Clown Shoes Loses & Re-Gains Georgia Distribution Partner

n September 8^th  2014 we received this email from the head of the beer division for Quality Wine & Spirits, our Georgia wholesaler:

I am writing today with a bit of bad news. Quality is getting out of the beer business. As of Sept 30^th of this year we will no longer sell beer.

The future of the beer program has been a topic of internal discussion for some time. We are in the midst of a comprehensive IT overhaul and it became clear that the cost of coding the new system to deal with beer was going to be prohibitively expensive. Furthermore we are dealing with very real set of space constraints in our warehouse. Beer takes up a lot of space and on a profit-per-square foot basis isn’t generating the kind of revenue that wine and spirits do. Add to this the challenges with perishability and the logistical nightmare posed by kegs and it became clear that we needed to focus on what we are good at.

For my part, while I always ran 100% of our beer program, beer was not 100% of my portfolio responsibilities. I will be re-focusing my attention on the dozens of wineries that fall under my umbrella.

We are working on clearing out inventory and while we have discounted we have not done so in such a way that will cause you any problems with price in the market. Presuming that you wish to continue selling in the Georgia market you will need to find alternative distribution. Once you have identified a distributor please put them in touch with us and we will work out the transfer of distribution rights.

If you have any questions feel free to give me a call. I regret that we will not be able to work together moving forward and I wish you nothing but success.

Wow. Ok.

In good faith we began the search for a new wholesaler, eventually making a decision.

The wholesaler we have chosen wishes to pick up the brand, and we were in the process of working on an arrangement when we learned the owner of Quality was “shopping” our brand, meaning he wanted to sell the distribution rights.

This attempt to move our brand was done without any discussion with us. For Quality to reach out to all beer wholesalers, looking for a high bidder, was a perplexing way to conduct business, as the brand cannot be reassigned without our approval.

I called the owner of Quality and informed him where we wanted to go. At first things seemed fine, as it was indicated that a deal with our newly selected wholesaler should be achievable. It turns out this was not the case.

The wholesaler we chose, and for that matter all other beer wholesalers, refused to make an offer to Quality. Why? Because Quality had already announced plans to get out of the beer business. Everybody questioned: why on Earth should they pay for something that will be available soon for free?

When Quality’s inability to make a deal became clear, I requested our release as of September 30^th. The owner of Quality refused, claiming he still wanted time to make a deal.

Then Quality did an about face and said they want to stay in the Clown Shoes Beer business, at least until a deal could be done. The problem? The beer division has been dissolved. The beer manager has been reassigned. The salespeople have already announced to their customers they are out of the beer business.

I asked Quality for a plan to continue sales and was told by the former beer manager that he was not sure how well they would do, as he had been reassigned and that he did not have a “crystal ball.” Then he sent me an order that was about 1/5 the size of a normal order, which we refused to ship.

I have left numerous messages over the past week for ownership and management at Quality asking for clarity. No response.

It appears Quality does not care that the business we do in Georgia is important to Clown Shoes. They have pulled the rug out from us on our relationships with bars, retailers, and consumers that we worked hard to establish. The lost revenue matters (it actually does), but an inability to maintain our relationships is worse.

Bummer.

It feels like we have taken a cavalier, unexpected, and unethical shot to the chin. From a friend.

Georgia, we love you, but until Quality Wine and Spirits gives us our release, we cannot ship you beer.

UPDATE 8 Oct 2014:

When I wrote a blog on Monday, it was without hope of quick resolution.

Surprisingly, the owners and management of Quality Wine & Spirits took to heart our plight and have worked with us aggressively this week to resolve the conflict. We no longer have any hard feelings toward Quality and ask that our customers follow suit. They are real people over there. They had other real problems to deal with that were unavoidable over the last two weeks, but once they understood how much this was hurting us it became a top priority to help us find a new home. They have now done so in a reasonable and decent manner.

Thank you very much to the whole team at Quality Wine and Spirits.

General Wholesale will be distributing Clown Shoes Beer as soon as we can complete the licensing work, with product planned to ship later this month. This isn’t a one hundred percent certainty, but I’d say we are at the 1 yard line and about to break into the end zone, in terms of having a finalized agreement.

General Wholesale is a large beer wholesaler (they sell Heineken, Corona, etc.) that has been making strides in developing a craft portfolio, as well as a team to promote craft beer.

The team at General (and yeah this may sound corny) was like the cavalry arriving during a dark hour. They not only have managed to keep all parties whole in this transaction, they have also laid out a road map to develop our brand that we find reasonable. We are growing. They are growing , and more importantly they are improving. Everyone is willing to be flexible and all of us know business needs to be earned, not taken for granted.

Georgia, we love you and, quite unexpectedly, it appears we will be shipping beer to you again as early as next week.

To all who have offered their support and assistance this week, we want you to know that at Clown Shoes we could not be more grateful.

Sincerely,

Gregg Berman