft ciders soared from $1 million to $16.3 million.

  According to Statistics Canada, ciders and coolers represented 4.2% of total alcohol sales in Canada in 2018, with the largest market share in New Brunswick (6.8%) and the lowest in Nu-navut (0.9%).

Key Dates for Canadian Cider Festivals (as of the date of publishing):

•    B.C. Cider Festival (http://bcciderfest.ca/): May 24, 2020: This year’s event will feature over 30 cideries from the Pacific Northwest and beyond. The festival is connected with B.C. Cider Week, May 23-31, which includes tasting events and tap takeovers throughout the province.

• Toronto Cider Festival (https://www.torontociderfestival.com/): August 28-29, 2020: Fea-tures live music, artisan market, food, an outdoor fire pit, and of course, a cider showcase and tasting events.

How Craft Beer Producers Can Incentivize Distributors and Wholesalers to Help Them Go to Market

By: Nichole Gunn, Vice President of Marketing and Creative Services, Incentive Solutions

As a craft beer producer, competition is fierce. According to the Brewers Association, there were 7,346 craft beer producers in the U.S. last year competing for $27.6 billion in sales. That’s a lot of beer! And, that doesn’t even take into account competition from “The Big Five” or import beer for shares of the overall U.S. beer market.

  For craft beer producers who are looking to scale and increase sales, it might be tempting to start pouring your marketing funds into consumer marketing. But will that really make a splash? Think of the hundreds of millions in media spend by beer companies every year that you’ll be going up against.

  Could there possibly be a more efficient way to use that marketing spend? For craft beers producers who are trying to go to market, it’s important to sit down and ask yourself, “Who has the biggest impact on whether or not end consumers find my beer? And how can I motivate them to prioritize my business?”

Understanding the Craft Beer Sales Channel 

  When it comes to connecting with end consumers, craft beer producers have four options:

•    On-Site: Selling directly to consumers at your brewery.

•    E-Commerce: Selling directly to consumers online.

•    Retail: Selling to consumers through other retailers.

•    On-Premise: Selling to consumers through bars and restaurants.

  However, on-site sales are limited by geography and e-commerce sales require brand familiarity or extremely creative (or very expensive) marketing. For a scalable sales and marketing strategy, craft beer producers have to turn their attention to retail and on-premise sales and the indirect sales force that helps them achieve penetration with these vendors.

Incentivizing Distributor and Wholesaler Sales Reps

  Outside of smaller, highly localized breweries, most craft beer producers rely on distributors, wholesalers and other supply chain trading partners to market to retailers and restaurants. Distributor and wholesaler sales reps are responsible for selling vendors on the value of your beer, negotiating pricing and terms of sale agreements and ultimately getting your craft beer to market.

  There’s one small problem: no matter how awesome your craft beer is, it only a small fraction of your distributor or wholesaler’s supply mix. In this battle for mindshare, it’s up to you to educate reps about your brand, enable them to sell your product and supply them with a value proposition that inspires them to take action on your account.

  This is where an incentive program comes into play. When many people think of incentive programs, they think about rewards. But while rewards play a big role in building relationships with your channel partners and adding to your overall value proposition, modern incentive programs take a more holistic, software-driven approach.

  Today’s incentive programs act as comprehensive sales and marketing platforms that enable craft beer producers to:

•   Build mindshare with distributor and wholesaler sales reps.

•   Target promotions by qualifying participant type, regions or product line.

•   Fill data gaps within their channel.

•   Enable sales reps to sell their product to vendors.

•   Deepen relationships with partners throughout their channel.

Building Mindshare with Distributors and Wholesaler Sales Reps

  Sales reps, for the most part, sell what they know. However, in a crowded supply mix, building this awareness and product knowledge with sales reps can be challenging. While every supplier wants something from these outside sales reps, far fewer supplier focus on offering value and creating memorable brand interactions.

  Inviting these sale reps to enroll in an incentive program where they have the opportunity to earn millions of rewards or exclusive incentive travel opportunities (and perhaps giving them a generous point bonus upfront) is more than a nice gesture. It’s a strategic differentiator and an opportunity to stand out from your competitors.  

  Your rewards program also creates new opportunities for communication and engagement that aren’t strictly business. These brand interactions are an opportunity to improve personalization and build relationship capital, which can be difficult to achieve in supply chain partnerships.

Targeting Promotions to Minimize Cost and Maximize Return

  It’s worth noting that a channel partner program is an investment. When planning an incentive marketing strategy, craft beer producers need to focus on maximizing the return on their marketing spend. This means that they should target first and scale second.

  For instance, would it make more sense financially to target your program to the sales and brand managers at the distributor level or the individual reps who work beneath them? It depends on your go-to-market strategy and the size and number of distributors you work with. If you sell through smaller wholesalers with a handful of reps, who each are responsible for a significant portion of your overall sales volume, then it might make sense to structure your program to reward individual sales reps. On the other hand, if you’re selling through a number of wholesalers and distributors, or an extremely large distributor with thousands of reps, it might make more sense to target your incentive programs to sales and brand managers.

  Additionally, from those managers and sales reps, craft beer producers can set qualification thresholds, based on sales volume or engagement, to ensure that their incentive program spend is allocated toward the participants who are most impactful to their sales growth.

  Another aspect of your targeting strategy is choosing to set incentive promotions by specific regions or product lines, based on strategic initiatives and opportunities for growth.   

Collecting More Complete Data Throughout Your Channel

  Craft beer producers, like many other companies who sell into a channel, often struggle with having inaccurate and incomplete data about their channel. Your incentive program is an opportunity to motivate distributors and wholesalers to provide more complete data. There are several ways craft beer producers can use their incentive program to fill in gaps in channel data:

•   Structuring enrollment forms that capture contact information and firmographic data during program registration.

•   Including automated tools for sales reps to attach invoices or other documents as part of the program’s sales verification process.

•   Offering rewards to participating sales reps for referring other reps within their organization.

•   Rewarding sales reps for completing voluntary surveys that can be used to clean up your existing database or collect more information about your participants’ interests, demographic and lifestyle.

•   Analyzing engagement datapoints the program generates to spot highly engaged accounts that are ripe for upsells and cross-sells.

  All of this information can be used to inform your sales and marketing strategy and increase the level of personalization you offer your supply chain partners.

  However, all the data in the world is useless unless you’re able to act on it. Modern incentive software includes CRM integration, data filters, reporting dashboards and custom reports to streamline this data for optimal use.

Enabling Your Distributor and Wholesaler Sales Reps

  Do you know one of the quickest ways to build brand preference with an indirect sales rep? Provide quality sales enablement. Using proven strategies to educate sales reps on your brand and your products makes it easy for them to sell your products to vendors.

  Integrating interactive quizzes and training videos with your incentive program is a powerful tool for supplying your external sales reps with the knowledge they need to sell your beer. This education can be supplemented by your incentive program’s digital communication platforms. (If you use this kind of strategy, make sure to break things up into bite-sized pieces and focus on the highlights your partners will need to help you go-to-market). Additionally, these quizzes are another opportunity for sales reps to earn rewards, increasing the overall value proposition of your program.

Deepening Relationships Throughout Your Channel

  Finally, in addition to short-term sales growth and marketing penetration, your incentive program has another benefit that will have a lasting impact on the success of your go-to-market strategy: relationship-building. Non-cash rewards are a social currency that achieve emotional impact and memorability with sales reps at distributors and wholesalers. In addition to motivating sales growth and reinforcing desired behavior, the rewards your program offers create a sense of personalization.

  For craft beer producers, your distributors and wholesalers are more than just conduits to the end consumer. They are your partners – an indispensable part of your go-to-market strategy. Offering your sales reps the opportunity to choose from exciting rewards or treating top performers to unforgettable incentive travel experiences represents the type of brand interactions that will set you apart from the competition. But more than that, these rewards inspire your distributor and wholesaler sales reps to emotionally invest in your brand and take an active interest in your success.

Unsure About Where to Start? Be Smart, Explore Your Options and Focus on Scalability

  An incentive program can be an integral part of a craft beer producer’s go-to-market strategy. However, what about companies who have never used this type of strategy before? If you are interested in creating a channel marketing program for your distributors and wholesalers, do your homework. Identify a goal for your program and the software functionalities you’ll need to achieve that goal.

  Compile a list of incentive program providers who fit your requirements and who have a proven track record, with case studies and testimonials to prove it. From there, begin reaching out to these providers and enlist their help in planning your incentive strategy. Use these conversations to refine your strategy and learn more about what has worked for companies with similar goals and similar distribution channels to yours in the past.

  Once you’ve decided on a provider, you don’t have to go all in. It’s prudent to start small, maybe with a pilot program or highly targeted incentive promotion. You can always scale, once you’ve proven that you can do this successfully.

  However, it’s also important to have a sense of urgency. As craft beer sales continues to grow, so will competition for craft beer dollars. Beating your competitors to building an incentive program for your distributor and wholesale sales reps can be a major competitive advantage. Plus, you owe it to your future customers to help them find their new favorite beer!

  Nichole Gunn is the VP of Marketing and Creative Services at Incentive Solutions (www.incentivesolutions.com), an Atlanta-based incentive company that specializes in helping B2B companies improve their channel sales, build customer loyalty, and motivate their employees. Nichole Gunn can be reached at ngunn@incentivesolutions.com

Distribution Agreements: Negotiate Your “PreNup” Carefully

Business people shaking hands, finishing up a papers signing. Meeting, contract and lawyer consulting concept.

By: Brian D. Kaider, Esq.

Starting a brewery requires learning a lot of new skills and practices that have nothing to do with making great beer.  One of the most confusing and frustrating is the issue of distribution.  If their state allows, most new breweries initially distribute their own products and, if the brewery is content to be relatively local, that might never change. 

But, in many cases, brewery growth necessitates working with a distributor.  This is not a relationship to be entered into lightly. A distributor becomes an ambassador for the brewery’s brand and, once retained, the supplier may have little control over how its beer is marketed. Further, these relationships can be difficult or financially impossible to break once established.

  Supplier/distributor relationships are governed by franchise laws in most states. In the absence of franchise laws, the relationship is defined entirely by a distribution agreement between the parties. But, even in franchise states, the distribution agreement can play a critical role, particularly in the termination of the distributor relationship.

  Too often, however, breweries accept a distributor’s “standard” agreement and when the relationship sours, the supplier finds that they are stuck with no viable option to terminate. The best practice is to engage an experienced attorney to negotiate the terms of the distribution agreement. While even the best attorney cannot evade state franchise laws (which generally prohibit a distributor from waiving its rights), there are ways an attorney may help bring balance to the supplier/distributor relationship.  Some of the key terms to negotiate include termination, territory, brand scope, and exclusivity.

Termination

  The most critical section of the agreement sets forth the manner and circumstances under which a supplier may terminate the distributor. In a franchise state, the law typically says that a supplier may terminate for “good cause.” If good cause is defined in the law, it is paramount that the distribution agreement mirror the language of the law, because in many cases, a contract that contradicts the law will be held invalid, leaving the supplier in the position of effectively not having an agreement at all.

  For example, the Virginia Beer Franchise Act states that good cause includes “failure by the wholesaler to substantially comply, without reasonable cause or justification, with any reasonable and material requirement imposed upon him in writing by the brewery.”  Further, the Act provides, “good cause shall not be construed to exist without a finding of a material deficiency for which the wholesaler is responsible.”  Tracking that language, a distribution agreement in Virginia should clearly define certain of the distributor’s obligations as “material requirements” and explicitly define certain actions as “material deficiencies.” 

For example, the Virginia law identifies failure to “maintain a sales volume” of a brewery’s brands as being a reasonable and material requirement.  But, the law does not specify what volume is required.  So, the distribution agreement should clearly lay out specific minimum sales volumes (preferably on an escalating scale) and identify the requirement to hit those volumes as a material requirement of the contract. 

  When the law does not define good cause, and in non-franchise states, it is essential for the distribution agreement to do so. The contract should clearly set forth the distributor’s requirements that are critical to the business relationship and for which failure to perform will be grounds for termination.

Examples of common requirements include: meeting specified sales and marketing goals, maintaining appropriate records and reports regarding inventory and sales, transporting and storing the product under specified temperature and lighting conditions, exercising adequate quality control measures to ensure product freshness, and paying invoices within a specified time frame. It is also common to include termination rights if the distributor is declared bankrupt, enters a voluntary’ petition for bankruptcy, enters into a compromise or agreement for the benefit of its creditors, or fails to maintain in good standing all Federal and State licenses and permits necessary for the proper conduct of its business.

  In some cases, sale of the distributor or even a change in the ownership structure may be justification for termination.  In February 2019, Bell’s Brewery of Kalamazoo, Michigan completely pulled all of its distribution in the Commonwealth of Virginia.  The issue was that its distributor in Richmond was sold to a subsidiary of Reyes Beer Division, the largest distributor of beer in the United States.  Per its distribution agreement, the original distributor was to have provided Bell’s with certain information about the sale to Reyes, but it failed to do so and Bell’s believed that because it did not have the opportunity to properly vet the new distributor, termination of the franchise was warranted.  To this day the dispute has not been resolved and Bell’s beer is not available in Virginia.

  In most states, a supplier must compensate the distributor for the lost business even if the supplier is able to terminate for cause.  Sometimes the law simply says the supplier must pay the distributor the “fair market value” of the distribution rights.  There can be an expensive battle just to determine that compensation if fair market value is not defined in the distribution agreement.  Often the value is defined as a percentage of the prior year’s case volume multiplied by some dollar amount per case. The “standard” contracts pushed by some distributors can be very severe in this section. In the beer industry, it is not uncommon to see values set at an entire year’s worth of profits times a multiplier that can range from 1.5 to many times higher. In practice, often a new distributor will buy out the distribution rights from the old distributor, but if the supplier wants to return to self-distribution, this buy-out provision may be cost prohibitive. 

  While the beer franchise laws in most states were written at a time in which large beer manufacturers had significant market power over small distributors, those roles have substantially reversed.  Slowly, state laws are being revised to accommodate this change.  In Maryland, for example, the law changed on January 1, 2020 to eliminate the “for cause” provision of termination for suppliers who manufacture fewer than 20,000 barrels per year and the termination notice was shortened from 180 days to 45.  However, the manufacturer still has to give the terminated distributor fair market value of the franchise.

Territory

  Depending on the size, experience, and reach of the distributor, there may be an opportunity to creatively carve out different territories. Territories are most commonly limited to certain states. However, a supplier may be able to limit a smaller distributor to certain counties or even specific types of establishments (grocery stores, but not restaurants, for example). One of the clearest breaches of the distribution agreement, that may constitute good cause for termination, is for a distributor to make sales outside of its contracted territory. 

Brands

  Generally, when a distributor is hired to carry a brewery’s brand, it has the right to all of the products in that brand. But exactly what constitutes a  ‘brand” is unclear both in the statutory language of most state franchise laws and in many distribution agreements. 

In Maryland’s beer franchise law, for example, “brand” is not explicitly defined, but the law appears to favor the distributor in terms of brand scope. Specifically, section 105 of Maryland ‘s Beer Franchise Fair Dealing Act prohibits a brewery from entering into a beer franchise agreement with more than one distributor for “its brand or brands of beer” in a given territory. One might argue that the language “or brands” means that the first distributor has the right to all brands of the manufacturer in a given territory.

In fact, that very’ issue was litigated in the 1985 case of Erwin and Shafer, Inc. v. Pabst Brewing Co., Inc. and Judge Couch, writing for the panel of The Court of Appeal of Maryland, disagreed. The court held that if a brewery retained a distributor to handle one or more of its brands within a territory, it could not then contract with a second distributor within the territory for those same brands. It could, however, contract with a second distributor to carry a different set of brands.

  How far the court would take its interpretation of what is a “brand” is unclear, however. In the Pabst case, the first distributor was given the right to distribute Pabst brand beers, but Pabst later merged with Olympia Brewing Company and gave the second distributor the right to sell its newly acquired Hamm’s brand beers. Whether the court would have allowed the brewery to contract with one distributor for Pabst and another for Pabst Extra Light it did not say.

Exclusivity

  Even if rights under a distribution agreement cannot be divided by brand (as in the case of the beer franchise law in Maryland), some states may nevertheless allow a supplier to contract with more than one distributor within a territory. If permitted in their state, a brewery should ideally enter into all of its distribution agreements for a given territory simultaneously, providing notice to each distributor. At a minimum, the brewery should ensure that the first agreement entered into is explicitly designated as non-exclusive. Otherwise, the distributor may view the agreement as giving it exclusive rights to the territory and could sue the brewery for diminishing the distributor’s business if it were to engage a second distributor in that territory.

Final Thoughts

  Whether a brewery is in a franchise state or not, it is critical that it review and negotiate its distribution agreements carefully, with the assistance of an experienced attorney. It is also important to remember that the supplier’s diligence does not end when the agreement is signed. No matter how well the terms of the distribution agreement are negotiated and drafted, they are effectively useless if the supplier cannot back up its claims for good cause.

Accordingly, thorough documentation is essential. If a distributor is not meeting sales goals, mishandling product, or failing to provide adequate reports, they must be given written notice of those deficiencies each time they occur.

  There are great distributors out there who become essential partners in a brewery’s business. But, sometimes those relationships can sour and signing an agreement without anticipating complications down the line can make it virtually impossible to sever those ties. A little forethought and planning and a lot of diligence will go a long way toward a successful termination of a bad relationship.

  Brian Kaider is a principal of KaiderLaw, an intellectual property law firm with extensive experience in the craft beverage industry. He has represented clients from the smallest of start-up breweries to Fortune 500 corporations in the navigation of regulatory requirements, drafting and negotiating contracts, prosecuting trademark and patent applications, and complex commercial litigation.