Beer Supply Chain: Bars' Beer Sources Explained

The beer served in bars comes from various sources, depending on the location and local regulations. Some bars may produce their own beer, while others may purchase it from local beverage distributors, wholesalers, or directly from breweries. In some cases, bars may also order beer online through private sales or use bar and beverage ordering platforms to place orders with distributors. The choice between buying beer from a distributor, wholesaler, or directly from a brewery depends on factors such as pricing, convenience, and the relationship between the bar and the supplier.

Bars buy beer from a local beverage distributor or brewery

Bars, pubs, and restaurants typically purchase their beer from a local beverage distributor or brewery. This is because wholesale prices are much cheaper than retail prices, which helps to lower costs and increase profit margins. Bars will usually pay 70% to 80% less than what they charge their customers for drinks.

Some businesses, like brewpubs and brewery taps, produce their own alcohol. However, most will order from a wholesaler or distributor, or they may order directly from the brewery. Distributors act as brokers between breweries and buyers, and also as wholesalers. They often keep the beer at the brewery and only transport it when fulfilling an order.

Bars will usually outline their supply sources in their restaurant business plan. They can also buy particular vintages through private online liquor sales. Bars typically maintain a consistent bar supplies list that they restock each week, carefully selecting bottle sizes to get more value for their money.

There are various ways for bars to buy their alcohol. One is to contact a sales representative for a distributor or wholesaler directly, either by phone or online. The other is to use a bar and beverage ordering platform, where all orders are placed directly to distributors through subscription-based software.

They pay wholesale prices, which are much cheaper than retail prices

Bars, pubs, and restaurants usually buy their beer from a local beverage distributor or brewery. They pay wholesale prices, which are much cheaper than retail prices. This helps to lower the cost of beer and increase profit margins. Bars typically pay 70% to 80% less than what they charge their customers. For example, if a bar pays $1 for a single 12-ounce serving of beer, they will charge their customers between $3.33 and $5.

Bars can order beer in a few different ways. They can contact a sales representative for a distributor or wholesaler directly by phone or online. Alternatively, they can use a bar and beverage ordering platform, where all orders are placed directly to distributors through subscription-based software. This type of platform can provide complete insight into vendors, order creation dates, delivery dates, and more.

The amount that bars spend on beer varies depending on their size and inventory turnover. Small bars tend to spend around $2,500 to $6,000 per month on alcohol, while mid- to large-sized bars can spend anywhere from $6,000 to $13,000 per month.

In some cases, breweries may offer free or low-cost beer to pubs and bars, with the condition that only their brand is on tap for a certain period. Additionally, pubs may sell taps to breweries.

Bars can buy direct from the brewery or through a distributor

Bars can buy beer directly from the brewery or through a distributor. Distributors act as brokers between breweries and bars, and also as wholesalers. They store beer at the brewery and only transport it when fulfilling an order. Distributors also offer other products such as soft drinks, wine, glassware, and bar supplies.

Bars, pubs, and restaurants usually purchase from a local beverage distributor or brewery. They can contact a sales representative directly or use a bar and beverage ordering platform to place orders with distributors. Bars can also buy beer through private online sales if they are looking for particular vintages.

In the US, each state has its own laws regarding alcohol sales. Some breweries may have to go through a liquor distribution board (LDB). Breweries sometimes provide free or low-cost beer to new pubs and bars on the condition that only their brand is on tap for a certain period.

Bars may be offered free beer by bigger breweries in exchange for exclusivity

In the United States, the three-tier system dictates how most alcoholic drinks are taxed and sold. This system states that, with some exceptions, all beer, wine, and spirits must be sold by their supplier (e.g. a brewery) to a wholesaler (or distributor), who then sells them to a retailer (e.g. a bar or restaurant), who then sells them to the end consumer.

While the three-tier system is intended to encourage competition by preventing "tied houses" (where a brewery owns the bar or restaurant serving its beer), it can also make it more difficult for new breweries to establish themselves, as they must first secure a distribution contract.

In some states, breweries are allowed to hold ownership in two of the three tiers (e.g. owning both the brewery and a distributor or retail shop), and brewpubs (which make and serve beer) are exempt from the three-tier system. Some states also allow breweries to self-distribute if they produce below a certain volume of beer.

While it is illegal for breweries to offer keg deals, cash, or other financial incentives to bars in exchange for selling their products, bigger breweries may offer bars free beer in exchange for exclusivity. This practice is known as "inducements" and is prohibited by Regulation 720 of Ontario's Liquor Licence Act.

In Texas, for example, it is illegal for a supplier or wholesaler to enter into any exclusive purchase agreement with a retailer. Additionally, providing or purchasing any type of advertising that benefits a specific retailer is considered an illegal inducement.

Despite these regulations, the system of graft for tap lines is so ingrained in the hospitality industry that fighting it can feel futile. There are even Facebook groups where people boast about the free items they have received from breweries or compare notes on which breweries will pay the most to help install a draught line.

While breweries may face penalties for providing inducements, these penalties are rarely enforced. However, with the launch of online portals such as iAGCO in Ontario, it may become easier for people to report illegal inducements and curb the practice.

Bars can buy beer from a local distributor or compose their own beer list

In Canada, bars in Ontario buy alcohol from the LCBO (Liquor Control Board of Ontario) or the Beer Store, which delivers kegs by truck. In British Columbia, beer comes from Brewers Distributors.

In Europe, pubs, bars, and restaurants usually order from a wholesaler or cash-and-carry, or direct from the brewery or a distributor. Distributors act as brokers between breweries and buyers, keeping the beer at the brewery and only delivering it when an order comes in. In Belgium, breweries distribute their own beer, and pubs can buy directly from them, getting lower prices and perks like branded parasols, cards, and furniture. Alternatively, they can buy from a local distributor and compose their own beer list, but this is more expensive.

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