As craft brewing industry grows, so does the risk for distributors
When it comes to distributors, there can be a lot of gray area around losses that take place during loading and unloading of products.
by Leigh Ann Champion
Business Insurance Account Executive at State Auto Insurance
Are you a beer drinker? If not, you might not have noticed how many different types of craft brews are now available at your local grocery store. If you consider yourself somewhat of a beer connoisseur, you've probably tried most of them.
Craft breweries have been gaining traction in the beer industry in recent years. While overall beer sales were down slightly (.02 percent) in 2015, sales of craft brewed beer were up 12.8 percent. The craft beer market is now $22.3 billion of the total $105.9 billion beer market. (stats)
Someone has to get all of these tasty brews to retailers to sell. As the craft brewery market grows, so does the distribution industry.
And, with so many varieties available, retailers are keeping less of an inventory in stock. This means it's up to the distributors to pack and deliver orders more frequently than they ever have before.
Distributors need to maximize their space utilization to store the products they're selling, and have slick automation technology to efficiently operate and deliver.
Now it's time to get the products on the trucks, and deliver them from their warehouse to the final destination … and here's where it can get messy.
Imagine a truck leaves the warehouse one summer morning filled with delicious craft beers. Some are named for the season, and some are flavored with fruit or spices. Some are dark, stout brews, but most are lighter ales and pilsners - perfect for a crisp drink on a hot day.
Now imagine all of these precious bottles are traveling down the road in the distribution truck, and there's an accident.
Several boxes of beer are destroyed in the collision. Bottles are shattered. Beer is spilled everywhere. This is tragic for the would-be beer drinkers, of course, but the big question remains - are these brews covered by insurance?
The answer is: it depends. The ruined beer may or may not be covered, depending on the distributor's commercial insurance package. If the distributor's insurance is endorsed with specific coverage for property in-transit, for example, it's likely covered. But, if the distributor has only standard Commercial Property insurance, the coverage on the insured's property while being transported on a vehicle is extremely limited. This is true even when the insured's personal property is insured under the broadest available Commercial Property form, the Causes of Loss - Special Form.
So, if you don't have some specific enhancement on your insurance policy, you may be 'brewing' some frustration.
This potential problem is growing along with the craft brewing industry, which contributed $55.7 billion to the U.S. economy in 2014 through breweries, wholesalers and retailers. In our experience helping distributors manage risk, it's certainly possible that a business might have significant gaps in coverage as their operation grows.
How can you protect your craft beer distribution business?
Many companies will increase your ability to cover property in transit through endorsement enhancements. For example, State Auto Insurance has an endorsement which increases property off-premises and in-transit on the insured's vehicles to a limit of $100,000!
Another option would be to purchase coverage such as Inland Marine Owner's Cargo Coverage. Owner's Cargo Coverage covers the insured's property while being carried on the insured's vehicles. What does that mean? In the case of our wayward beer distributor who lost multiple bottles in an accident, they would be covered, regardless of who is at fault for the accident.
Does your craft beer require to be kept at a certain temperature while traveling? Look for coverage options around refrigeration or heating unit breakdown. If your heated or refrigerated truck breaks down while in transit, spoiling the contents within, rendering your load undeliverable, this coverage can help pay for the loss to the damaged stock.
Consider Brands and Labels coverage. In the example above, there may be multiple bottles which did not break, but still might be considered damaged or salvage goods, and will be sold on the salvage market. Brands and labels coverage will pay to have the labels removed. Why is that of importance? Removal of the label can help protect your company's reputation and the manufacturer's reputation from potential damage due to the sale of salvaged goods.
But wait, there's more! Other ways to ensure that craft beer arrives safely at its destination?
Properly secure the load. Do what you need to do to make sure that frothy bottle of heavenly libation arrives at its destination perfectly intact. Tie it, zip it, tape it, lock it.
Have a vehicle maintenance program in place, check those tires, inspect the refrigeration equipment, and ensure brake lights are functioning. These and many other checkpoints can aid in safely transporting your customer's goods.
Use telematics. Telematics has been shown to reduce theft, one of distributors biggest pain points. With Telematics owners can track their assets the entire time they are on the way to their targeted destination. Telematics can also help reduce vehicle costs, by alerting you to problems immediately, before they become a bigger problem. Want to improve on driver inefficiencies such as driving on the most efficient route, harsh braking, or sitting idle for long periods of time which can increase fuel costs? Telematics can help you do just that.
A load off your mind! Know this…
When it comes to distributors, there can be a lot of gray area around losses that take place during loading and unloading of products. It is highly recommended to have both your auto and general liability insurance with the same company to save you potential future headaches in the event of a loss.
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