Mar 212017
 

Rainier posterColumbia Distributing was formed with the merger of three Northwest beer and wine houses, one of which was Mt. Hood Beverage.  Mt. Hood Beverage was formed when Dick Lytle purchased Coast Distributors in 1990, at which time I was the General Manager for Coast.

Coast, which had existed for over 100 years, was one of the largest U.S. beer distributors at that time.  It was also the largest Pabst distributor, by volume, in the country.  Hamm’s, sold more beer in Oregon than Budweiser or Coors during this time period, in fact, we did close to three million cases of Hamm’s in 1989.  Of course, we also had PBR along with a number of G. Heileman brands across the state.  Maletis Distributing in Portland, however, had Henry’s and Rainer, and Henry’s still enjoyed a market share of 12% in Portland.

In 1991, Heileman, which had already filed for bankruptcy protection, attempted to terminate Maletis.  Heileman had brought in a team to do a 90-day market drive with the express purpose of discovering any out of date product.  They found quite a bit of old beer.  Heileman wanted to move to Coast, however, while running Coast, I cannot recall having any discussions with either Heileman or Maletis regarding the purchase of these brands.

Maletis sued, and I was retained to determine future loss of profit and, in my opinion, to determine if the termination was justified.  Just prior to jury selection in New York City, both parties reached an agreement, thus foregoing trial.  The brands did move to Coast.  Combined, both parties spent several millions of dollars in litigation.

The industry has seen an onslaught of attempts by craft breweries to modify the current franchise laws, targeting terminations without cause.  Many states have changed their franchise laws to allow crafts, which have a small share of the wholesaler’s total business, can now buy out for fair market value.  The percent of the wholesalers business taking advantage of the changes in franchise laws ranges by state, but typically encompasses under 10% of the wholesaler’s volume.

It has taken the craft segment almost two decades to accomplish the current franchise law changes, and it continues today.  The recent events in a couple of states emphasizes the importance of franchise laws.  Recently, Pabst terminated three Washington state wholesalers and moved the Pabst brands to Columbia.  The fair market value is yet to be determined!

It is not unreasonable to believe that conversations between Pabst, Columbia and the three Washington wholesalers took place last year.  Since Pabst is a large part of the overall business in Washington, one might assume all three wholesalers had no interest in selling distribution rights.  Pabst’s termination forces this issue through the court system.

This attempt by Pabst to terminate longtime wholesalers, along with AB’s actions in Mississippi, does nothing to help crafts’ attempts to change franchise laws.  In fact, wholesalers can use these cases to strengthen their position that franchise protection is needed now more than ever.  For crafts, these actions could not have come at a worst time.

There will be a lot of money spent in Washington over these terminations, and in the end, Pabst will be at Columbia, but those wholesalers will be compensated.  Your life works to the degree to which you keep your agreements…

EDITORS NOTE;  I am sorry to report that Fred Schumacher past away last Sunday at 78 years old.  Fred, who was the man responsible for importing Hofbrau into the US, also worked for the Jos. Schlitz Brewing Co.  He will be missed.

 Posted by at 6:00 am
Mar 142017
 

Corona PremierMiller Lite was the first line extension introduced in the early 1970s.  Lite’s success was soon followed in the mid-1970s by Coors Light and Bud Light.  These three brands created an entirely new category, and as successful as they were, these three brands not only replaced their mother-brands, they surpassed them.  The term “cannibalized the mother- brand” can be over used, but when you take the combined volume of both the regular and light brews of each brand, the decision to create a light beer was never second guessed.

Today, we see Miller, Budweiser, and Coors, all once the flag ships of their respected breweries, in different places.  Miller has moved toward retro marketing and is positioned as a price beer; Budweiser is still in a free fall, looking for a parachute; and Coors, who years ago went back to a retro marketing strategy, has been growing for over 10 years.

Perhaps the ultimate line extension the industry has seen is Michelob Ultra. This is certainly the hottest domestic brand, with only Modelo Especial coming close to Ultra’s growth trends.  When AB dropped the tear-drop shaped Michelob bottle, the brand became a memory to older drinkers.  Ultra today is Michelob, and its success has become the target of several major importers.

Heineken and Modelo are now offering brands aimed directly at the Ultra consumer, however, their marketing strategies are dramatically different. Heineken is introducing Amstel XLight, using their long-dormant brand, Amstel as the vehicle to capture the Ultra consumer.   Modelo, on the other hand, is using the long established, and highly successful, Corona brand as their strategy to capture the Ultra consumer with Corona Premier.  These are interesting tactics and dramatically different.

How will a buyer for a major chain view these two new brands?  Heineken will be asking for shelf space for a brand, long disappeared from the consumer’s point, yet Corona will introduce their Premier tied to the Corona name.  Obviously, the buyer will be much more supportive of the Premier as it will have stronger name recognition over Amstel.  It seems to be a lock that Corona’s attempt will be successful and Amstel’s will not.

The question really is: why did Heineken use the Amstel label for the XLight instead of the Heineken label?  Perhaps Heineken should have used their Dos Equis label.  It seems that Heineken is testing the temperature of the water, where Modelo is jumping directly into the deep end.

It will not be surprising if the XLight disappears from the shelves by the end of the year, or at best, the brand will have limited distribution. Nor will it be a surprise that Premier will be the hot new beer of the year.  If so and Ultra’s trends continue as is, Heineken may be using their labels and go with something like a Heineken Superior or Dos Equis Grande.  The chance that those products will succeed is much better than Amstel XLight, so why bother with the Amstel name?

Perhaps this is an example of the difference between a European managed importer verses an American managed company?

A fool can throw a stone in a pond that 100 wise men cannot get out…..

 Posted by at 6:00 am
Mar 072017
 

Clint EastwoodThe basic premise as to what drives volume in the beer industry is twofold:  it is either through media or through price discounting, with a combination of both being the ideal situation.  That being said, over the last 10 years, both AB and MC have lost millions of barrels and substantial market share.  The reason, ineffective marketing and aggressive pricing. The numbers do not lie.

Over the last five decades there have been an endless number of media campaigns by AB, Miller, and Coors.  Many have been very effective, however, some have been a total disaster.  There was the Schlitz, Don’t Take Away My Beer ad, made by actor James Colburn that was in your face and very offensive.  Then, Miller produced the infamous Dick ads, enough said.  Then there are the classics like Miller Lite’s Tastes Great, Less Filling, which started a new category that still dominates the industry today.  AB ran with This Buds For You!, along with some other variations that really drove the brand.  These are two examples of classic ads which spoke to the consumer.

The question today is, why have the current messages failed to drive volume for these brands?  Maybe the better question, is why have ads for AB and MC been ineffective, while some ads for other brands been very successful?  Michelob Ultra, Coors, Corona, and Dos Equis have all seen great growth for years, but perhaps the personification of success is Modelo Especial!

What do these brands have in common, and what are they saying to the consumer that the others are not?  Could there be an underlying theme that is resonating, not only with older consumers, but also with the millennials?  A message that hits home to the cupcakes and buttercups that society has earmarked?

Coors has used the actor Sam Elliot, long known as a rough cowboy with a gruff voice, since 2007 as the voice for their retro Rocky Mountain ads.  Coors has experienced single digit growth for years.  Corona, has relied on the beach-in-the-bottle theme for decades, showing couples enjoying life on the beach.  Michelob Ultra has illustrated a lifestyle with successful, chiseled bodies, that hits its intended mark, and the numbers are nothing short of incredible.  Dos Equis and the Most Interesting Man in the World has been so successful that Heineken recently rebooted this ad with a younger man. The result has been that the numbers continue to grow, indicating the younger MIMW, resonates with younger men.

But, perhaps it is Modelo Especial that is the bell weather of just why these brands are so successful.  Using music from the macho movie, The Good, The Bad, and The Ugly, which emphasizes the macho theme, while the ad highlights the brewing of Modelo Especial.  These ads are definitely speaking to males.

Ads from Coors, Michelob Ultra, Corona, Dos Equis, and Modelo Especial speak to the quality of the beer, however, they all have the underlying macho theme that hits home for males of all ages.  Men are saying, I cannot be like them, but I can drink their beer.

What is clear is that fraternity-style ads and ads-sharing-with-friends are not working.  Masculine focused ads are hitting home and the numbers reflect that.

The Good, The Bad, and The Ugly…..

Beer Fodder; 

 

Beer Fodder #2; 

 Posted by at 6:00 am
Feb 282017
 

beer wallIt was 41 years ago this March that Coors opened S. Texas.  This rollout was much anticipated by both retailers and consumers as Coors was only available in 10 states and half of Texas. Despite the limited availability, Coors was by far the largest selling beer in all markets, with market share ranging from a low of around 35% to a high of around 70% in parts of Kansas and Oklahoma.

The largest trade channel in San Antonio was the c-store, however, the largest grocery chain was Handy-Andy, as HEB did not sell beer in 1976.  The morning of the initial rollout all of the stores were anticipating delivery and had already provide shelf space in their respective cold boxes.  The consumers were lined up to waiting to purchase Coors.  Since we delivered the beer cold, it went directly into the empty spaces, which, at Handy-Andy, were right in the middle of Schlitz and Budweiser.

The premium section consisted of three beers: Coors, Schlitz, Miller Lite and Budweiser.  The regional section was composed of: Lone Star, Pearl, Falstaff, Jax, and Busch.  There were a few price beers, including Texas Pride and Buckhorn.  Imports were limited, mostly Heineken, Becks, Carta Blanca, and Tecate.  The line-up was simple, but that was the ways things were in 1976.

The spring resets for most grocery and c-store chains are now underway.  As has been the norm in recent years, the number of new products available continues to overwhelm buyers.  Buyers have their own criteria in which they reset their space, and because there is no industry standard, each chain is different.

At one time, boxes were set based on traffic flow.  The number one beer got the first spot, followed by the number two beer, and so forth.  Price beers occupied the final place.  Over time, however, buyers learned to up-sell the consumer and some chains reversed the sets enabling the higher priced imports, the first spot. This sales tactic did prove to be beneficial.

Today, we see sets with a domestic section, an import section, a craft section, and a FMB section.  These sections can also be split.  This spring, a large chain had over 450 new SKUs submitted.  Even the best chains cannot handle all these new products.

So the question is, can there be a more effective approach to setting space?  The internet provided the initial boast to crafts by providing the consumer with the knowledge that these types of styles existed.  What would happen if a hierarchy existed in cold box setting?  A craft or beer might have to earn or qualify for a place?

Perhaps a highly awarded product with high ratings could get the prime space as earned at the GABF or another international competition.  This way, all the pressure would fall on the brewery to prove they deserved the spot.  A retailer could have a gold section, a silver section, and a bronze section, along with a current local section.  The consumer could than decide how to buy based on industry hierarchy.  This could prove to be an interesting concept.

Total Wine, with their thousands of SKUs, identifies beers with ratings, but not by a section.  What would it look like if Total Wine created their sets by ratings, starting with the highest rating and decreasing down the shelf to the lowest rating.  How many consumers would go to the end?  How fast would those lower rated beers disappear off the shelves?

What is there to lose?  Hierarchy works well in a stable environment…..

 Posted by at 6:00 am
Feb 212017
 

JN Few Good MenThe proliferation of Fake News, has, up until this year, left the beer industry untouched.  Sure, there was once the infamous Corona liquid fake news, which began out west and spread like wild fire.  Fortunately, however, the distributor who started the vicious rumor was quickly determined and Barton/Gambrinus immediately doused the horrible story.  Some damage was done, but the after effects quickly dissipated and the rest was history.

This blog once told the story of Coors Brewing Company’s accusation that AB and Schlitz had fusel oil as a byproduct of their brewing process.  Once again, a few well-placed phone calls and the issue quickly disappeared.  It was, however, not a good look for the industry.

Social media has been the godsend of the craft industry to date.  One might agree that the industry would not be what it is today without this relatively new form of communication.  Social media has allowed local crafts to talk directly to their consumer and potential consumers, telling their story without any obstructions, and better yet, without the major costs associated with the traditional above-the-line advertising.  Everyone uses social media, including the big boys, albeit, by looking at the numbers, not quite as well.

In the 2016 presidential election, it was clear that social media played a significant role for both parties.  That single election will change how campaigns will be run in the future.  The losing party, and those who supported it, are now using social media to attack the winning party, using the term fake news, or simply making up negative stories about the other side and sending said stories out on the internet.

Fake news is also being used to galvanize voters and raise money.  It seems to be working if you believe the reports on TV.  Just look at all the protests being held on campuses, the rallies, speeches, and marches.

As more and more breweries struggle to get established and grow, the question becomes, when and how will fake news be used in the beer industry?  A craft could spread a vicious rumor about another brewer’s product using fake news.  One might even start a fake news story about a successful brewer selling out to AB or MC!  This could certainly create opportunities for the fake news brewer.  Fake news could announce a pending major price increase, or start a personal campaign against an owner.  All types of fake news could be started and would accomplish nothing but hurt the overall industry.

We have just seen a number of key retail outlets discontinue product lines associated with the President or his family.  Companies are taking a political stance regardless of the possible consumer response.  This type of political involvement has not yet been fully played out to see just how this will affect said retailers’ overall sales.  This could, however, be a direction any number of crafts will soon take.

The beer industry has been, and always will be, highly visible to the consumer given that beer is such a personal product.  Let’s hope that political stances and fake news stay away from our industry.

The thing about the truth is, not a lot of people can handle it….

 Posted by at 6:00 am
Feb 142017
 

David vs GolithA number of years ago, Hofbrau, one of the six original German Munich breweries who can produce and sell Oktoberfest beer in that country, developed a unique business model.  Once they established an importing agency in the U.S., focusing on their Munich heritage, Hofbrau decided to franchise its name while using their famous Munich beer hall.

Today in the U.S. there are seven Hofbrau franchised beer halls.  There are several models one can invest in, depending on what the buyer would like to purchase, including a full-blown brewery.  Obviously these halls are German themed, with authentic outfits, glassware, banners etc., including the original Hofbrau from Munich.  Hofbrau is not trying to be something they are not; they are building on what they already are.

Even though these Hofbrau houses are franchised, and not part of Hofbrau, it is only from a legal view that the average observer would know these houses are not part of Hofbrau.  The laws have either been changed or modified by states to allow craft brewers to sell their beers in-house or to-go.  Some crafts, where it is legal to do so, are building brew pubs in other markets, not unlike Hofbrau, only they are not franchised.

Some crafts, Anchor, Boston, New Belgium, Yuengling, and even Rogue, have themed bars in locations like airports.  In such bars, their beers are served along with food.  It is called the blurring of the three tier system, but is this not really the melting together of the current system?

Two weeks ago, Diageo, the owner of Guinness, announced that Diageo would build a version of Guinness’s Dublin Open Gate Brewery in Maryland.  Their goal is to open the brewery in October in celebration of the 200th anniversary of its first importation. In addition to the brewery, Guinness will have a tasting room, retail store, packaging and warehouse.  The total investment is reported to be around $50 million dollars.  While the iconic Guinness will not be brewed there, Guinness Blonde will be, along with other special brews. A number of Maryland beer laws need to be modified or changed to allow Diageo to build this facility, but considering the economic impact of what this brewery means to Maryland, one can count on those laws being changed.

So the bigger question is now: will this new business model of the major breweries continue in the future?  We all are aware of AB’s expansion of craft brew pubs of the beers they currently own.  Now we see this model unveiled with Guinness.  Will the major breweries start building these eclectic breweries in major cities or tourist areas?  Why not?

Even if these models by-pass the middle tier, the local wholesaler should benefit from the money the brewery invests in their market.  Will the locals support those brands?  It is working for those who have made the investment, like Hofbrau!  It is working for all the crafts!  It will work for Guinness.

The melting of the tiers continues and, in fact, seems to be accelerating today.  Look for others to follow Guinness and Hofbrau in the not too distant future.  The new definition of this centuries “tied house.”

I love challenging the status quo….

 

 

 Posted by at 6:00 am
Feb 072017
 

beer glassesThe Rio Grande Valley area of Texas is considered an isolated part of the U.S. because of its location, surround on the southeast by the Gulf of Mexico, the county of Mexico to the south, and the vast expansion of the King Ranch to the north, coupled with the fact that a majority of Valley’s population is confined to just three counties.  Because of this, in 1980, there were multiple beer wholesalers located in the valley:   one Schlitz wholesale, run by me; one AB, one Miller (Falstaff), two Coors; two Lone Star; one Pearl/Imports; and believe it or not, one Hamm’s (Femsa).  Heineken, was delivered into the valley by Glazer’s, based in Corpus Christi.  Altogether, nine different houses not counting Glazer’s.

By 1982, however, the beer industry was affected by the following a multitude of uncontrollable factors:  a massive peso devaluation; a 100-year freeze which destroyed 95% of the citrus trees; and the oil embargo.  These events created an unemployment rate of near 50% and a decline in population as people moved to locations where they could find work.  All of these factors created a major reduction in the beer volume.  The economy, unfortunately, was supported by the seasonal visits of the upper mid-west winter Texans, who at this time, were mostly retired WWII vets.

Fast forward to today.  Since the early 1980s, the Valley has more than tripled in population, but today there are only two beer distributors; three if you include BEK who maintains a small operation in the area.  Of the original nine wholesalers, only the AB house L&F remain, all the others have consolidated into a Glazer’s operation.  In other words, the breweries who survived, along with the financially committed wholesalers, weathered the storm and are today making money.

Recently, while visiting a small brewer in their sixth year of business, I learned that in 2016 this brewer experienced his first decline in sales.  He self-distributes and because of that, his tap handles have become a target for the other beer distributors.  He told me that the wholesalers have a $300 bounty for his handles!  Unfortunately for this brewer, he cannot compete with such a practice and has lost a lot of business.

With over 7,000 breweries of all sizes, another 1,900+ with permits, but not yet brewing, and a couple of thousand more in various stages of planning, the industry has reached a saturation point.  It is yet to be determined how many of those will get the funding to build, but rest assured, many will not get the funding they need.  Still, it is obvious that those in the business today are hitting the proverbial wall, not growing as the category slows.  Those breweries without the sales structure, programing, pricing, money, and most importantly, the will and focus to continue on, will surely risk failure in the future.

Just as what happened in the Valley over 30 years ago, economic conditions and top tier consolidation were the reason that seven of those distributors sold out.  The two that stayed the course are now benefiting from their tenacity.  This same determination applies to those craft breweries today.  If the liquid is quality, and one can withstand changing conditions, then the sky will be the limit.

If you want to see the sunshine, then you have to weather the storm.

 

 Posted by at 6:00 am
Jan 312017
 

Red BullThe numbers for 2016 are now being released.  In 2016, we once again saw the industry produce similar results very similar to the last 10 years.  Since 2010, domestics have lost 16.5 million bbls. or 9% in volume, crafts have gained +13.2 million bbls., and imports +5.9 million bbls.  Therein lies the issue with wholesalers.  AB, MC, and even established crafts such as Boston are losing ground   As a wholesaler do you stay or expand?

In recent years, many wholesalers have expanded into non-beer products.  Even importers have done the same.  In the late 1980s, Warsteiner took on Nestles, albeit for a short time as this experiment did not work.  A number of these expansions do not work, but there are some that are very good, such as the energy drinks Red Bull and Monster.

Monster is now leaving the beer network, predominantly AB houses, by exercising provisions in their agreement with the wholesalers to buy out their rights.  Monster, like Red Bull, is a very profitable product and a key part of anyone’s business, and because of this, many of AB wholesalers are fighting back. Yet, at the first of January, Andrews Distributing, which has MC houses in both north and south Texas, and is a long time Red Bull distributor, announced that they were getting out of the Red Bull business in Texas.  Andrews’ annual volume is around 1.5 million cases of Red Bull. “This was a tough and thorough decision-making process, but the decision allows us to move forward with 100 percent focus on our core beer business,” per notes from Mike McGuire.  He states they will continue adding “new and powerful brands, territories, and customers to the company’s portfolio.”

So the question is, why would Andrews go this direction when most other wholesalers are doing just the opposite?  Could this decision be based on retiring debt?  Andrews has bought both the Miller and the Coors distributor in Ft. Worth in recent years with the goal to consolidate both in a new super facility which is under construction.  Makes sense?

Maybe there is another reason why Andrews is making this move.  Andrews’ markets, DFW and Corpus Christi, are connected by Interstate 35, which goes through San Antonio, Austin and Waco.  Two of these markets, San Antonio and Waco, are owned by Glazer’s.  Now that Glazer’s has merged with Southern with their wine and spirits business, and spun off their beer division, the question arises: will Glazer’s continue to retain just the beer operations?  No doubt Andrews would love to have Waco and San Antonio in their operations. Add in the Rio Grande Valley, which also is Glazer’s, and you pretty much have it covered, omitting only Austin.  Divesting Red Bull should put Andrews in a much better position should they become available.

2017 will be the year when we learn more behind this decision to get rid of 1.5 million cases of Red Bull.   Maybe there is another reason why Andrews is making this business decision.

A tree is a tree.  How many more do you need to look at?

Beer Fodder; https://www.youtube.com/watch?v=vQusMl8aNmg

 Posted by at 6:00 am
Jan 242017
 

Fredericksburg breweryMany years ago, Diageo requested that all their U.S. beer distributors for Guinness sign a distributor contract.  At the time, less than half Diageo’s U.S. distributors had signed any document with Diageo.  With the promise from their Distributor Advisory Committee, Diageo set out to construct a contract which could, and would, be agreeable with both parties.  It took two years for both sides to come to acceptable language, but the document was completed and sent to every distributor for execution. Once again, only half agreed to sign the document as written!  This is not news, as we all know.

Recently a large wholesaler, in negotiating a beer agreement, changed the brewer’s QA standards to the wholesaler’s internal standards!  Now just where does a wholesaler start to determine what a brewer’s QA standards should be?  I can see a wholesaler telling a brewer, like AB, MC, Constellation, Boston or Heineken, that the wholesalers QA standards are in play, not theirs.  I am sure the brewers would all go for that.

While there are multiple points of contention in the contract, one major issue is pricing.  In 2007, the U.S. Supreme Court made the following ruling which was the subject of a post in September of 2012:

In the mid 70’s, Coors Brewing Company was reprimanded and placed under a two-year moratorium regarding price discussions when a conversation between the brewery and a wholesaler was recorded by the later. From that point forward, the talks on pricing between wholesalers and vendors always included the words “recommended” or “suggested” in the discussions, and all price letters to wholesalers had the language “we recognize your right as an independent wholesaler” and “businesses to set your prices accordingly.”

Leegin Creative Leather Products, Inc. v. PSKS, Inc. 551 U.S. 877 (2007), is a U.S. antitrust case in which the United States Supreme Court reversed the 96-year-old doctrine that vertical price restraints were illegal per se under Section 1 of the Sherman Act.  The afore mentioned case replaced the older doctrine with the rule of reason. Resale price maintenance (RPM) is the practice whereby a manufacturer and its distributors agree that the distributors will sell the manufacturer’s product at certain prices: at or above a price floor, or, at or below a price ceiling. If a reseller (distributor) refuses to maintain prices, either openly or covertly, the manufacturer may stop doing business with said wholesaler. This marked a dramatic shift on how attorneys and enforcement agencies addressed the legality of contractual minimum pricing, and essentially allowed the reestablishment of resale price maintenance in the US in most commercial situations.

No doubt that beer prices, led by crafts, could be more aggressive in the coming year.  Vendors do have a right to discuss partners’ pricing with their wholesaler.  Even though it has been 10 years since the above Supreme Court ruling, there have been no further rulings which clarify this case.

The industry is changing, but both wholesalers and their attorneys need to be aware that their contractual demands will not work for vendors, or even the courts.  The fact that wholesalers are awarded distribution rights for free, and that they are protected with federal and state statues, written with input from wholesalers, yet the wholesalers still slants contracts.

Unfortunately, there are no mulligans when it comes to beer contracts…..

 Posted by at 6:00 am
Jan 172017
 

swinckelsIt will be a couple of months before the final 2016 numbers on both shipments and depletions are announced, however, we do have the 11 months of import shipments to review.  While the industry buzz is about the slow-down in the grow rate for crafts, the numbers indicate that imports are surging at an increasing rate.

No doubt, we all are aware of the remarkable growth of the Mexican beers.  In fact, both Constellation Brands and the Heineken Mexican beers are accelerating in sales.  The growth we are seeing in a number of European countries is quite interesting.

Thru November, German beers are up +30%, followed by the Irish up +20%.  Several countries are still negative, including the Netherlands down -7%; Belgium down -8%; and at the bottom, the UK down -27%.  Canada is also slow at -19%.

Part of this trend must be attributed to the growth of the high end, but, why all of sudden, is there a surge in imports?  With the exception of Stella, imports from Europe have not had much success in decades. So why now?

Past posts have discussed decisions made by successful European brewers who, mostly due to the exchange rate, reduced or eliminated their U.S. business model during the early 2000s.  Now with a change of administrations and a different U.S. monetary policy, the exchange rate with the Euro is almost one to one.  The breweries that left, now want to come back.

The personification might be Bavaria.  Bavaria, just over 10 years ago, was a very successful importer.  They had their own importing agency and shipped over 100K HLs. per year.  Their three largest states were New Jersey, Florida and Texas. Considering that Bavaria might have been the first popular priced import, with a pricing model $2.00 per six-pack under Heineken.  Bavaria had set their standards to be placed in the well next to Heineken.  It worked.

Because of this model, Bavaria’s sales skewed to 99% off-premise.  They basically had almost no on- premise business.  They shipped no kegs.  As the Euro grew stronger, because of their pricing, Bavaria had to increase front-line pricing to offset the exchange rates.  The consumer no longer saw any value in buying Bavaria as the beer’s price edged closer to that of Heineken.

With declining sales, Bavaria closed their U.S. importer and assigned rights to a California importer.  For all practical purposes, Bavaria disappeared…until now.

The owner of Bavaria, Swinckel’s, has recently purchased the U.S. importer Latis Imports.  Obviously this purchase is to reestablish Swinckel’s beer sales and grow them in the U.S.  You can almost be assured that someday Bavaria will be part of Latis Imports, along with Swinckel’s and Holandia.

If the exchange rate drops lower than one to one in favor of the dollar, expect a return to the 1980s when European and Canadian imports invested heavily in the U.S.  This time, however, with the high-end segment growing and expanding, the importers will not back out.  This expansion could put a damper on the craft segment with the millennials.  Only time will tell.

It makes one wonder where a brand like Bavaria would be today had the Swinkel’s not pulled out years ago?  Experience is simple, it is the name we give our mistakes….

 

 Posted by at 6:00 am