Update, Feb. 22, 2024: On Feb. 21, the U.S. Bankruptcy Court Northern District of Georgia, Atlanta Division, approved Pontoon Brewing's motion to dissolve its business agreement with Bevana Partners' parent company, Community Brewing Ventures. The judge's order states that Pontoon's service agreement is "rejected effective immediately," noting that CBV may file a proof of claim for rejection damages."It allows us to go back to business with our distributors directly and move on from that mess of a relationship," Pontoon CEO and owner Sean O'Keefe says via email. "Once we are finished with bankruptcy, we will be filing our complaint against them for the money they owe us, the damages they caused, etc."
Update, Nov. 29, 2023: Another brewery has come forward alleging Bevana delayed and withheld payments.
Hunter Smith, founder of Charlottesville, Virginia’s Champion Brewing Co., says it took three months and a formal letter of demand from Champion for Bevana to pay the brewery its initial acquisition fee. He further says that Bevana still owes his brewery sales royalties. (He declined to quantify either figure, citing contractual confidentiality.)
Champion closed its brewery at the end of June, and Smith says he’d hoped that the money generated through a partnership with Bevana would help settle its debts and create a pool for laid-off employees.
“Instead, I looked like a jerk for promoting Bevana and our partnership while laying off my team, and nobody has been able to benefit from the Champion brand but Bevana—six figures in sales to distributors this year and nothing for us,” Smith wrote via email.
Update, Nov. 27, 2023: After this article’s publication, Pontoon Brewing’s CEO and co-founder Sean O’Keefe contacted the reporter to say that his brewery was pursuing legal action against Bevana Partners. Pontoon alleges that Bevana owes the brewery hundreds of thousands of dollars. Because of that debt, O’Keefe says, Pontoon is in the process of filing for chapter 11 bankruptcy. Emails reviewed by Good Beer Hunting between Bevana CEO Andrew Durstewitz and O'Keefe show Durstewitz agreeing on Oct. 9 to a “set of payments over the next two weeks … but it WILL NOT be the entirety of the account balance.”
“We closed because of them,” O’Keefe says. “They still have not mentioned how they are going to pay us.”
Separately, the Charlotte Business Journal reported today that SouthState Bank has sued D9 Brewing, Bevana parent company Community Brewing Ventures, Durstewitz, and D9 owner John Ashcroft Jr. for $149,000. The suit reportedly states that D9 sold “equipment without approval, failed to pay proceeds to SouthState and didn't pay its loan in full.” The CBJ states that Durstewitz called the bank’s refinancing practices “predatory,” and he maintains D9 has paid off its principal and interest but still has an outstanding balance due to those refinancing practices. A counter to the suit has not yet been filed.
Bevana did not immediately respond to a request for comment; this story may be updated. The original story follows.
THE GIST
Within a slowing craft beer market, sales growth for companies has been more difficult to come by than in recent memory. Draft sales are down in bars and taprooms while craft’s dollar share of beer sold in chain retail has fallen -1% from five years ago, despite being a premium-priced product.
These challenges have left many small breweries struggling to find ways to expand their business, afford equipment upgrades that would help them brew more and better beer, or to sell in new markets. Since 2019, North Carolina-based Bevana Partners has billed itself as a one-of-a-kind solution to all three problems. Its roster of partners includes Southeast breweries like Champion Brewing Company (Virginia), Orpheus Brewing (Georgia), and several Tar Heel State companies. It has "affiliate" agreements to sell brands from the trend-setting Incendiary Brewing Company, long-beloved Jester King Brewery, and more.
But how exactly Bevana provides its services in beer’s complex web of legal and distribution requirements hasn’t been crystal clear. The company, which until March 2022 was called Community Brewing Ventures, admits to being “willfully vague” about its model, which combines contact brewing, brand licensing, sales and distribution support, and e-commerce. The murkiness hasn’t stopped Bevana Partners from generating media attention—it’s been hailed as “the first craft beer accelerator to restore growth”—and signing on 21 current brewery clients.
In the simplest terms, Bevana’s mission is to connect small beverage companies with a wider market of customers. Small breweries are eager for just this type of help: Bevana’s goal of providing scale plus distribution expertise is what many see as their ticket to better efficiencies and more sales at a time when both can be difficult and expensive challenges.
But not all breweries that have partnered with Bevana have realized success: Several have closed in recent years and others have ceased using Bevana’s services after failing to meet sales goals. Interviews with current and former brewery partners of Bevana, former employees, Bevana leadership, and beverage industry sales experts indicate that while the company’s model is novel and in demand, it has struggled to deliver on its ambitious goals.
In what feels like a time of peril for some breweries, these shortcomings represent challenges rather than solutions. At best, Bevana offers breweries new sales models they couldn’t achieve on their own, although with the risks like any other new venture. At worst, it’s a last-gasp attempt for struggling breweries to make some money via licensing agreements before the business essentially folds.
WHY IT MATTERS
Bevana has created a new business model to solve the most pernicious challenges craft beverage companies face—and it has national ambitions. Yet its track record so far is mixed. Former employees and brewery partners say the company failed to deliver on a central promise: to accelerate breweries’ sales through more retail placements. Two former sales employees who worked for the company last year say Bevana’s business model and portfolio of breweries wasn’t appealing to major chain retailers, and both employees ultimately didn’t try to sell into those stores.
At least two former brewery partners of Bevana’s—Charleston, South Carolina’s Fatty’s Beer Works and United Arab Emirates-based Side Hustle Brews & Spirits—declined to renew contracts with the company after the arrangement failed to yield anticipated sales. Side Hustle Brews & Spirits joined Bevana in late 2020, when Bevana did not have a long track record of sales for the brewery to examine. Side Hustle says Bevana suggested they could sell $1-$2 million of the brewery’s beer annually, but Side Hustle leadership was skeptical of this ambitious estimate. In the end, Side Hustle leadership says the company made about $1,000 through its partnership with Bevana, while Bevana says that for that company and Fatty’s Beer Works, “our expectations didn't align, and the brand failed to gain the anticipated traction.”
(Bevana previously had a service managing breweries’ taprooms, but it suspended that last year. Bevana CEO and founder Andrew Durstewitz called that move one “in a series of mistakes that we’ve made along the way.”)
This premise—that Bevana has the expertise to sell craft beverages on more shelves to more people—is central to its current and future business. Durstewitz says the long-term plan is for Bevana to partner with 400 beverage brands across the country, most with regional sales in three to five states. Though it has lofty goals, Bevana has yet to disrupt the three-tier model of beer sales and distribution that has existed for generations and in a way that delivers consistent success for its partners.
Currently, Bevana offers two types of partnership for beverage companies:
E-commerce: Affiliate breweries can sign up with Bevana to have the company manage their e-commerce sales to 42 states through Bevana’s online marketplace. Breweries including Jester King, Fiddlin’ Fish Brewing Co., and Resident Culture Brewing & Blending sell their beers online through Bevana.
Licensing, contract brewing, and sales and distribution: Full-service partners with Bevana sign an agreement to license their beer brands to Bevana, which then brews those brands and manages their sales and distribution. The brewery in turn receives a licensing fee and a portion of the sales Bevana makes through wholesalers. Bevana declined to quantify either, stating that each contract is unique; it says royalties are “in line with current CPG industry standards.” (Generally, standards for licensing fees may commonly fall in a range of 3-7%)
At its core, Durstewitz says Bevana’s business began with the idea of “cloud manufacturing.” (He also uses the term “craft beverage accelerator” to describe the model.) Prior to Bevana, he had founded Huntersville, North Carolina’s D9 Brewing in 2013, where he learned how expensive it is for a brewery to expand production and to continue generating sales to pay off that expansion. He says a brewery with a 10-15 barrel brewhouse system and a cellar designed for taproom and local distribution could anticipate investments of $3-$5 million to take production to a regional level. Today, D9 is a licensed brand partner of Bevana. Community Brewing Ventures is the partner company of both D9 and Bevana, but the two companies operate independently, according to Durstewitz.
His idea behind cloud manufacturing is to create a pool of breweries with excess brewing capacity and connect them with growing breweries that need to brew more beer. This is essentially a network of contract breweries that can fulfill the production needs of their own portfolio and that of other brands who are Bevana partners. What it hinges on is continued growth for Bevana's portfolio of breweries, capacity at dozens or hundreds of breweries across the country that want to contract brew, and momentum for the craft category itself, although slow to no growth is now craft’s “normal.” Still, the basic premise has merit, according to industry experts.
“The concept behind Bevana is a wonderful, hopeful idea. And I would love to see that concept find success with the craft beverage industry somewhere,” says Jamaar Valentine, who was a regional general manager for Bevana’s erstwhile taproom management division for 8 months last year. He says he was attracted to the company because he believed it could create positive change and growth for small breweries and their communities. “But I don’t believe that my vision for that was achieved. I wouldn’t call it a success.”
Unlike traditional contract brewers or co-packers, Bevana also handles sales and distribution of the beers that small breweries have contracted with them to produce. That’s the appeal for many breweries that have signed on: They don’t believe they have the expertise, time, or money internally to pay for more sales staff or to navigate the process of securing chain retail sales in places like grocery stores and pharmacies. However, this is the piece of Bevana’s business model that critics say has largely failed to deliver.
According to Durstewitz, Bevana tells partner breweries that they hope to see annual revenues from distributed beer, within about a 150-mile radius, that are five times what the taproom is currently earning. He acknowledges that it will take “massive volume” for breweries to achieve that, which is why Bevana intends to grow toward national scale. But even that faces problems inherent to the idea of “local”: A brewery’s sales decline for every mile away from its brewery with the steepest dropoff starting around 100 miles. Not only would a brewery face the issue of having to sell that massive volume, but market forces suggest it would be very difficult to maintain this as a prolonged business plan.
Chris Farmand, founder and CEO of Small Batch Standard—a Florida-based accounting and finance firm focused on breweries—says it would be relatively easy for a company like Bevana to offer very small breweries big returns, at least initially. But if the Bevana or brewery can’t support those brands in the market, and if customers aren’t excited about the beer, they won’t generate repeat sales.
“There are places to put beer. But is it going to sell, is it going to move? Probably not,” Farmand says. “There's this ramp up but then you hit a wall. If all [Bevana is] doing is paying a licensing fee on anything that sells, if nothing sells, they don’t pay much.”
Still, for some breweries, what Bevana promises is leagues away from what they believe they’d be able to achieve on their own. Jeff Dake, co-founder of Arches Brewing in Hapeville, Georgia, signed his brewery up as a full partner with Bevana earlier this year. He says the appeal of having Bevana manage most retail sales was the primary motivation. He feels Arches didn’t have the money to increase its production, invest in its taproom, and hire sales reps to sell its beer in distribution locations like grocery stores.
“As people who started a brewery because we liked making beer, that part was the most foreign to us. Places where we’re not directly interfacing with the customer … [Bevana has] a lot of that experience,” Dake says. “It’s hard for us to commit to three or four salaries for sales reps and as we’re committed to that, how do we spin up production?”
Instead of spending money to hire additional sales representatives or to buy larger brewing tanks, Arches signed a licensing agreement with Bevana to brew several of its core brands. Aaron Williams, a former marketing director for breweries and alcohol retailers in the Atlanta area, says many small breweries are willing to take a cut in the percentage of sales they make in exchange for that type of service.
“Customers have so many choices that breweries have to work overtime to stay top-of-mind, which costs time and money—two things most breweries don't have,” Williams says. “Bevana gives a brand at least some of that support. Is that worth the smaller margin? It depends on your business model, your current workload, and if you're okay with ceding some control of your brand and product.”
Dake says this is the right move for Arches, even as he keeps the “worst-case scenario” in mind. That worst case, he says, would be if Bevana can’t sell enough of Arches’ core beers to justify brewing more, or it loses their chain retail placements. When Arches joined Bevana in August, the brewery’s trackable chain retail sales were down -40% in volume in the most recent 52-week sales period compared to the previous year. That decline stayed consistent in the months since. Bevana currently doesn’t have Arches beer listed in its online shop as it waits for the beer to be delivered to its warehouse; Durstewitz says this will happen in the next two weeks. To many larger breweries, the loss of chain placements for flagships would be catastrophic; however, Dake doesn’t see it that way.
“That would be tough, but simultaneously, we’ve spent eight years trying to chase the distribution dragon. … We weren’t going to be able to get to it on our own,” he says.
In a difficult time for chain retail sales of craft beer, Dake is banking on Bevana’s expertise—or, failing that, on sales through Arches’ taproom. Even if the handoff of core beers to Bevana were to be unsuccessful, Dake says Arches would survive as a taproom-focused brewery. Last year, the Brewers Association estimated Arches’ production at about 2,300 barrels, an above-average amount nationally, but on par with many peers who are focused on taproom or local distribution. By transferring production and sales of core brands to Bevana, Arches hopes to improve its taproom experience and brew more experimental beers outside its current lineup there that will increase on-site sales.
In fact, Bevana has struggled in the past to sell its partners’ beer. According to two former sales employees, quality concerns, high staff turnover at Bevana, and a lack of marketing support prevented them from securing major chain retail placements for the company’s partner breweries.
In the most recent 52-week sales period ending Nov. 5, chain retail volume sales were down for partner breweries New Sarum Brewing (-46%) and D9 Brewing (-50%).
Champion (-57.5%) shuttered its business in June, although its Shower Beer Pilsner is still brewed by Bevana and sold online.
Partner brewery Pontoon Brewing also closed in October while its retail volume was down -75%. Its beer is still sold in Bevana's online shop.
A former sales director who worked for Bevana from February-November 2022 before being let go from the company says they were hesitant to pitch chain buyers on beers from Bevana’s partner breweries because of what they describe as persistent quality problems—the very chain placements that Bevana’s model is predicated on. After a previous stop working in national accounts for Constellation Brands, where they built relationships with chain buyers, the former sales director says he became worried about products that could end up in consumers’ hands. Soon after they started with Bevana, they say the company had to destroy nearly $500,000 worth of beer from D9 and partner breweries because it had gone out of code. Slow sales for the brands meant that distributors weren’t moving through inventory quickly enough to keep it fresh, they say. They also say that brewers left residual tank cleaning chemicals in a batch of beer that resulted in a recall. (This person has requested their name not be used because they still work in the industry and fear their career could be impacted by speaking out.)
“I couldn’t trust taking [this beer] to the national chain level; I couldn’t risk burning those relationships. I kind of refused,” the former sales director says. “It’s tough for me to tell a buyer ‘trust me’ when I don’t know if the second batch that’s going to come in will create a problem or solve a problem.”
Durstewitz acknowledges both incidents:
He says the out-of-code beer was a result of inaccurate forecasting on Bevana’s part.
The beer with residual sanitizer left in it, he says, passed quality assurance checks, and Durstewitz says sanitizer isn’t dangerous to people in small quantities. It did, however, cause rapid oxidation in the beer after just three to four weeks, and he says Bevana credited the wholesaler for that batch.
“All beer produced by our partners is analyzed for quality, and anytime something does slip through, we conduct a root cause to determine routes for prevention in the future,” Durstewitz says.
The former sales director attributes these quality issues to the age of D9’s brewing equipment and to variable processes among the contract breweries producing Bevana partners’ beer. They say that samples they tasted of partner breweries’ beers were often of poor or middle-of-the-road quality. “I would get a hold of it and it’s like ‘I’m not taking this anywhere.’”
According to another former Bevana sales employee who left the company last year—and who asked not to be named in order to discuss sensitive information—staff turnover at Bevana also hindered relationships with retailers and distributors in this former employee’s sales territory. Ultimately, this former employee said trying to pitch chains on Bevana’s portfolio of breweries was so fruitless that they stopped doing so. After less than a year, this employee left Bevana.
“There was no relationship [with retailers]. The reception was always: ‘Who are you? I don’t order this beer through XYZ distributor anymore?’” this former employee says.
According to them, retailers did not understand what Bevana was. Some assumed Bevana or D9 had bought its partner breweries outright, or they thought Bevana was a new distribution company.
“The further I get away from it, the more I’m like: This makes no sense to me. They’re just adding one more middle man,” the former employee says. “If you hire an entry-level sales rep at your small brewery, you’ll get 300 placements faster than you’ll get 100 with this company.”
The former sales director also notes that the breweries in Bevana’s portfolio often were signed with different wholesalers, which made selling them into national accounts more complicated. They give this this example: If they and a distributor had a meeting with grocery chain Harris Teeter, and Harris Teeter is interested in selling a brewery in Bevana’s portfolio that is sold through an entirely different distributor, the director would be in the awkward position of essentially competing against the distributor rep sitting next to them. “If I go too deep, I start selling against my own distributor who got me this meeting,” they say.
For Andy Morrison, a former high-end and craft portfolio manager for an Anheuser Busch-aligned wholesaler in North Carolina, this awkward distribution setup is the model’s Achilles heel: At a time when retailers and distributors are already overwhelmed by craft brands, Bevana sales staff are adding more bureaucracy to the equation. And those sales reps risk becoming overwhelmed by the number of brands they’re tasked with representing, just as wholesalers have been.
“At some point, Bevana just becomes another layer, a fourth tier in the three-tier system,” Morrison says. “If they’re trying to capture all these brands and do all this for everybody, how can they logistically do that and maintain focus on any one brand in particular or really drive sales?”
Valentine agrees that this was a point of friction for the company's model. Whereas breweries saw Bevana as a one-stop shop that handled relationships with retailers and wholesalers, the equation was different for other tiers of the industry.
“The retailers, distributors, other buyers in the three-tier system—for them it is another middle man, sure,” Valentine says.
It didn’t help the Bevana sales rep’s task that many of the brands in Bevana’s portfolio at the time were struggling to survive. The former sales director says they’d be told Bevana was signing on a great new brewery, only to get on Instagram soon after and find out that the brewery had closed its doors.
“Now I know why we picked up their recipe,” they say.
This is not the case for all of Bevana’s partner breweries, but even Durstewitz admits that early on, the company could have been more selective in choosing to help scale brands that already had momentum. At least seven brands that Bevana had partnered with—Champion, Bay Cannon, Orpheus, Reason, Pontoon, Unknown, and UpDog Kombucha—have closed their taprooms, shut down their breweries entirely, or sold their brands.
Durstewitz says Bevana’s approach to new partnerships has changed to be more selective and involve more vetting. He notes that Bevana has paid more than $350,000 in wholesale brand debt from struggling partner brands. Ideally, he says, these debts would be disclosed before the partnership. In the worst-case scenario, those debts come to light after Bevana and its partner have signed an agreement. That leaves Bevana to decide whether to pay off the debt and keep the brand with its existing wholesaler, or leave the debt unpaid, likely resulting in the wholesaler dropping that brand.
“We had this altruistic point of view of ‘Yeah, everybody on board!’ But the first rule of being a lifeguard is the person you're trying to save is not allowed to drown you,” he says. “We need to pay more attention. We need to look inside these companies more.… We've had to investigate inside of their companies to see: Are we walking into a ticking time bomb?”
A brewery that has been pleased with its partnership with Bevana is Pursuit, a low-calorie, low-carb active lifestyle beer that positions itself as a Michelob Ultra competitor. Pursuit’s director of production Whit Baker, who also co-founded Bond Brothers Beer Company, says Pursuit is a specific type of brand that’s well suited to Bevana’s model because it is a new brand, is specifically designed for chain sales, generates higher margins than craft beer, and has a longer shelf life than standard beers. Bevana has licensed Pursuit’s brand, brewed the beer, and managed its sales since 2021.
“We have this brand that specifically is geared toward chain placements, but as a company, we don’t want the headache of managing a chain placement,” Baker says. He adds that because of the way the low-carb beer is brewed—using enzymes to reduce the amount of malt needed to produce alcohol—it’s less expensive to brew than craft beers. “It’s also really cheap to make. … [Bevana is] paying royalties based on what they sell it for and we’re making it for a lot cheaper than the average beer.”
But beyond more efficient plug-and-play brands like Pursuit and the uneven track record of its past brewery partners, several sources expressed uncertainty about whether and how Bevana will adapt.
“I don’t know if it’s a SKU play for them, a volume play, or what it is, but amassing a bunch of flailing breweries is not a cool thing,” Farmand says.
Durstewitz says Bevana is now more careful about its partnerships and is signing on more successful brands.
“We are starting to now get strong brands, by the way. So it's not just distressed brands,” he says. “We're starting to get ones who are saying, ‘Hey, I have a need to go bigger, but I don't want to make the investment.’”
Ultimately, Durstewitz says that to expand, Bevana Partners has to stand for quality and reliability in the eyes of wholesalers, retailers, and most importantly, drinkers. Bevana isn’t a household name now, but Durstewitz says the plan for next year is to create marketing materials like shelf talkers that direct shoppers to Bevana brands specifically, which may be grouped together on a shelf.
“We're trying to make sure that we have excellent liquid and excellent brands out there in the market so that if it's between lager A and lager B, well, lager B is a Bevana lager so I'm going to go with that,” he says. “We want to be the seal of trust, essentially.”
Words by Kate Bernot