A new startup promising craft brewers the ability to lower operating expenses by helping their companies gain access to discounted raw materials and valuable industry information is preparing to launch this fall.
Called the Independent Brewers Alliance (IBA), the purchasing cooperative believes it can save small brewers money on necessities like bottles, cans, hops and malt by negotiating rebates and bulk buy discounts with supplier companies.
According to its website, the company also believes it can save breweries money on “operational expenses such as freight, energy and credit cards,” and “improve member operations by sharing industry information and best practices in areas such as human resources, technology and legal compliance.”
It plans to officially incorporate this month and begin signing up members as early as July, a spokesperson told Brewbound.
Joe Fisher, one of the individuals tapped to help launch the project, said IBA has already met with over 25 brewers, many on the Brewers Association’s top 100 largest craft brewers list, who have expressed significant interest in assembling or joining a “craft brewing purchasing force” that would leverage its group buying power and strike better deals with suppliers.
“Right now, there is a lot of consolidation within craft,” Fisher said. “Everyone sees the landscape changing and there is a general awareness that things are getting more competitive. If you don’t want to merge or sell and you want to remain independent, a purchasing alliance gives yourself the strength and resources of a much larger company.”
IBA members would own a majority of entity, Fisher said, and participate in rebates that would be redistributed to members based on size and purchasing behavior.
Fisher compared the group to Ace Hardware, a retailer cooperative with more than 4,500 locations that purchase merchandise in bulk, at the lowest possible price, in order to save money. That model, Fisher explained, enables smaller Ace Hardware outfits to compete with larger big box stores like Home Depot.
The pitch to brewers? IBA believes that continued consolidation and increasing competition within beer will make it more difficult more small and mid-size players to secure favorable terms with suppliers. As a collective group, smaller players could strengthen their individual businesses by banding together on discounted purchasing agreements and sharing best practices.
A brewer’s membership in IBA would remain invisible to consumers and the group would not take an equity stake in its member beer companies. Members would also not be obligated to participate in group buying programs.
But there’s a hurdle in place: in order to achieve the kind of group buying power that would open the door to better contracts, IBA must first get membership commitments from a collection of craft brewers making at least 250,000 combined barrels, Fisher said.
And for the IBA to really see the best results, Fisher said, it would need to become one of the “largest purchasing forces in craft brewing.” That means bringing “well above” one million barrels of purchasing power to the table, he added.
IBA is currently recruiting potential brewery members and looking to hire a full-time executive director with “a broad network of strong relationships within the industry.” It also plans to hire member relations and supplier purchasing staff, Fisher said.
Although IBA is still finalizing its corporate structure, Fisher said those positions would likely be funded through a combination of recurring annual membership fees, which have not been determined, and member brewery stock purchases.
The soon-to-form company was co-founded by Greg Brodsky, an active group purchasing strategist and son of Howard Brodsky — a known champion of cooperative business models and an inductee into the Cooperative Hall of Fame (yes, it’s real). Three other silent partners are also involved in the venture.
The company hopes to eventually convince at least 500 individual craft breweries each making at least 5,000 barrels annually to join the group, Fisher said.