27-Sep-2012 (Thu)
Wherein the upstairs beer tower is now fully operational.

The new beer lines are hooked up!

To recap: the big DNA Lounge walk-in fridge is full of kegs, and there's a mile-long series of tubes running to each bar. There's a huge tank of carbon dioxide that is used to push the beer out of the kegs and into the tubes (and because our tubes are so long, there are pumps as well). The Beer Snake has glycol (antifreeze) circulating alongside the beer lines to keep it cool so that it doesn't foam up. At the bar, each tap is just a valve. CO2 is used to push the beer instead of air because oxygen makes beer go bad. In the case of Guiness, it's nitrogen instead of CO2 or air.

Also in the back is a big rack of bags of syrup for the sodas. There's a different snake for sodas, which are pushed down the tubes warm and in syrup form. One of the tubes is CO2 instead of syrup. At the bar end, the syrup is mixed with water and circulated through another series of tubes inside a metal plate beneath the bartender's ice bin, and then a pump injects the CO2 into it. This reaction requires cold, which is why you get a flat soda if you use the soda gun at a closed bar that doesn't have ice in the bin. And then finally, the soda gun is just a valve.

These two snakes fan out from the DNA Lounge back room to our now seven bars.

And, all of our beers have changed!

The beers on tap on the DNA Pizza side of the world are now: Firestone Pale Ale, Shock Top, Bud Light, Stella Artois, Lagunitas IPA and Guiness. No cider on tap, but we have Ace Apple in bottles. Meanwhile, over on the DNA Lounge side, we've got: Ace Pear Cider, Big Daddy IPA, Widmere Hefeweizen, Stella Artois, Mirror Pond and Guiness.

So, why's that... well, for large bars and clubs, beer and soda distribution systems like the ones we have are almost always installed for free by the distributors. You're buying the product from them, so it's in their best interest for you to be able to move that product efficiently. So we said to our current distributors, "Hey guys, three new bars! Gonna be buying a lot more of your product! Hook us up!" And they said... no.

Both of them said no -- both DBI (our former beer distributor) and 7Up (our former soda distributor) were unwilling to pay for the installation of the respective new systems. (Well, DBI didn't technically say no, but they kept saying "It's all good bro" without ever committing to anything, and we couldn't wait any longer.) As a result, both of them lost all of our business, since we turned right around and switched our distribution to Coke for sodas and Matagrano for beer. Those folks were happy to have our business, and rip out the 7Up/DBI systems and install their own for free.

We are not a small account. I really can't believe the other guys really let it go this far. But, oh well. Not my problem now!

It's fortunate that there are multiple distributors (really, only the two of each) because each one has a total monopoly on the products that they distribute. E.g., you can only buy Miller from DBI, and you can only buy Budweiser from Matagrano. I'm not sure if the beer companies actually own the distributors, but the distinction is academic.

That means that we still have to buy Red Bull cans from Matagrano, because for some goofy accounting/sales-reporting reasons, it's cheaper for us to get it from them than Costco, and they have an exclusive.

And that's today's lesson in both the mechanics, and the goofy economics, of getting people drunk.

18 Responses:

  1. Johnnie Lamar Odom says:

    I remember years ago reading your construction notes, that you were worried the long lines would result in losing a lot of product. How did you ultimately get around that issue? Always love reading about the mechanics of the club!

    • Jamie Zawinski says:

      We probably do lose more product than we would if the kegs were right next to the taps, but the hassle of having to haul kegs through the club and up stairs while the room is full of customers would have been absolutely horrible.

      • Brian Van Nieuwenhoven says:

        I'm supposing the "loss" is mitigated by the fact that beer/syrup in the lines only costs you wholesale and that it's a small percentage of overall sales volume on a good night. (for products where markup is high) But it's still probably up to $100 or so of wasted stock per evening, which could pay for a part-time bathroom security person.

  2. Ben Brockert says:

    Interesting stuff about the suppliers. The system is yours after it's installed? It's similar to things like paint displays in big box home improvement stores, they're all installed by the supplier, not the store.

    I'm surprised you have a cider on tap, a lot of places don't do that unless they're the 40 things on tap kind of establishment. I'm a fan.

  3. GreatEvil says:

    How do you clean lines that long? I've been told that lines can get funky if not tended to properly.

  4. captain18 says:

    I've noticed an uptick recently in companies who are willing to let a customer walk rather than making any sort of a concession or accommodation. I can't tell whether this is because they're making these decisions based on a strict ROI evaluation, a (possibly true) belief that the vast majority of customers only bluff about walking away from a deal, or whether it's as simple as the person you're dealing with at that company has simply stopped giving a shit.

    • nooj says:

      It's not so mysterious. People in Retention Departments have quotas and margins and limits on their generosity, just like salespeople. In a recession, they have less ability to offer freebies and credits. There is a restocking fee of 15%, and that is the margin they play with. (I have no idea what, if any, restocking jwz needed. Maybe instead of restocking they invited over the folk from Hubba Hubba Revue, put hoses on the Miller taps, and played 'beer capture the flag' or 'beer wrestling'.)

      Regarding your specific explanations:

      Strict ROI evaluations are done at the upper management / VP level, and would include few if any individual accounts. ROIs for individual accounts are someone thinking, "Do I want to deal with this?" and couldn't be called strict.

      The person you're dealing with at that company never gave a shit; they just wanted to make their margin and get that quarter's bonus. The ROI for that person is "Will this account help me get my bonus / keep my job?" The answer could be no for as simple a reason as, "I sent this up the chain saying we needed to do this, but my supervisor (who has a quota 10-100x larger) didn't have enough points of margin of his own to approve it."

      Back to the case in point:

      7up/DBI was looking at jwz as an existing customer who wanted them to spend a lot of money--potentially having to re-do all his lines--for a simple increase in purchase. Not to minimize his business expansion, but revenue from increases in purchase go into a different cell in the Excel spreadsheet from the 'new customer' cell, and the cell for 'costs incurred for increases in business' is supposed to be zero. Sure, businesses expand and that's good, and someone needs a beatin' for letting a big account walk; but it's a recession and everyone's margins are tightening, and consumer-side business doesn't have as much ability to spend money to make money.

      Coke/Matagreno had totally different incentives: jwz is a new customer, so there is (usually) more ability to offer incentives. Particularly for this product, new customers always have an up-front cost (so it's okay for that number in the spreadsheet to be big). So jwz's henchman called up Coke/Mantagrano and said, "Hey, do you want a really fucking big order? We have seven bars and with our construction schedule they're going to be live and running full blast the day you install them. As an added bonus"--and I'm sure there is an Excel cell for this--"you get to steal that business from 7up/DBI. Did I mention our credit is fantastic? Yeah, our credit is fantastic." Whoever answered the phone pissed himself with glee.

      • jwz says:

        Yup, pretty much that.

        • Andrew says:

          I'm not an accountant, but it makes me think that the former distributors do not take into account income lost from prior events when they analyse their financial performance. If they did, losing an account would be just as significant as a negative as gaining it would be as a positive, and thus one distributor would fight just as hard to keep their current accounts as another one would to acquire new ones. This explanation seems to say that there really is no tracking or reckoning for losing the account, aside from the initial face palm, and so in effect after the news wears off, they are picking money off the table and tossing it in the trash, going forward into the indeterminate future, without realizing it.

          Then again, maybe it's healthier both personally and professionally to move on after a screwup.

  5. John Flanagan says:

    It is nice to see things working out reasonably well for the DNA every once in a while. So often, these blog posts are bad news.

  6. bodenste says:

    Are you required to purchase the kegs from a distributor? I assume those taps are "most popular" and you've obviously got to make money, but if you wanted to sell a tap of a more boutique beer can you just go and buy a key from the brewery and slap it in? Or is that a regulated process?

    • Jamie Zawinski says:

      We're required to buy from distributors, but for a brewery to be legally able to sell someone a keg in the first place, they'd have to have a distributor license, so that would be fine. But, we only have 12 taps available (6 at DNA Lounge and potentially a different 6 at DNA Pizza) so for less popular stuff it would make much more sense to do that in bottles. Oh, and also, part of getting the glycol system installed was an agreement that we'll be serving their beers on it for some-longish-length-of-time (like a cell phone contract).

  7. mr_bloo_sky says:

    It would be great to have a video showing all of this in action, with Raymond Scott's "Powerhouse" as the soundtrack: http://www.youtube.com/watch?v=qaC0vNLdLvY&t=18s

  8. Ronan Waide says:

    I can't say I'd have guessed Guinness would be a top line seller in a San Francisco club, what with being a slow, bitter pint that Diageo have repeatedly tried to alter to suit a younger crowd who like fast, less bitter beer.

  9. tankadin says:

    Do you stock bottled root beer? I've only ever seen a few bars that do it, but for people like me who don't drink alcohol, I'm grateful for any place that is thoughtful enough to stock a quality bottled root beer. Note that none of the following count as "quality"... Stewart's, IBC, Barq's, Hires, A&W. Quality root beer is brewed and preferably only contains real sugar. My current favorite is Virgil's, but Hank's is also very good. I don't know what distributors offer in your neck of the woods. This site lists a bunch of root beer that they consider decent, though I disagree with them about Virgil's... http://www.gourmetrootbeer.com/rev4.html

  10. tankadin says:

    You should stock a quality bottled root beer for people like me who don't drink alcohol, yet don't want to drink crap fountain soda. The best root beers are brewed and use real sugar. Stay away from crap like Stewarts and IBC. There's a few bars here in Raleigh that have bottled root beer, and at least one even offers a micro-brew root beer on tap. I don't know what's available in your area but my personal favorites are Hank's root beer and Virgil's root beer. Virgil's has some non-traditional spices in it like anise, so some root beer purists don't care for it.