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Pepin Distributing expands warehouse to meet demand for craft beer

TAMPA — Normally, businesses scale back when sales slip. Pepin Distributing did quite the opposite.

Despite a slight drop in overall beer sales, the local distributor has completed a $12 million warehouse expansion to make room for a trendy, niche product: craft beer.

Craft beer sales make up just 5.5 percent of the Tampa beer market but have grown substantially in the past few years. No longer is it good enough for a bar, restaurant or store to sell Budweiser, Bud Light and Stella Artois. It also must have Magic Hat's Circus Boy, Goose Island's Honkers Ale and Green Flash's Palate Wrecker.

"Places that used to have six or eight taps, today they need 20 or 30 or 40,'' said Bill Gieseking, Pepin's director of marketing. "They feel that they need that variety.''

To accommodate consumers' thirst for craft beer, Pepin expanded its warehouse space by 56 percent and its cooler space for kegs by 64 percent, bringing the total square footage to 334,000 — about the size of six football fields. It can store up to 1.3 million cases of beer at a time, up from the previous 900,000-case limit. The cooler alone can hold 17,600 kegs.

"Everyone wants to make sure we have the storage, infrastructure and inventory to take their beer to market,'' said Joe Wessel, Pepin's training and development coordinator.

Pepin bought its sprawling property at 4121 N 50th St. several years ago with an eye toward growth. One of the largest beer distributors in the Tampa Bay area, Pepin distributes beer from 19 breweries to about 2,300 bars, restaurants and stores across Hillsborough County and eastern Pasco. It also sells nonalcoholic drinks such as Nestea and Nesquik, a tiny but increasingly notable part of the business.

While more recession-proof than other industries, the beer business wasn't completely spared from tough times. Pepin's sales are down 2 percent compared with last year, which was down 2 percent from the previous year. Many construction workers — a key segment of the domestic beer business — lost their jobs and cut out happy hours.

Pepin ramped up its expansion plans a few years ago as the craft beer craze spread. Suddenly retailers wanted dozens, not several, kinds of beer, and they wanted each craft brand in the lager, stout and other varieties. (Have you seen the menu at World of Beer?)

Craft beer poses advantages and challenges to distributors. Pepin, which had revenues of $154 million last year, makes more money per case of craft beer than the typical domestic or import beer ($4 to $5 per case vs. $1.50 or $2). But craft beer sells in smaller quantities and sits longer in a warehouse. Fulfilling orders with so many variables gets complicated.

Craft beer attracts a smaller market of higher-income, better-educated customers. They typically live in urban areas and drink craft beers in what experts call shorter "sessions'' than, say, Corona drinkers who might drink beer all day long while mowing the lawn, watching a football game and having dinner with friends and family, Gieseking said.

While the Tampa market for craft beer is modest compared with places like Boston and Portland, the potential is great. Pepin foresees craft beer sales could make up 10 percent of the market in the next decade.

Pushing that boost are the addition of cans — as opposed to traditional bottles — by some breweries, such as Tampa Bay Brewing Co. and Blue Point Brewing Co. Cans are convenient and, to some beer-guzzling purists, the best way to enjoy a brew. (Aluminum blocks ultraviolet exposure from the sun.) Cans' durability and portability also create more opportunities for grabbing one.

Helping distributors — and anyone who sells craft beer — is the fact that craft beer has a longer shelf life than other beer, Pepin officials said. Craft beer lasts about 180 days vs. 110 days for most domestic and imported beers, based on its higher alcohol and hops content. The same goes for craft beer in kegs, although the shelf life is about half.

Pepin works closely with its customers to determine the best locations and product mix of craft beer. A bar like Hogan's Beach that goes through 300 cases a week of Bud, Michelob Ultra and other common brands might sell only 10 to 20 cases of craft beer.

At other places, craft beer is king. The Brass Tap on N Dale Mabry in Tampa sold 114 cases of craft beer in May. Total Wine & More down the street sold nearly 1,900.

Susan Thurston can be reached at sthurston@tampabay.com or (813) 225-3110. Follow her on Twitter at @susan_thurston.

Pepin Distributing expands warehouse to meet demand for craft beer 09/06/13 [Last modified: Friday, September 6, 2013 6:10pm]
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