Out of code beer is an expensive problem for beer distributors. And the problem is growing.
The rapid increase of new breweries, brands and packages has been great for the beer industry. However, lurking in the shadows of this beer nirvana is a ticking time bomb for beer distributors: old beer on the shelves.
Old beer is a problem for beer distributors because they bear the full burden to deal with it. The stale dated product must be identified, removed from the retail account and destroyed. All the cost is on the distributor’s dime.
The key is to identify old beer before it goes bad and have a plan in place to get it sold through to the consumer while the beer is still fresh. In this article we’ll reveal the total costs of old beer and share a process you can use to reduce this growing cost in your beer business.
- Know the rules: How to read the code dates
- The cost of out of code beer: It’s more than you may think
- Implement and follow this close code process
- Track, measure, and monitor to reduce out of code in your beer business
Know the Rules: How to Read the Code Dates
Like many consumer products, beer comes with a code date that indicates the shelf life of the product. Generally speaking, package beer has a shelf life of 90 to 180 days and draft beer is good for 60 days. These dates assume the beer is treated properly, refrigerated and kept out of direct sunlight. Any mistreatment of the beer can significantly shorten the actual shelf life.
Code dates on beer are notoriously difficult to decipher. Some breweries use a Best By date, which is straight-forward – the beer is good until the date indicated. Other breweries use a Born On date. This is helpful, but only if you know how long the beer should be good for. Still other breweries use a Julian dating system, or their own proprietary system.
The range of code date systems, combined with the varying shelf life of different beers makes it a difficult task to identify close coded beer.
To attack close coded beer, the first step is to be able to read and understand the code dates. Start by assembling a comprehensive list of the breweries, brands and packages with their related code dates. If you can’t figure out the dates on your own, insist that your supplier partners provide code date information for their products.
In sports, you can’t tell the players without a program. And in the beer world, you can’t identify close coded beer without a guide to do so.
The Cost of Old Beer
Old beer costs a lot more than you may think. On average, for every one case of beer that goes out of code, the distributor must sell five cases to make up for it.
When beer goes out of code it must be removed from the retail account (or warehouse) and destroyed. The retailer gets a credit for the old beer. The cost and responsibility for removal are borne by the beer distributor. And the costs add up fast.
The many cost components of out of code beer:
- Cost of the beer (often referred to as the FOB cost)
- Cost of freight – the amount paid to the freight carrier when the beer was originally received
- Cost to pick up the old beer from the retailer and bring back to the warehouse (delivery time, warehouse time, administrative time)
- Cost to destroy the product (shipping to the destruction company, costs to destroy)
Results may vary and the specific costs above will be different from distributor to distributor. However, it takes a lot of new sales to make up for every case of beer that goes out of code.
Run the numbers for your operation and determine your actual costs. Use an average cost per case so that it is easy to communicate the financial impact of every case of out of code beer.
When we first did this exercise in our distribution company we had a lot of surprised people. They had no idea how much old beer cost the company. This knowledge, combined with an increased awareness on the problem of managing old beer, helped to get our teams engaged to reduce the expense. It worked for us; it can work for you as well.
Implement a Close Code Process
It takes a village to reduce out of code beer and the related expense that hits your income statement.
Drivers and merchandisers must properly rotate product at retail to ensure the older code dates are sold first. The warehouse team needs to do the same in the warehouse – ensuring the older beer is rotated to the front of the line so that it is picked first by the loaders. Everyone has a role in reducing old beer expense.
The close code process outlined below can be used as a template to reduce old beer in your company. As with any process, it only works if you communicate the plan, educate your team on how it works, and insist that the plan is followed.
- Identify Close Code Product
- Product with 30 to 45 days of shelf life remaining is identified, removed from the account and sent back to the warehouse for distribution to an account where it has a better chance of being sold.
- Segregate Close Code Product
- The product is stored in a separately marked area of the warehouse so that the warehouse and night crew can locate and pick from this close coded product.
- Communicate Close Code Product On Hand
- The warehouse counts the Close Code product every Friday and sends a list to the salesman by email so they know the details going into a new week
- Identify Accounts that Turn Product Faster
- Each sales rep should provide at least 3 accounts that can turn Close Code product quickly. This creates a target list to sell to.
- Sell the Close Code Product
- Sales team will request Close Code product to go to accounts where product has best chance to sell – high volume accounts, for example. The night team will also use discretion and send it to pre-designated accounts that have high turn
- Communicate Where Close Code is Sold
- The night manager sends an email to the GM or sales manager that states where Close Code product was sent and that information is shared that with sales reps and TLs so they can merchandise properly
At the end of this article you can download a one-page version of this process. Modify it to fit your specific company needs. Make additions or other edits, and let me know how you made out. I’d love to see your version of the process.
Reduce Out of code
Once the Close Code Process is on paper and communicated it to your team, you’ll need a method to determine if it’s actually working. The mission is to reduce out of code beer expense, plain and simple.
A spreadsheet like this one can be used to track progress towards the goal of reducing the amount of old beer. Set the goal in cases, dollars or both. Track actual old beer against the goal. Communicate the updates regularly so the team can see the results.
As an alternative to the spreadsheet, most route accounting software (Encompass, VIP, etc.) should be able to produce an Out of Code Beer report. The report should be able to provide all the details about the old beer: package, account, quantity, sales rep, team leader, etc.
Look for trends in the data. Does one sales rep have significantly more old beer than the others? Are there particular packages or brands that stand out? Are there certain retail accounts that have a lot more old beer than others?
Bottom line: Keep it simple. Set a goal to reduce old beer, keep track of actual losses, and report the results regularly to your team.
Wrap Up
Out of code beer is growing expense for beer distributors. With so many new breweries, brands and packages it can be difficult to stay on top of all the code dates on beer. But that’s your job.
- Problem: Old beer is expensive
- Solution: A Close Code process you can follow
- Benefits: Reduced expense on income statement
Use the process presented here, or develop one that works better for your company. Communicate the plan, educate your team on what needs to be done, and insist that the process is followed. Track, measure and monitor old beer to make sure the process is working. Old beer is bad for everyone. Do your part to reduce it.
