Fourteen months after launching, Melbourne’s Hawkers Brewery is already profitable in spite of its refusal to enter into exclusionary tap contracts with venues, according to co-founder Mazen Hajjar.
Hajjar said his strong opposition to tap contracts was unpopular with the company’s sales representatives when Hawkers launched early last year.
“They felt they were going into the marketplace with their hands behind their backs. We were offered taps and we adamantly refused because we want the market to be interesting for everybody and accessible for everybody,” he told a Brews News Q&A in Melbourne last week.
Hajjar said Hawkers had instead based its sales strategy on a “uniform pricing structure” that is attractive for the bar.
“There’s no secrets, it’s all based on paying us early, which means we can better manage our cash flow. We don’t do any outside deals,” he said.
Hajjar rejected the suggestion that Hawkers undercuts other independent brewers, nominating the list price for a keg of Hawkers Pilsner as $260, which is discounted by five per cent if paid within seven days and 2.5 per cent if paid within 14 days.
“If you use our direct debit system, which means I don’t have to spend money on my sales reps chasing you around for money, I don’t have to administer your account, then you get a 10+1 deal,” he said.
“That is everything we offer. Whether you buy one keg, or a thousand kegs, that is the simple price formula. You make our administration easy, we will pass on the savings – it’s as simple as that.
“We are 14 months into this business and we are profitable. We have not bought a single tap. If people can not be profitable at that level, they need to address their business model, not criticise our pricing structure,” Hajjar said.
Contracts a false economy
The Hawkers co-founder said brewers are “hiding behind” their justification that contracts are beneficial for publicans, who may use the capital from selling a tap to fund the purchase of their draught system.
“I’m sorry, I’ve never heard a restaurant open up that didn’t have the money to buy an oven. If you can’t afford a draught system you should not be in business,” he said.
“I think contracts are a false economy. If you believe that brewers give you money for free, you either are delusional or you haven’t read your contracts correctly.
“Contracts, we did a calculation… based on the period that they are there, end up representing a three to five per cent discount on the list price, depending on the duration of the contract.
“If you are a good publican you can negotiate and bash us on the head for a bigger discount than that,” Hajjar said.
Radio Brews News Episode 90 – Tap Contracts is available to download here.