Jun 182019
 

Last week’s post highlighted the story of the Mark Anthony Group. The account of Mark Anthony is not as much about their hot product, White Claw, as it is about how the company made a complete turn-around. This is a bit of an anomaly in the industry as most turn-around stories are about the brands themselves, not about the actual beer company.

There have been a myriad of stories about Schlitz in these posts. A brand that could not have been saved despite the fact that multiple leaders tried and millions of dollars were spent. Pabst is another story, albeit one with an asterisk. Notwithstanding a small revival some years ago, and multiple owners, Pabst is now struggling.

Many regional brands, long since departed, have attempted comebacks under different ownership. None have succeeded, although several appear to be riding the proverbial roller coaster. Examples include Rainer and Lone Star, both of which are owned by Pabst, and both of which have managed to become more relevant in their regional markets.

Because crafts, many of which have not been existence for 10 years or more, have a shorter history, they do not fit into this category of come-backs. Older crafts like Sierra Nevada, New Belgium, and Boston have either morphed their portfolio to ensure success, or have simply ridden the ups and downs from year to year. The glaring exception is Yuenglng, which, under the same ownership, continues to excel regardless of how or what the industry is doing.

Wholesaler’ degree of success is not relevant when discussing the topic of turnarounds because success is more directly tied to that of their suppliers. Even wholesalers, whose volume for decades consisted of brands like Schlitz or Pabst, survived if they could capture a brand like Constellations Brands or Heineken in their house.   

Obviously, wholesalers who were not as fortunate to have afore mentioned vendors, have since sold out or closed. A wholesaler who finds themselves in a crisis is most likely in that position due to their portfolio; and in almost all cases it does not matter who is in charge. Without the bullets, you are firing blanks.

Importers are the one segment where a change in leadership can and does make a difference. With the right leadership a restructuring and direction change can turn a small to medium-size importer around.

The beer industry is not one of turn-arounds. This is an industry which needs the right product at the right time; a product that will be supported and enabled to move in the right direction with a clear understanding of who and what that product is.   Victory is never going to happen when a beer attempts to be something that it is not, can never be, and prevents the brewery and the products from ever being successful.

Spending resources in an attempt to be something that will never happen is a waste and a pathway to failure. A crisis in beer is not about leadership, it does not have to be a crisis if the proper leadership is in place.

Careers are made in times of “crisis.” 

 Posted by at 6:00 am
Jun 112019
 

An article in Beer Business Daily last week focused on the Mark Anthony Group and their hot brand, White Claw. As a company, the Mark Anthony Group could be considered the personification of what it means to move from insignificance to viable vendor, for yet the second time.

In the 1990’s, Mike’s Hard Lemonade, a front runner among FMBs, was one the hottest brands of their time. Not only was their product selling at record pace, the company’s culture was envied by many. But in 2000, that all changed and Mike’s sales started to slip. New management was brought in, many of whom were from Gallo, and immediately the culture changed, key employees left, and the company began to struggle.

A year or so later, Mike’s annual sales meeting was held in Las Vegas. What was typically an easy location at which to entice distributors to attend turned into a challenge to get distributors to show up.  In some cases, distributors were so reluctant to attend the convention that field reps even had to persuade them to do so. And once at the convention, many distributors walked out just 10 minutes into the opening session as they were so disgusted with the comments.

Eventually, Mark Anthony made changes, however, it was not until Phil Rosse took the lead role did Mike’s begin to move in a positive direction.  Phil stated, “Businesses today need purpose, and the next generation of employees is looking for so much more than just a job. You need a reason to feel deeply connected to companies, businesses, and brands. So for many years now, we have been working hard to make Mike’s a different type of place to work. And by different, we mean something that attracts folks that want to be part of something special that we’re trying to build, and a place where every employee plays a critical role.”

Phil goes on to say, “We have been trying for many years now to create an environment where everybody wins. Obviously, there’s ownership, there’s management, but winning must be felt by all employees and all our partners. We want everyone associated with this business to feel like they are a part of the success. That, in our mind, is the Mike’s culture and we believe organizational culture can be as much a disruptor in today’s world as a new product can.”

The article in Beer Business Daily is extensive, but there were two other comments which provide additional insight on how Mike’s goes to market. Sanjiv Gajiwala, the marketing chief commented on consumer targeting: “We have not in our marketing been trying to identify or associate who, or what, a White Claw drinker looks like.”  Phil added, “My perspective on category management, shelf sets, and space at retail is that it has always been our number one opportunity as a company. I think it (category management) is truer now than ever, is our number one opportunity as a company.”

There is no discounting the fact that superior products such as Mike’s and White Claw speak volumes in the success of any company, but in Mark Anthony’s case, Phil and his leadership team have implemented a winning culture.

It is apparent that Mike’s learned from their past, the question is: why is it others cannot see that, too?

Culture eats strategy for breakfast.


 Posted by at 6:00 am
Jun 042019
 

When Jerry Jones bought the Dallas Cowboys in the early 1990s, Texas Stadium was not owned by the football franchise; therefore, the venue was not subject to the rules of the NFL corporate sponsorships.  After Coors passed on the offer, Jones sold the beer-pouring rights to Miller. Today, Miller Lite remains the beer sponsor of AT&T Stadium and finding another beer at AT&T is difficult at best.

Selling the pouring rights to sporting events is embedded in the beer industry and has been an issue for decades. In recent years, college stadiums and basketball arenas have sold their pouring rights. While one can find other brands to purchase at these venues, it is typically difficult as other brands are sold in out-of-the-way locations

The state fair of Texas hosts an open-air concert stage called, The Dos Equis Pavilion. At the pavilion, one can buy a plethora of beers brands, however, the name Dos Equis is liberally splashed throughout the pavilion. The amount of money spent by breweries on these venues is enormous, but this is part of the business and has been for many years.  

The industry appears to be oblivious to the growing number of vendors who have been fined for illegal payments.  Constellation Brands is the latest brewer to find themselves in a less-than-favorable position, having recently agreed to a $420,000 dollar fine for buying draft placements. This comes on the heels of Heineken’s agreement to a $2.5 million fine in April. Prior to these fines, Eagle Brands was hit for $1.5 million in fines and, of course, Warsteiner paid $900,000 in fines just last year. Remember, some distributors have also been fined. Brewers Distributing paid $350,000 and Elgin Beverages paid $325,000 in fines, both for illegal activity.

It is no secret that brewers, importers, and distributors are pushing hard for volume and market share regardless of the cost. But the question is: how do buying rights to a stadium or venue differ from the buying rights of a draft handle in an account? Is this another gray area? The industry sees the blurring of lines across all three tiers as brewers, distributers, and wholesalers brew and sell beer at the brewery and act as a retailer.

Any way you look at the current situation; it seems the industry has become oblivious to announcements that another fine has been levied for some type of illegal activity or payments. As the size of the pie continues to constrict downward, expect to see more fines.

Gradually, many of the previous restrictions in the industry have either been eliminated or loosened.  An example of such is the fact that professional athletes are now able to represent a brewery or beer. So where does this end?  Or perhaps a more appropriate question is: in what direction will these actions lead and how will the consequences affect the future of the beer industry?

Not listening results in misunderstandings and conflicts.

 Posted by at 6:00 am
May 282019
 

Jim Koch celebrated his 70th birthday yesterday, May 27th, and as a tradition with these pages warrants, we annually revisit Jim and Boston Beers on this date.  Because this is Jim’s 70th, this year is most relevant in the future of Boston Beers.

The company has evolved into one that is perhaps more in-tune-with the consumers’ wants than any other current beer company. Boston’s portfolio is extensive, but their brands, like Twisted Tea, Truly, and Angry Orchard, have transformed the company.   Where Boston’s great beers once led the charge, they are now secondary in volume sales; and their alternative products are primary in volume sales.

Several years ago, Boston Beers’ future was being discussed by many industry and Wall Street pundits. The company’s recent successes in alternative beers now has Boston’s stock price at or near all-time records! Their short term future outlook has changed dramatically.

Recently, the on-going question for Jim has been: what will the future hold for the company as Jim aged. That seems to have been answered with Boston’s recent announcement regarding the purchase of Dogfish Head and subsequently, Sam Calagione will be joining Boston’s team.

As structured, the deal was certainly a win-win for both companies with both portfolios’ merging. Even their individual distributor networks are workable as over 50% of distributors have both brands in their houses. The key to this acquisition is that Jim and Boston now have a 50-year-old, passionate, and motivated craft beer leader who can assist Boston and Dogfish going forward. On the surface, it looks like a perfect fit for both companies, but only time will tell. In the past, the industry has seen similar ventures which initially appeared to be a good fit, but then things changed, and ultimately the the merger did not work out according to plan. This one, however, looks to be different.

So the question going forward is: now that Boston and Dogfish are together, will there be more acquisitions by Boston? Jim has commented recently that he has been offered over 50 such deals, but passed on all until Dogfish presented itself.  Of course, when your company continues to grow, its stock remains at or near highs, and you lead in new products and categories, it puts the company in a position to be very selective as opportunities present themselves.

It appears that Jim’s wait-and-see approach is working. Given the current craft trends, that wait-and-see approach is the right hand to play.

No doubt this next decade for Jim will be very interesting. Happy 70th Jim!

May 27th, 2019

 Posted by at 6:00 am
May 212019
 

As the title of this blog states, the subject matter for my writings is truly limitless!  The inspirations come from my real life experiences of more than 50 years in the beer industry, providing fodder for the inspiring topics covered over the past seven years.  Frequently when asked about my knowledge of the industry, I share stories concerning the companies I have managed, the brands I have represented, and recently, about my teaching assignments, and consulting jobs. 

Though questions often center on what involvement I have had in the industry, some inquiries are less focused on the mundane and more so on the exciting and less talked about aspects of this business.  Like the dead bodies I have seen in bars, the outlines of human remains on bar floors, the beer stolen from my truck, the retailer who pulled a gun on me, and even the retailed who pulled a pistol from his pocket and began shooting at a rat running across the floor of his establishment.  I have also seen brewery executives fired for stealing, taking bribes and kickbacks, wholesalers trans-shipping beer, selling beer outside of their territory, altering the liquid in the kegs, falsifying bill-backs, and even hiding out-of-date products.

Of course, I have witnessed many employees partaking in the same tricks and once even knew of an individual who worked in the field for two different breweries at the same time! And, he was a full-time employee for both companies. The special considerations asked for by retailers have ranged the gamut from legal to illegal and everything in between.  Unfortunately, I have seen many breweries accommodate those requests.

On the flip side, I have witnessed a tremendous amount of good in the beer industry. For example, many wholesalers and breweries have provided help to victims of natural disasters; countless in the industry have hosted charity events for veterans’ organizations; and many have provided opportunities for fund-raising events to support local needs. I am happy to report that the good that is being done in the industry far out weights anything shady.

Perhaps, when asked: “What have you done in the beer industry,” rather than answer with the historical overview of my previous positions, I should respond:  “I have done and seen just about everything one can imagine in an industry that has a far-reaching impact on many.”

The subject material for these blogs is unending.

Editors note: There have been some technical difficulties with this site, we are trying to resolve these soon. Thanks.

 Posted by at 6:00 am
May 142019
 

 

Cinco de Mayo was celebrated last week and though the numbers for the weekend have yet to be released, the industry expects to see the continued success of Corona, Modelo, Dos Equis, and other Mexican beers.  This growth did not happen overnight. It took these brands many years and hundreds of thousands of dollars to become major selling volume beers in the U.S.

Other imported beers have tried to penetrate the U.S. market, and while some have created a nice business, most have been unsuccessful.  Those that were not as profitable have either left the country or have maintained a small, yet viable business concentrating on the CDI/BDI indexes where they have a fair chance to create volume.

On the other hand, American crafts that have attempted to launch markets overseas have also struggled to establish themselves as viable companies.  Some brands have been successful, and some, like Stone, have not flourished and consequently have left Germany.

With the exception of the Modelo brands, no other imported brand has become a disrupter in the U.S. market.  To date, other imports lacked the knowledge, resources, and/or the desire to build their brands.  That, however, may soon change.

In a major announcement last week, Lion published that Simon Thorpe, the former CEO of Pabst, has been named CEO of Lion for their U.S. market.  Kirin, which owns Lion, is also the owner of a number of Australian and New Zeeland breweries and beverages, some of which have been imported into the U.S. The company brings with it years of leadership experience in operating U.S. companies.  Other major American investments made by Kirin include Coke a Cola bottling of Northern New England and the partial ownership of Brooklyn Brewery and Four Roses Distillery.

With more than 7,000 employees, Lion could easily be considered a disrupter.  The question going forward is will Lion be the disrupter or will Lion become more like Sapporo.  This brewery moved into North America with their purchase of Sleeman in Canada and have since purchased Anchor in San Francisco.  Sapporo has a major presence in both the U.S. and Canadian markets, but has yet to move the needle in either.  The reason could be that Sapporo is taking the long road and not pushing for immediate results.

Lion could well employ the same strategy, but with Simon as CEO, coupled and the current beer environment in the U.S., Lion’s timing puts them in the perfect position to play the disrupter.

No doubt that Lion has the key parts to become a disrupter: resources; leadership; partnerships; investments in the U.S.; and worldwide success.  The industry will know Lion’s ultimate goals by the end of 2020 and they could be interesting.

This is the age of disruption.

 

 

 

 

 Posted by at 6:00 am
May 072019
 

MillerCoors released their first quarter numbers last week, and once again, the results were worrisome.    Depletions were down -3.8% and shipments were off -2.7%.  In the fourth quarter, depletions were off -5.1% and shipments were off -8.9%.  Perhaps a more telling stat is that MC’s first quarter negative numbers were up against 2018 negative numbers, depletions down -3.8% while shipments were down -6.7%.  This trend in negative numbers continues not only MC but also for AB.

While recently visiting with employees of a large AB distributor, a former, long-time employee put the negative trends into perspective.  In the almost 30 years this individual had worked at AB, Budweiser had lost volume every year, yet even today, Budweiser remains the fourth largest volume brand in the U.S.! This is remarkable.

At the same get-together, it was announced that senior management had decided to add a spirit line to the company’s portfolio with the hopes of bringing in local spirit and wine brands.  Obviously, this large AB wholesaler was looking to the future, as are AB and MC by rapidly adding to their product line.  The conversation moved to the effectiveness of this AB wholesaler given the fact that they will now compete against W&S houses, including Southern Glazers, Republic, Diageo, Brown-Foreman and other powerhouse companies and brands.  Keep in mind that Tito’s is a regional product from Texas and will also be considered a competitor.

Southern Glazers and Republic have both attempted to enter the beer side of the industry with little to no success despite the fact that both distributors have states with competitive beer portfolios.  Neither company, regardless of the brand quality, however, can compete against the beer guys in servicing the market.  This is because the marketing of beer is so distinctly different from that of wine and spirits.

Unless a beer distributor is fortunate enough to acquire a successful brand like Tito’s, competing against powerhouses Southern Glazers, Republic and other large W&S companies will be difficult. Such an acquisition will take resources from what could otherwise have been spent on their malt business.  A more successful model can be seen in the Northwest beer house, Columbia, where both Constellation beer and the W&S segment consolidated under one roof.

Many industry pundits have provided their opinions as to why the industry and brands continue to decline. Some say it is pricing while others tout the decline is due to marketing (above the line). Either way, the negative trends persist.

As the fall-out of craft breweries continues, it will not be long before wholesalers identify which crafts to invest in.  Spreading a limited dollar amount among 20 to 30 crafts has little effect, but when that amount of vendors is reduced to 10 to12, a wholesaler might experience the unexpected… greater success.

The key is not to prioritize what’s on your schedule but to schedule your priorities.

 

 

 

 Posted by at 6:00 am
Apr 302019
 

A couple of weeks ago Tiger Woods won his fifth Masters tournament and subsequently his 15th major win.  This was Tiger’s first major win since the U.S. Open in 2008 and his last Master’s victory in 2005, some fourteen years ago.  Just two years ago, however, Tiger’s back pain made walking difficult and returning to competitive golf seemed a distant memory.

Tiger Woods’ golf career has been a roller coaster, to say the least.  The multiple back and knee surgeries coupled with his personal problems had many pundits believing that Tiger would never win again.  His come back is remarkable in lieu of what he has overcome; however, Tiger’s true transformation is his outlook on life. A transformation that is perhaps even more notable than his golf comeback.

it is safe to say that during Tiger’s early years on the tour, he was cold, distant, and aloof.  Now, after multiple physical and personal problems, Tiger is a changed person. It is obvious that he is grateful that he can play again, compete, and win!  Tiger is happy to be in his own skin right now and it shows.  He is a changed man.

A recent article in the Wall Street Journal focused on the changes in Carlos Brito, head of AB in the U.S.  AB has been driven by 10 years of declining sales and market share, coupled with a heavy debt load from the acquisition of other breweries including SABMiller.

But Brito has transformed his management style: once an advocate of zero-based budgeting, cost-cutting, and headcount reduction, Brito is now transformed.  A true numbers cruncher, Brito has reduced the quantity and length of meetings; he has eliminated non-marketing people at the meetings, and he has increased the number of women in the company.

The article goes on to state that Carlos has freed up his time to take crash courses in AI and robotics, while focusing on new ventures like the Keurig machines for cocktails that the company is reviewing. Carlos goes on consumer safaris, shadows millennial shoppers overseas and visits other consumer companies including Starbucks and Harry’s to gather pertinent information, and he has even spent time learning about the coming Blockchain robotics and applications.  Brito has all done this while shuffling his senior leadership team and increasing the number of marketers.  His hope is that these changes will slow the decline of Bud and Bud Light while pushing new brands and products like hard seltzers, cold-brew coffee, and canned cocktails.

Assuming he remains in the leadership role, Brito’s legacy will be chronicled at AB, but that is yet to be determined.  Tiger’s legacy is already written regardless of how he performs going forward.   Tiger’s legacy will not be what he accomplished but what he did not accomplish.  That begs the question: will Carlos Brito’s legacy be similar to Tiger’s? Will Carlos be remembered for what he did versus what he did not do?

The greatest accomplishment is the not fact that one never fails, the greatest accomplishment comes in rising after the fall.

 

 

 

 

 

 

 Posted by at 6:00 am
Apr 232019
 

Despite a Denver snow storm, another successful Craft Brewers Conference recently concluded. As is typical at these conferences, old friendships were renewed and new ones were formed. Brewers and distributors visited, learn about new industry topics, and viewed the exhibits. The CBC continues to dwarf all other beer industry conventions with more than double the attendance at the NBWA. Expect the CBC’s attendance growth to continue at next year’s event in San Antonio.

One of the more interesting speeches at this year’s CBC was made by Marc Sorini, in his annual appraisal of governmental and legislative affairs. After providing an update on the history of franchise laws, Marc noted that some states are finally loosening their franchise laws. As he noted, this move could signal the beginning of states’ siding with the craft industry. According to Marc, “Wholesalers have massively consolidated and now have more than enough clout to protect themselves both legislatively and legally.” Florida, Georgia, North Carolina, Maryland, Massachusetts, and Maine all are currently undergoing some form of franchise reform.

Each state has a different sales volume maximum which is required in order for the wholesaler’s supplier to have the right to terminate “at will” without the necessity of paying to terminate the contract. The status of each state’s bill varies.  Some bills will not make it out of committee and some bills will not get to a vote, while others will.

Certainly most in the industry will celebrate this news; but should they? On the surface it appears that these laws are advantageous for the small suppliers, enabling such suppliers the ability to terminate and move to a different supplier without financial compensation; and thereby providing improved ability to execute on the suppliers’ products.

Suppliers, however, need to first step back before concluding that these changes in franchise laws are advantageous. Consider that there are two, perhaps three wholesalers in any major market. A supplier’s choices are very limited. If any supplier believer that a wholesaler would take on a new vendor without franchise protection, they should reconsider.

The reality is that without protection, wholesalers will rewrite their distributor contracts. It is possible that many wholesalers could ask both parties to wave all provisions of their respective state beer franchise protection laws and only use the contract as the legal document. Rest assured these contracts will have provisions on terminations and multiples. The language will be very wholesaler specific, with little regard to the rights of the supplier. In fact, most of these contracts will become evergreen. Suppliers will not have any choice but to go along or simply pack up and leave. Since there are only two or three wholesalers, the supplier is right back to where they started. Wholesalers may lose their franchise protection but they will not compromise on contracts.

Divorce is probably as painful as death.

 Posted by at 6:00 am
Apr 162019
 

Last week Stone Brewing announced the sale of their Berlin facility to BrewDog of Scotland for an undisclosed amount.  Stone has owned the brewery since 2014, but has now decided to leave the Germany market.

In an August 2014 edition of this blog, (Sound strategy starts with having the right goal.), Greg Koch, Stone’s co-founder, blamed the closure of the brewery on multiple issues, one being building complications and the resulting delay in construction.  Koch claimed that when concerns arose, construction was halted and no solutions were presented.  He added that the delays cost Stone both time and money, stating that the project was “too big and bold” for Germany.  Koch lamented that the brewery should have started smaller, thus giving all involved the opportunity to gain insight into what was necessary for successful growth.

In the same post referenced above, the challenges that Stone Brewing faced in building a facility in Germany were outlined.   And as it turned out, those challenges were real and Stone is, in fact, closing.

Various posts have addressed the topic of foreign ownership and management faced by beer companies hoping to establish in the U.S. market. Such companies continue to fail or fall short of their goals by not adapting to the U.S. beer industry model.  Leaders, who have been successful in other countries, fail to understand the American systems or they try to incorporate their countries’ systems in our country. The result is frequently failure.

ABI, MC, Pabst, Heineken (to some degree) and others breweries are managed by non-American leaders.  But the ongoing theme seems to be: is this working for these companies?

Jeff Alworth, who writes a blog entitled Beervana, criticized Koch when he, Koch, announced the Berlin project by smashing a pile of German beers with a rock. Shortly thereafter, Koch exclaimed that “Berlin is not really a beer city yet.”  That is like saying Augusta, Georgia is not a golf town yet.  That statement surely endeared Koch with many of the Germans.

Simply because a brewery finds success in their home country does not mean that same success will be duplicate in another country.  It does not matter whether you are dealing with the U.S. or another country, the facts are the same.  As we discussed in the 2014 post, Germans have local breweries and support them, just like Americans support our local crafts.  The German’s might have tried one of Stone’s beers, but in the end, they will support their own countries’ beers.

Based on Stone’s approach to the Berlin brewery, the chances of success were slim at best.  The same can be said of other breweries that approach business in a similar fashion.   It is an historical fact.  Having spent many years with German breweries, Stone’s struggles come as no surprise.

Hindsight is a wonderful thing.

 

 

 

 

 Posted by at 6:00 am