Road Beers and a New Pandemic-Inspired Delivery Model
The Covid pandemic is leaving a ton of wreckage in its wake, but in its profound shock to the way we live our lives, it has also opened up new ways of doing things. It has created entirely new business models that might not have been imaginable a year ago. Here in Portland, Casey Armstrong has given birth to something entirely new: a direct-to-consumer beer delivery model he calls Road Beers that may permanently shake up the way we buy beer.
A decade ago, people loved to talk about “disruption”—which was often little more than harnessing phones to cut through old, calcified logistics. Sometimes, though, things really did change. In much that mode, Covid has exposed an opportunity, a seam in the market, that could have been exploited at any time: delivering beer straight to customers and cutting grocery stores out of the picture. In the traditional model, breweries sell to wholesalers, wholesalers sell to retailers, and retailers sell to customers out on their weekly shopping trip. Armstrong’s approach is different: charging a fee to deliver a brewery’s beer straight to the customer, no distributor or retailer needed.
Actually, it’s a little more complicated than that, so let’s back up to March 2020 to see how the whole thing started.
Maybe This is Going to Get Serious
Before the virus hit, Casey was happily operating his brick-and-mortar business, Function PDX, an event space in Northwest Portland. He had enjoyed a strong year in 2019 and was looking forward to a slate of activities in 2020 as ominous news started coming in. Like so many other businesses, that’s when he began scrambling. “Honestly, in my mind I was thinking, ‘let’s stay relevant, and deliver beer for a month,’” he said, describing a process of throwing up a quick website and setting up delivery with the City and OLCC. “I was literally operating it off a cell phone and Instagram. The first day we did seventeen deliveries and about fifteen pick-ups. We ran out of almost all of our beer. I thought, ‘maybe this is going to get serious.’ It wasn’t an idea at all until March 14th, we shut down on the 17th, and I opened on the 20th.”
Casey’s background is in marketing and brand strategy. He was with Adidas for eight years then went to Widmer in 2013, where he worked on the 30 Beers in 30 Years campaign and the Hefeweizen refresh. This was one element of his fortunate positioning, which included several advantages already in place. He had the building at Function, which quickly became a makeshift “mini-warehouse,” as he described it. A business partner is Andrea Lins, who owns Back Pedal Brewing, which had shut down because of Covid. He was able to use her cooler as a backstop. Because he was already in the business of selling beer, it was easy enough to retool and sell that same beer with a delivery component.
The initial, bootstraps operation Casey calls Phase 1. He was, functionally, a bottle shop that delivered. “I acted as an account; I had account status with the OLCC at Function.” Since he’d already worked with breweries at Function, he drew on those relationships to buy an inventory for the nascent project. “It was really just me buying beer and reselling it.” This component is still going strong, and Road Beers has an impressive selection of breweries to choose from.
Phase Two: Brewery Partners
The second phase only recently came online, and it offers the most intriguing possibilities. Here, Road Beer merely charges a fee and acts as a delivery service for breweries. Immediately after Covid started, some companies like Gigantic and Reverend Nat’s implemented their own delivery service—but it’s a huge project. Nat West of Reverend Nat’s wrote about this in an installment of the Coronavirus Diaries, describing a process in which he essentially launched a second, separate business. Road Beers offers the prospect of outsourcing the delivery, while leaving the lion’s share of profit with the brewery.
Casey Armstrong (via Casey/Road Beers)
With what he calls Phase 2, he’s turned "Road Beers “into a partner delivery service for breweries that either can’t do it or don’t want to do it anymore.” So far he’s signed up two partners, Wayfinder and Culmination. On delivery days, a driver from Road Beers goes to the breweries and picks up the orders, taking them back to Function to bundle with other orders, or delivering them immediately. Road Beers charges a delivery fee to customers—something many breweries were already doing—and a service fee to the brewery for delivering the beer. Breweries using Road Beers in the Phase 2 model sell beer at retail, minus the fee, rather than wholesale.
The “phase” language belies a system in which wholesale and retail form complementary elements of a system. Casey points out that he stocks Wayfinder and Culmination through the wholesale side as well as the new phase two side. “Wayfinder doesn’t offer everything to their wholesale accounts, or crowlers and that kind of thing,” he said. Road Beers is able to offer a broader selection of these brewery’s beers because customers can get special, taproom-only beer delivered only through Road Beers in addition to the more common beers found in stores. Casey hopes to add more breweries to the Phase 2 model, and mentioned he’s already in talks with a couple.
After the Pandemic
At some point in 2021, life is going to return to normal. Does that mean people will stop having beer delivered to their home—or will home delivery become a permanent fixture of the way we consume beer? Casey believes it will be permanent. “Yes, I’m a huge believer in that. I just think that the convenience model of having stuff delivered to your door, especially from a local brewery—I just can’t see that appeal going away.” He pointed out a familiar pattern he’s already seen. In the early weeks of this experiment, deliveries picked up fast. As the warm summer months arrived, they dwindled, only to pick up steam again when the cold weather returned. This follows the seasonal pattern of beer consumption, which spikes in the summer. Casey believes delivery will flourish most in those off seasons. “But ask me again in six months!” he joked.
I couldn’t help but notice how closely Road Beers’ model mirrored the one distributors use. He takes a series of logistical problems off breweries’ hands to makes sure their beer arrives at consumers’ doorsteps. At one point, Casey even sounded like a distributor:
“We want to bring on more partner breweries because, again, then we’re building our book. The idea would be to have—and this is phase three—this wholesale distribution model, but from a consumer standpoint.”
There are some key differences, however, and they make my eyes sparkle with possibility. In their long decades of existence, distributors have carved out a safe, government-mandated niche in which their partners are locked in perpetuity to their service. They are cosseted from the worst violence of the market. In the delivery model, Casey has no such protections. Anyone could start a rival business and offer to deliver at lower fees. The relationships Casey builds will survive by mutual benefit, not legal fiat. Home delivery will likely never constitute enough total market share to make distributors worry, but the model might make them edgy. It could demonstrate that all the protections they’ve demanded aren’t critical to the smooth function of the industry.
Casey’s right about building his “book,” too (wholesaler-speak for the portfolio of breweries they distribute). Road Beers will be a more attractive service to customers the more choices they have. The downside of ordering direct from breweries is that lack of choice—a customer may love a particular brewery, but still wish to have a beer or two from a different brewery as well. Going to one place and receiving one delivery will be key to the model’s success. The delivery footprint will matter, too, and Road Beers delivers in a fifteen-mile radius from Northwest Portland, reaching suburbs like Hillsboro, Gresham, and Sherwood.
It’s also an elegant component in the ecosystem of beer sales. For breweries, selling retail rather than wholesale is hugely valuable. Being able to do so without a lot of expensive time and energy is pure upside. Where most things depend on economies of scale, it should be easy enough for breweries to accommodate Road Beers’ orders for even small amounts of beer. That might not be worth it at wholesale prices, but at retail it makes even small volume worthwhile. Casey is happy to support breweries this way so long as he can make enough to support his delivery business.
I do think there’s an open question about how many people will use home delivery, but it extends well beyond beer—and based on the number of UPS and FedEx trucks that rumble through my neighborhood, delivery is winning. We once developed the habit of of going to stores to make purchases. Habit is a powerful force, and it’s why we continued to go to stores even when online ordering emerged as a viable alternative. The pandemic has forced us to change our habits, however, and that may spark a culture-wide change in the way we buy beer.
Time will tell. We will have to take Casey up on his offer and check back in next year to see if this was a great pandemic-era business, or if it points to a new way of doing things after we’re all back to “normal.”