Oct 152019
 

While at the NBWA convention, wholesalers are offered the opportunity to attend a multitude of seminars on Monday and Tuesday mornings from 8 to 9:30.   Distributors can sign up to go to the seminar of their choice, unfortunately however, due to time constraints; it is possible that one cannot attend all the desired discussions. This year’s convention was no exception. 

One workshop offered was led by Joe Verno, one of the founders of The Denver Management consulting group. Denver Management has been in existence for a long time and in the 70s and 80s, their focus was on converting wholesaler driver sales to pre-sales for many distributors. At this year’s NBWA Joe and his son, now consultants in the family business, Verno Consulting, discussed what they believe are 40 things wholesalers should stop doing. Last week Beer Business Daily highlighted these same 40 issues outlined by the Vernos. The subject matter covered all segments of a wholesaler’s operation including, but not limited to: training, delivering, sales, talent, and vendor relations.  The top 40 areas that wholesalers should avoid outlined by the Vernos should be eye- opening to many wholesalers, although many may bypass these important points saying, “It’s not my operation, we are a step ahead of all of these points, my business is doing very well.” 

The wholesalers who are fortunate to have White Claw, Truly, Constellation, or Ultra in their house only have to look at their bottom line and smile. Using technology, almost all wholesalers have improved their overall operations and logistics while adding a number of new vendors and now, many carry non-alcoholic products.

It is clear that the Vernos are saying to wholesalers: While you are growing, are you sacrificing the long-term for the short-term? It was also clear that the Vernos see obvious wholesaler short comings including: internal structure, lack of talent, bench depth, and training. There are good odds that when questioned, almost all vendors would agree with that position.

On the reverse, wholesalers see the same issues with many new or recent vendors. Both parts of the industry hire to fill a void, not for leadership, experience, and growth. Both sides will make a point of not being able to find the right talent which is only an excuse. Talent is out there, but to obtain the best, both parties have to step up. The talent gap between wine and spirit companies and beer companies can be eye-awaking, especially when dealing with mid-management areas.

Expect to see more on the 40 key metrics outlined by the Vernos in the coming weeks. Or, one can always contact the Vernos directly for more information on this topic, for a fee, or course. 

Thank you, Captain Obvious.

 Posted by at 6:00 am
Oct 082019
 

The beer industry has an old adage that holds true even today:  A full truck is a happy truck! In the days when the deliveries were all driver-sales and the wholesalers represented only one supplier, it was the driver who loaded out the truck. An experienced driver would typically return to the warehouse with an empty truck. He knew when, and how, to load the truck according to the day and/or the promotion. Of course, during these times, the industry was using eight bay trucks to deliver beer, and reloads were not uncommon on big drop days. The advent of 16 bays and bigger trucks put an end to the reloads.

Fast forward to today and the technology on beer delivery has totally changed. Wholesalers have learned to maximize their delivery; however, what still remains relevant is what the industry calls, golden cases. The true definition of a golden case is dollars floating to the bottom line on high margin crafts or imports (maybe seltzers) with little or no investment from the wholesaler. This model works well for wholesalers. If a brewery closes its doors, for any reason, the wholesaler only loses those golden dollars.  And as we know, closings are becoming more and more common today. On the other hand, if a golden case grows and the vendor begins investing behind their brands, at what point does a golden case become a golden brand? What metrics must a wholesaler identify when this transition happens? How much does the wholesaler subsequently increase their commitment?

When Truly and White Claw hit the market, one would suppose both were nice golden cases and the rapid growth of both brands quickly turned them into golden brands. Truly and White Claw are owned by major breweries with their own professional sales and marketing teams, and both products have the backing of wholesalers. Many golden cases, however, are from local or regional breweries without the support needed to become golden brands. So, the question arises: Is the transition from golden case to golden brand the result of volume or something else? Volume would be the easiest metric, but what would that number need to be? 50K cases or more? Does it include an across-the-board advertising and marketing support program? Perhaps all of the above are necessary to make the shift from golden case to golden brand.

What happens if all of those key components are in place, yet the wholesaler still looks at the brewery as nothing more than a golden case? How does a vendor view themselves with the wholesaler? Often the vendors see their brands as golden brands while the wholesaler still views the vendor’s brand only as a golden case.  Therein lies the problem.

I believe in the golden rule, the man with the gold… rules!

 Posted by at 6:00 am
Oct 012019
 

In the 1970s, it was common for most medium to large size cities to have a local beer wholesaler association, in addition to their state association. There were even some strong regional beer associations, including the Rocky Mountain Conference of Beer Wholesalers Assoc. Most wholesalers had only one supplier. Most markets would typically have an AB, Miller, Pabst, Schlitz and Coors distributors along with regional houses, like Lone Star and/or Pearl house, which was the case in Texas. In the northwest, the regionals might have included Olympia, Rainer, and Henry’s. Other parts of the country had their own regional houses, as well. There could have easily been six or seven wholesalers in any given market. All of these associations turned to the National Beer Wholesalers Association for a national presence. As the years went by, however, and the consolidation of the beer industry became a way of life, most of the local and regional beer associations disbanded, leaving only the state associations and, of course, the NBWA.

In the 70s, the national NBWA convention’s political focus was on fighting deposit legislation, while the convention show concentrated on vehicles and delivery equipment. At the time, convention conversations often centered on Coors’ eastward expansion. Interested wholesalers would locate Coors wholesalers who could provide them with information to assist with their Coors distributor applications.

By the 1980s, the convention moved to highlighting imported beers, mostly European breweries, who were interested in expanding into the U.S. Wholesaler consolidation had not yet impacted the overall attendance at the convention, the suppliers conducted wholesaler meetings during the NBWA. Because wholesalers typically had only one vendor, many major breweries hosted their national golf tournament and other events during the convention.

By the 1990s, Pabst and Schlitz were almost gone and the rise of crafts and the Corona “miracle” became a national topic of discussion. Multi-brand beer houses became the norm which resulted in more hospitality rooms and dinners, thus enabling the vendors the opportunity to entertain their wholesalers. Some vendors, like Diane Fall of Warsteiner, invited key volume wholesalers for a private limo pub crawl across Vegas. At each casino Diane handed the wholesaler a $100 chip and a Warsteiner. The evening typically lasted until sunrise. Many other vendors also had their own unique evenings.

The NBWA frequently featured a beer segment that was particularly popular during the given time frame and provided that segment with a special section on the floor during the convention. The NBWA created the craft beer sections which enabled craft breweries to feature their respective beers while, at the same time, enabling conversation with current and potential wholesalers. This style of presentation was popular for years.

This year’s recent convention was a real eye opener for those who have attended the NBWA for decades. The massive three room exhibition hall featured seltzers, ciders, CBD, Hemp, and alcoholic infused waters. It seemed as though one had to really look for the beer segment. In one seminar, the presenter graphed the number of suppliers a beer wholesaler represented. This graph illustrated that the average wholesaler had 61 vendors, but a mere 30 were beer vendors.

The question is: does this indicate the direction the industry is taking or does this indicate the reason that beer sales have been losing share of stomach to other beverages?

Perhaps it is time to call the NBWA, the National Beverage Wholesalers Assoc. and drop the word “beer.” Some people seem to think so. 

 Posted by at 6:00 am
Sep 242019
 

Breweries will go to great lengths and spend millions of dollars to create internet meme for a brand. It is very difficult to simply create an effective branding tactic, not to mention having a brand’s identity become part of a generation’s lingo. If a brewery is fortunate enough to create such a marketing home run for a brand, then it becomes a question of how long can the brewery ride this success, and how does the marketing evolve?

Corona could be considered the personification of building a brand without losing its identity and core message.  After decades of touting the brand as “Beach in a Bottle,” the phrase still rings true today. 

Some great brands created slogans, and thus branding, that the consumer instantly connected to:  “When you are out of Schlitz, you are out of beer!” or “For all you do, this Bud is for you” and another, “If you got the time, we got the beer, Miller beer.” But with each of these brands, the advertising changed as the years passed and the brands’ popularity faded.

In 2006, Dos Equis discovered an internet meme that quickly became embedded into everyday language and drove the brand to double-digit growth. “The Most Interesting Man” campaign had great success with the line, “Stay thirsty my friends,” along with the myriad of impossible accomplishments that made up his stories.  Dos Equis rode this highly successful marketing campaign for 10 years. But when the man who played The Most Interesting Man part, Jonathan Goldsmith, was replaced with a younger version, the magic was lost and The Most Interesting Man campaign soon ended.

Now along comes the industries’ latest rocket ship, White Claw, which appears to be resistant to anything that will slow down its growth. While White Claw’s advertising is not unique, the brand has developed a strong online presence through ironic memes and parodies. There are a number of Instagrams devoted to jokes about White Claw, including whiteclawgang and itsawhiteclawsummer.  Retail accounts that either ran out of White Claw, or do not carry the product, are referred to as being “declawed.” It seems these White Claw memes are never ending. One truly cannot buy this kind of marketing, it is so unique. No doubt White Claw and its distinctive marketing have resonated with the millennial generation.  White Claw is a breweries’ marketing department dream product, and if played right, will remain that way for a number of years. Even the line extensions for White Claw could drive further sales. Think of the options:  Black Claw, Red Claw, Brown Claw, and others. The possibilities are endless.

White Claw, unlike Dos Equis might be a brand that the marketing people cannot mess up, however, that remains to be seen. Until that time comes, life is good for the White Claw distributors!

 Posted by at 6:00 am
Sep 102019
 

The frequently used statement  “People don’t leave jobs, they quit bosses” is often seen in today’s  social media posts, which makes one wonder, what goes through a boss’ mind upon seeing such a comment?

During Gambrinus’ hey days when Corona was on fire, many employees complained about the workload and the required correspondence with the brewery and wholesalers. Conversely, many employees enjoyed their time in the market for the simple fact that Gambrinus’ brands were on fire. Often employees were miserable until the annual bonuses were dispersed and only remained with the company until such time, typically at the end of the first quarter.  Once the bonuses were dispersed, the mass exodus began.

During the years that the Jos. Schlitz Brewing Co. was nipping at AB’s heals, Schlitz’s employee turnover was said to have been up to 70%. While it is difficult to quantify, it is safe to say that this loss and subsequent turnover of talent at Schlitz had to have a negative effect, resulting in the demise of the brand.

On the other hand, employees of the Mark Anthony Company are currently in the mist of one of the most incredible rides the industry has ever experienced. White Claw’s growth is remarkable. How does a company establish annual goals and bonuses when the growth is north of triple digits? One wonders what those numbers would look like if the White Claw production could be maintained. Tactical spending against While Claw would only be throwing gas on a roaring fire. Do the younger employees of Mark Anthony realize just how good it is for them?

Employees working for struggling companies express a completely different complaint. They know that their annual bonuses will not be paid, and they know that if their major brand is declining when the bonus goals are delivered, the internal pressure for management can be difficult. This despite the fact that in many cases, the brand’s decline started in the first place as a result of poor brand management.

Once again, AB announced another round of reorganizations, simply one of many, this time of their field sales teams. With the continued decline of Bud Light, at both the AB wholesalers’ and breweries’ level, pressure continues to mount. AB employees must be very thankful for Michelob Ultra. When Ultra growth slows or flattens, employees’ complaints will most definitely increase.

It seems a week does not go by without news of another craft brewery closing. Some of have been in business for three to five years. Many of the employees started with the craft, many of whom worked for free simply to get in the door. They put their heart and soul into a brewery only to see their dreams fail. One knows the complaints of these employees!

Employers and bosses need to be available to their employees and aware of their complaints, but employees also need to be aware of their environment.

There are times in life when, instead of complaining, you do something about your complaints. 

 Posted by at 6:00 am
Sep 032019
 

In the early 1970s, when Miller Lite hit the market and started to gain drinkers, Coors, and subsequently AB, jumped on board with their own versions of light beers. Both breweries’ first editions of light failed.  Coors Light redesigned their can color, changing it from a buff to silver; while AB changed their name from Budweiser Light to Bud Light. The rest is history.

At the time, Miller Lite was on fire, so both AB and Coors stayed the course. The light segment was viable but other breweries including Schlitz, Pabst, and regionals joined the trend with their respective versions of light beer. These beers, however, did not stick. When Corona caught fire and the industry realized that Corona was not a one-night stand, AB and Coors introduced Mexican-named beers in an effort to be competitive, both of which had little, if any success. 

Think about all the unique beers that have been tired over the decades, dry beers, ice beers, LA beers, even NA beers just to name a few.  None, however, have been successful. The beer industry has historically been nothing more than a copycat trade.  For example, Michelob Ultra, one of, if not thehottest brand around, has had multiple breweries attempt to copy Ultra’s success with their own low carb beers. MC, Heineken, Pabst, Modelo, and a slew of crafts have all introduced an Ultra knock-off. With the possible exception of Corona Premier, all the copy-cats have fallen by the wayside.

The talk of the beer industry is the unbelievable growth of the seltzer segment led by White Claw and Truly. White Claw is the hottest brand the industry has seen, while Truly currently represents approximately 40% of Boston Beers volume! This is remarkable. The growth of the seltzer segment has not gone unnoticed by the other players.  AB, MC, Pabst, and others have all introduced their own seltzer labels. To date, these brands have not even dented the growth of White Claw or Truly consequently these breweries are now moving to round two.

Pabst has introduced a higher ABV seltzer anticipating that this will drive sampling.  White Claw is now moving to a lower ABV with a higher price point. The real disruptor could be AB with Natural Light Seltzer. Natural Light is a long-established successful brand which is very popular with college students and millennials. With Natural Light’s Seltzer at a slightly higher ABV and with a price point much lower and in line with Bud Light, anticipate these younger drinkers to try the brand. A higher ABV and higher price point may play into the hands of White Claws and Truly with little to no success, but the Natural Lights Seltzer could be the label needed to crash their party.

Will the seltzer segment eventually pass the craft segment? Only time will tell, however, look for the major breweries to continue to bring new seltzers to market, all hoping to gain some traction. What is certain are the headaches and problems wholesalers and retailers will have with these new brands.

You should learn from your competitor but never copy. Copy and you die.

Editors note; This post was scheduled for August 20th but due to technical issues, it was not sent.

 Posted by at 6:00 am
Aug 272019
 

Here are the powerful brands that sit at the very top of the list:

RankBrandBrand Value ($B)1-Yr Value ChangeIndustry
#1Apple$205.5+12%Technology
#2Google$167.7+27%Technology
#3Microsoft$125.3+20%Technology
#4Amazon$97.0+37%Technology
#5Facebook$88.9-6%Technology
#6Coca-Cola$59.2+3%Beverages
#7Samsung$53.1+11%Technology
#8Disney$52.2+10%Leisure
#9Toyota$44.6+0%Automotive
#10McDonald’s$43.8+6%Restaurants

For many years “branding” has been the buzz word in the beer industry.   No doubt the branding of a brewery or a beer brand is the key to success. With the number of breweries in operation, in addition to the tens of thousands of brands and SKUs currently available, a beer product has only one chance to establish its branding.  The question for the beer industry is how does a company establish effective branding for itself or its brands? Just a simple package change or name change can create a monster. When Corona shifted from a simple brown bottle to a clear longneck bottle, it changed the industry.

Michelob has had success with two key packaging items. One of these success stories is Michelob Ultra’s thin, tall can which emphasizes their branding of low carb/low calorie. Ultra’s branding reflects that of Coors Banquet Beer from the 1960s , identified as America’s Fine Light beer. That Coors product came in a taller, yet thin can, similar to Ultra’s. Even today, many suppliers are attempting to market their products by using a similar style can, often referred to as the “Ultra style” can. Another product of Michelob which, at this point, causes one to wonder why AB has not reintroduced it into the market, is the famous tear-drop bottle. With the success of Michelob Ultra, what would happen if that tear-drop bottle were to be re-introduced into the market with a generation of drinkers who have never seen that bottle style?

The branding of seltzers, the current hot segment, is an interesting case study. Once the liquid is created the seltzer marketing experts build the branding around the key elements of the liquid. Similar to Ultra’s low carbs and calories, but with the addition of fruit flavor(s). The breweries are packaging the seltzer in a similar tall, thin Ultra-like-can, further emphasizing that the product is a light liquid. 

Branding a product that is created to play catch-up with an already existing hot segment could be difficult, at best. White Claw and Truly dominate the seltzer segment, but there is a great deal of competition in the seltzer market. How do these new products become viable against those already dominating the segment? Is that viability accomplished through branding? Some competitors see that a higher ABV, combined with the additional flavoring will help their branding and separate their liquid in the crowded market. Other competitors are going the opposite direction with much lower ABVs for their seltzers.

More importantly for the beer industry, however, are the struggles both AB and MC are experiencing with their current branding of Bud, Bud Light, Coors Light, and Miller Lite. The struggles of these two super-giants to update their brands has yet to be effective, Coors Light notwithstanding.

Once a successful brand starts to slide, just like creating branding for a new product, the beer industry has experienced the difficulty of re-branding. The surge of new products will continue for years to come, thus making the art of branding even more important.

Just ask all the former Schlitz executives or wholesalers!

Branding is a deliberate differentiation. 

 Posted by at 6:00 am
Aug 132019
 

Over the years many books have been written about the beer industry.  The majority of which have dealt with the industry’s history by focusing on brands, breweries, individuals, and historic cities including  Chicago, Milwaukee, St. Louis, and Cincinnati. One such historical piece was written by Maureen Ogle, Ambitious Brew.  Other books have centered on brands and importers from a more personal perspective, including Bitter Brew, by William Knoedelseder, which told the story of the rise and fall of AB. The Beer Monopoly, written by Ina Verstl and Ernst Faltermeier delineated the history of Interbrew’s transformation into InBev and the subsequent takeover of AB and the evolution of AB-InBev. All these books dealt with historic events which have shaped the beer industry and made it what it is today.

But why are there no books written on the history of beer distributors? Outside the NBWA, which represents the middle tier, not much has been written or acknowledgement given to beer distributors. One can glean the number of employees, tax dollars, community involvement, and other key metrics that wholesalers contribute to America through the NBWA site. 

The industry has been built on the backbone of beer distributors since the repeal of prohibition. There is very little, however, on the wholesalers’ history.  The consolidation of the middle tier means much of this valuable part of the beer industry has lost something. . Wholesalers, as with breweries and brands, are losing a segment of their history. 

GLI, a successful distributor created in 1982 with the purchase of the second largest Schlitz distributor in San Antonio, just announced it was selling out to Glazer’s Beer and Beverage. GLI survived all these years without MC or AB in their house. Another longtime wholesaler in Chicago, Skokie Valley, owned by the same family for four generations, sold out last year. Skokie Valley, like GLI, did not have MC or AB brands. They survived with Modelo, Old Style and other high-end crafts and NA’s. GLI, became successful through the distribution of Shiner, Dox Equis, Boston Beers, and other high-end crafts, but the distributor was also was one of Pabst largest distributors with Lone Star. Both these distributors, along with others still around like Skokie Valley and GLI, were successful growing their business, but have at some point decided the time was right to move on.

Each time one of these distributors sells out, the industry loses a little piece of itself. These companies were family-owned and their employees were part of their family. One could say it was the “little guys” against the “big guys.”  Such a culture is not evident in today’s mega wholesalers. Someday a book will be written about the importance and history of beer distributors. It is the least the industry can do to remember how it once was.

He who refuses to learn deserves extinction. 

 Posted by at 6:00 am
Aug 062019
 

The term “disruptor” or “disruption” is the current go-to expression for many industries that want to use the vernacular to describe new products or key employees. One might even consider the word “disruptor” the business model de jour!  The key question is: how does this label, “disruptor” apply to the beer industry? From a distance one might think the industry is nothing but disruptions, while in reality, it is just the opposite.

When thinking of major product launches that created a new segment, one would certainly think of the impact the light beer introductions had in the 1970s.   Driven by the boomer generation, the introduction of lights to the market would be considered a disruptor to the status quo. In just a few years, light beers became the largest selling segment in the industry as beer drinkers left regular beers in droves. The rise of Corona, and what Modelo accomplished, could also be considered a disruptor.  And of course, the growth of crafts has definitely disrupted the industry.  What might be the biggest disruptor in years is the seltzer segment.  Seltzers could be the latest example of a disruptor in the beer industry.  Or is it too early to make such a declaration?

Both companies and individuals can be considered disruptors.  When Philip Morris bought Miller Brewing, and brought the concept of marketing to the industry, Philip Morris was a disruptor. Russell Cleary of G. Heileman had what might be considered a disruptor model by acquiring a number of breweries and assigning brands to different distributors in the same market. This business model of pitting distributor against distributor was disruptive, but the distributors ended this by changing their state franchise laws and eliminating the brewery practice. Was Paul Kalmanovitz a disruptor as he acquired many regional and national breweries and brands? Probably not. Perhaps one would think that Jim Koch of Boston Beers is a disruptor? If not, Koch’s influence on the industry has helped create the craft or better-beer segment.

In recent years, the beer industry has been faced with what could be the greatest disruptor in its history, cannabis. As the cannabis industry expands, it will have an effect on beer sales and the distribution to the consumer will be a disruptor. What is an unknown is just how much of a disruption cannabis will be. Only time will tell.

Either way, when one looks at the beer industry one could either say the industry has been in a disrupted state for decades based on the changes in brands/segments. Or one could say that the beer business is not a disruptive industry due to the structure, laws, and state franchise protections. Simply put, the structure of the industry, in itself, is the disruptor. If that is the case, we will not know for decades to come.  

This is the age of disruption.

 Posted by at 6:00 am
Jul 302019
 

After years and years of chasing, buying, and stripping companies, InBev announced, prior to the release of their latest earnings report, that the company has sold their Australian business to the Japanese brewer, Asahi, for $11.3 billion. ABI said they sold that business to reduce their massive debt, which was brought on by the recent SABMiller acquisition. Selling this piece of InBev’s Asian business is considered their plan “B.” InBev had originally attempted a public offering of their Asian business, but reneged as it seemed ABI could not get the valuation they desired.  According to the pundits, this sale and reduction in debt puts ABI in a position to acquire more acquisitions in a faster growing market. If that is the case, how do the U.S. AB distributors feel?

The recently released second quarter results for ABI reflect higher revenue and earnings driven by their global market, led by Brazil and other countries.  Once again, though ABI’s global results look good, their U.S. results are not good.  ABI’s market share in the U.S. dropped .55%, in addition to a.1% loss in the first quarter. ABI blamed these results on raising prices, needed as a result of increased costs. ABI also announced that Michelob Ultra is 10% of their U.S. business, and still growing.

Are the pundits correct in saying that ABI’s business model is simply to buy and gut companies, but not sell them?  This seems to hold true concerning ABI’s goal to reduce their $104 billion-dollar debt. Yet, why are they are selling their highly profitable and mature Australian business, something ABI never does, only to reduce debt, then return to  the same debt-laden situation?

While it is hard not to admire what ABI has accomplished globally, the question is, can their business model continue to work while losing substantial market share in the U.S.? And, at the same time, SABMiller’s debt seems to have changed ABI’s operating strategy.

There is no reason that logically indicates any short-term changes for ABI. In fact, there may be a sense of urgency in their offices to get something done, and done quickly. Whatever happens, the industry and the world will soon know.

I never think about the future – it comes soon enough.

.

.

 Posted by at 6:00 am