Geoff

Previous key positions: President/CEO Krombacher USA 2010-2012, President/CEO Warsteiner Importers Agency 2006-2010, Corporate Director of Malt Beverages Glazer's 1999-2006, Regional Sales Manager Gambrinus 1996-1998, VP Marketing and Distribution Texas Brewing Co. 1996, President Distributor Investment Group 1991-1995, General Manager Coast Distributors (Columbia) 1988-1990, Distributor Development Manager Coors Brewing Co. 1987, President Texas Beers Inc., 1981-1987, Executive VP and GM Coors of Kansas 1978-1981, VP Sales Coors NE 1976-1978, others were sales manager Mid-State Beers, District Mgr. Lone Star Brewing Co and route sales Willowbrook. Active member of many industry associations such as NBWA, WBDT, Oregon Beer, Washington Beer, Utah Beer, Kansas Beer and Louisana Beer assoc. Nominated or won: Inner Circle, Founders, Proud Lion and other awards. Named industry expert in US Bankrupcy, Federal and many state courts.

Jun 202017
 

Several years ago this post ran a story on the inception of the Wholesale Beer Distributors of Texas.  While playing golf one afternoon 30 years ago, I ran into the first Pearl Beer distributor for that market. This gentleman had started his distributorship immediately following the end of the prohibition period.

This man told me the story of how, during 1932 to 1938, he lost money with his distributorship despite living in the Pearl warehouse.  In 1938, he, along with a number of other beer wholesalers, raised $60K and lobbied the legislators in Austin which resulted in the passing of a cash law.  Up until this point, beer was sold on consignment.  A wholesaler would drop off a case and come back the next day to collect, only to discover the bar had closed and the beer was gone, along with the owner.  Once the cash law went into effect, this Pearl distributor said he made $1,000 the following year.

This story is very interesting in that it shows what can happen when special interest groups have the money with which to lobby.  It is called buying influence.  This time, the distributors ensured that they would be paid, taxes would be collected and bills paid.  Obviously, this was win/win for the industry.

Fast forward 80 years.  The watchdog group, Texans for Public Justice, found that, between 2013 and 2016, state legislatures received more than $11 million in campaign funding from alcohol industry players. And, according to the Texas Tribune, more than three-fourth of the funding came from the beer wholesalers.  Silver Eagle President and CEO, John Nau, gave $2.4 million while serving as Texas Governor Greg Abbott’s campaign treasurer.  During that four-year time period, Abbott received $1.4 million from the beer wholesalers.  Texas Lt. Gov. Dan Patrick and House Speaker Joe Strauss received the second most money, $688,000 and $508,000, respectively.

This information was just published, because a bill is awaiting Abbott’s signature that requires breweries who sell more than 225, 000 bbls. annually, to buy their beer from a wholesaler for consumption on premise at the breweries taproom.  The bill goes into effect on June 18th unless it is vetoed by Abbott.  Furthermore, the bill grandfathers several breweries (Karbach Brewing, Revolver Brewing, and Independence Brewing) who were recently purchased by ABI, MC, and Lagunitas. Each of these breweries will be able to expand to new facilities.

On the other hand, Colorado based Oskar Blues Brewing, which recently built a $6.5 million brewery in Austin last June, is not included among the grandfathered breweries, and will have to purchase beer for their tap room from a distributor!  The Texas Craft Brewers Guild is lobbying Abbott to veto the bill and has petitioned against HB 3287.

By the time you read this, the industry will know how this bill has shaken out, but given the amount of campaign funding the beer wholesalers have donated over the last four years, many would be surprised with a veto.  All craft brewers have known for years what their challenges are in state legislatures.  Craft brewers have, for years also attempted to get laws changed which lean in crafts’ favor, especially against beer wholesalers.

Crafts in Texas are less than 10% of the total business, but if, and when, the day comes that their market share exceeds 20%, you can bet their political influence will equal or exceed that of the influence of the beer wholesalers.  Until that day, it will continue to be an uphill battle for crafts.

If it doesn’t matter who wins or loses, then why do they keep score?

Editors note, the bill became law but was not signed by the Governor.

 

 

 

 

 Posted by at 6:00 am
Jun 132017
 

lets have a beerWas anyone really surprised with the recent NFL announcement that spirits can be advertised, with certain restrictions, on their games?  A better question might be; why did it take so long for the NFL to come to this conclusion?

The obvious answer to why the NFL has now decided to allow the advertising of spirts during their games is because the NFL will be receiving much needed revenue to offset its declining viewership.  Once again, with this announcement, many industry publications have jumped in with a myriad of comments and thoughts.  Most believe the decision is negative for the beer industry, however, some believe it might be a positive in that it could be a wakeup call for brewers!

A general consensus exists in the ad industry that spirit advertising, as compared to advertising for beer, is much more effective at getting the message across to the consumer.  No doubt that the spirit ads are more compelling and speak to the consumer, highlighting the key attributes of the product.  Beer, for the most part, does not address such attributes.

Is ineffective advertising the real problem within the beer industry, or is it something else altogether?  The numbers are eye awaking!  Since 2008, MC and ABI have lost over 27 million bbls. in sales!  That is astounding!  Translate that number to market share and MC and ABI have gone from 75% share of the US beer market in 2008, to 66% market share in 2017.  With the current trends continuing, their market share for MC and ABI will be less by the end of the year, with no end in sight.

The industry knows that there are main stream products that are doing well: Ultra, Modelo Especial, Coors, and Stella.  Their advertising is highly acclaimed based on these brands’ sales trends, and for these brands, the sales trends are very good.  Buy why?

Could it be the simple fact that Coors Light, Miller Lite, Bud Light, and Budweiser, along with numerous other brands, are no longer seen by the consumer, regardless of the quality or quantity of the advertising messages, as brands that are in favor.  In other words, could these brands be passé?

As indicated by the number, domestic light beer consumers are moving to hot brands like Ultra, Corona Light, and Tecate Light.  These brands are viewed as favorable to the consumer.  They are hot, the others are not.

Brewery executives only have their resumes at risk.   Wholesalers, on the other hand, have a great deal of skin in the game, including their own families’ well-being, in addition to that of their employees and their families. If the wholesaler has a diverse portfolio, including Constellation and/or Heineken, they will well situated, if not, then there is most likely much concern in that house.

Someday these brands will bottom out and could languish for years, eventually coming to life again, similar to the scenario experienced by Pabst, Lone Star or Rainer.  A retro redo.  If that is true, then there is no form of, or amount of advertising content that will positively affect any of these brands, if the consumers continue to reject them.

Spirits being advertised on NFL games will not materially affect beer sales.  The issues with the beer industries are internal, not external.  Status quo is Latin for “the mess we are in.”

 Posted by at 6:00 am
Jun 062017
 

Beer monopolyThe book, The Beer Monopoly, by Ina Verstl and Ernst Faltermeier, goes into detail regarding how the four largest beer companies, ABI, SABMiller, Heineken, and Carlsberg, landed their current positions. The historical perspective of each company is well detailed, going back to the starting foundations of each organization.

What makes this book even more fascinating is how the authors focus on each company’s long-term business strategy and culture.  In other words, what makes each of the four companies tick!  Being in the industry for a number of years, we are familiar with the history of each of the four companies discussed, yet the book adds additional depth by carefully detailing the formation of each.

ABI’s modus operandi, as we all know, is acquiring companies and cutting out the fat, along with a great deal of bone.  ABI’s business model is not to grow by building brands, as their performance record indicates, but, rather, growing by swallowing companies.  ABI is a highly centralized and controlled company.

SABMiller, now part of ABI globally, and after becoming successful in South Africa, focused on being acquired by InBev. In anticipation of this move, SABMiller relocated their corporate headquarters to London and, for the most part, ran a decentralized model which understood that brands were local, not global.  SABMiller focused on building successful beers, and it worked well for them, having sold to ABI last year.

The Heineken and Carlsberg stories are somewhat more complicated, in that both are privately owned entities, and have different purposes.  Heineken, controlled by a family with many shareholders, was the first brewery to focus globally. They approached this model by identifying breweries, or JVs, with other breweries in multiple key countries. Heineken’s recent acquisition of Femsa, from Mexico, was instrumental in the company’s long term global survival.  Heineken, like ABI, is a highly centralized organization with key markets run by Dutch management.  Heineken’s ownership structure would make it difficult for another company to acquire them.

Carlsberg, unlike Heineken is owned by a foundation that supports a number of individuals.  Also highly centralized, Carlsberg took a risk and focused on owning the Russian market.  Carlsberg invested heavily only to see that country highly tax and regulate the alcoholic industry.  Even though Carlsberg is in control of the beer market share in Russia, overall volume has collapsed. Carlsberg has little focus and presence in North America.  Carlsberg ownership structure is also such that any attempt to acquire it would be very difficult.

The world growth markets, according to The Beer Monopoly, are Africa and China.  The later, however, has not become the volume provider many breweries believed it would. There is, however, hope for Africa.  When looking to the future, globally, it is clear that few, if any, opportunities exist to buy into a country like these four brewing powerhouses have done in the past.  The big boys are simply no longer there.

So the question remains, at least in the short term, will these breweries be focused on the craft segment, and those opportunities flourishing in the industry?  Based on what we have seen from Lagunitas, Ballast Point, Goose Island and others, it is working, just on a smaller base.

The book examines the industry today. Rest assured future chapters will be even more interesting.  The Beer Monopoly, chapter 2……

Editors note;  RIP; James “Jim” Barrett, the last in a long line of Schlitz Gulf Division managers for Texas when it was the largest state Schlitz  had.  Jim served in WWII in the navy and spent his entire professional life with Schlitz.  Jim retired with his wife Barb, to Granbury, Texas shortly after Stroh took over Schlitz in the 1980s.  Jim was 90.

 

 Posted by at 6:00 am
May 302017
 

Observes the law beerOver the years of posting stories, there have been a number written about individuals who, for personal reasons, violated either federal, state or contractual law.  Examples of such violations include: selling Old Milwaukee kegs as Schlitz, trans-shipping Coors out of a warehouse to eastern markets, dumping beer in Mexico, changing ABV dates on packages in 3.2 states, and brewery executives filing fake invoices for advertising.   While all these actions were illegal, all were done for individual gain.  And all of the above resulted in either loss of the distributorship, loss of job and fines, or prison time.  All for individual gain.

Much has changed in the beer industry in the last ten years, starting with InBev’s takeover of AB.  More and more ABI’s intent has become apparent in their management of their U.S. business, especially in light of their massive volume losses.  In recent months, AB branches in three separate states have been cited or fined for unfair trade practices.  Anyone see a trend here?

There was the yearlong California ABC investigation of the AB branches which resulted in a $400K dollar fine.  Half the fine will be returned to AB if the branches “behave!”  In Massachusetts, the AB branch was notified of a hearing in June concerning the branches’ activities of providing a” thing of value” to the retail trade. And, finally, in Colorado, the AB branch, American Eagle, was fined the state’s maximum of $5,000, in addition to a 14-day suspension for unfair trade practices.  The branch had to close for five days, with the remaining nine days being held in abeyance for one year, however, the $5,000 was paid in lieu of active suspension.

It seems obvious that AB is either interpreting the state ABC laws to benefit their own interest, or blatantly ignoring the state statues and doing what it takes to gain an advantage over the competition.  When considering the risk of getting fined or caught, versus the reward, AB’s attitude seems to be to move forward and take that risk.

To AB, these penalties are just a slap on the wrist.  If the state ABC agencies really wanted this illegal activity to cease and desist, then the state should make the penalties damaging enough to AB to feel the consequences.  The reality, however, is that it will simply not happen.  Closing a branch for a week is manageable.  The wholesaler can build retail inventories so that out-of-stocks will be nonexistent.  One week off for all employees is also manageable by the branch.

If the penalty was for a branch to shut down for an entire month, however, that could raise some eye brows!  AB products would be out of the market, employees would be out of a pay check for a month, and if the branch is unionized, that might create additional issues.  Imposing such stiff penalties, however, could create a backlash for the ABC.  The state would lose tax revenue and the unemployed workers could potentially become angry and negatively vocal.

Considering AB’s powerful lobbying, tax revenues, and political clout, the industry will continue to see these small penalties assessed.  And because AB owns these branches, there is no risk of a vendor pulling their product for contract violations.

Until the states get tough, the chances of AB continuing to play this game are quite high.  If you’re going to play, you must be willing to pay!

 

 Posted by at 6:00 am
May 232017
 

Jim KochThis Saturday Jim Koch will turn 68, and as we do every year at this time, let’s take a look at Boston Beer in 2017.  Unfortunately, what we see is not a pretty picture.

In the recent IRI data, ending April 30, 10 of the top 17 growth craft brands are totally owned, or partially owned, by larger brewers.  This includes the top five brands, the top three of which are owned by either MC or ABI.  The only craft beer on this list is Seasonal Overlay, a Sam product, which is in the sixth place. Perhaps this data reveals more about Boston Beer’s current status than anything else.

In a recent three-hour investor meeting, Sam laid out three strategic priorities: (1) return Sam Adams/Angry Orchard to growth; (2) eliminate waste; and (3) increase long-term innovation.  The new CMO, Jonathan Potter, has implemented a new brand direction which was well received by the industry analysts.  So the question is: what needs to happen in the craft beer industry to make to make Sam successful again?

Some decades ago, when distributors only represented one major brewery, if their major brand started to decline in volume, the strategy was to eliminate a route and consolidate the stops onto other routes.  In almost every situation, when a route was cut, the decrease in volume accelerated.  The opposite was true for increases.  When a route was added, the trends increased.  It was simple; more feet on the ground produce growth in a brand.

In reviewing Boston’s three priorities for the coming year, only eliminating waste is controllable.   Returning their two key products to growth will be challenging at best. And while Boston has long been known as a company on the cutting edge of innovation, recent years have produced little success.

If Boston fails to turn around their trends, cutting costs will no doubt positively impact their stock prices, thereby putting the company in a more attractive position, should Koch decide to sell.  One analysist put Boston’s odds of selling at one percent over the next five years.

More and more what is coming into play is the impact that the major breweries are having on the brands they are acquiring.  With the resources that an ABI, MC, Constellation, or Heineken can bring to a craft, it is no wonder that IRI data reflects that the top growth leaders are crafts owned by these major breweries.

Much of the success of these acquired brands occurs when their new owners are able to expand their footprint. That being said, however, the impact of their resources is obvious. It makes sense that any potential buyer for Boston would be a major brewer.  A major brewer would be willing to pay a premium and could leverage their resources and synergies.

Just two years ago this week, Boston’s numbers showed growth in the double digit range, while their stock prices were setting new heights.  How Boston will look two years from now is unknown, but what we do know is that Jim Koch will be 70!

Happy 68th, Jim!

 

 

 

 

 Posted by at 6:00 am
May 162017
 

Beer monopolyWhen searching for beer on line, Amazon has more than 101 pages of books listed under the beer category.  The majority of these beer books are about styles, bars, countries, or cities and their beer culture or history.   There have been, however, a few beer books published offering more than simply beer styles.

There are also a small number of beer books written by disgruntled former owners or key executives that bash their previous companies.  You may remember some of these: Silver Bullets: A Soldier’s Story of How Coors Bombed in the Beer Wars or Beer Blast, by Philip Van Munching; or the sad story of Stroh’s, Beer Money: A Memory of Privilege and Loss.  These are just a few of the compilation of titles available.

Several books are very interesting and well written, including: Bitter Brew, the inside story of how InBev acquired AB.  There are, however, two publications that stand alone in assisting the reader in understanding just how the beer industry wound up in its current positon.  Ambitious Brew: The Story of American Beer by Maureen Ogle, is an outstanding read of the history of beer in the U.S.  In fact, Ogle has recently published an update focusing on the rise of crafts over the last 20 years.

Another well written book and recently published book, The Beer Monopoly by Ina Verstl and Ernst Faltermeier, focuses on four brewing companies: ABI, SABMiller, Heineken, and Carlsberg.  The book details how each company came into existence and how their unique corporates cultures evolved.   The authors examine the respective business models of each company, thus giving the relevant indicators explaining each company’s survival.

As one nears the end of The Beer Monopoly, the question arises as to the future of the industry.  While these four companies achieved the success they have today brewery acquisition, one has to wonder how future growth will be attained.  The question becomes: what beer companies are still remaining to be purchased?

The Chinese and Russian beer industries did not unfold as major markets, as so many had predicted. Industry pundits claim a marriage between Heineken and MolsonCoors makes the most sense.  Now that SAB is gone, Heineken is the distant second to ABI in size, and this marriage would narrow that gap.

There are some very good German breweries that are still family owned, which could come into play.  Krombacher, at over five million hectoliters, would be one to watch.  Other German beers include Veltins and Warsteiner.  On this side of the pond, there is Moosehead in Canada, which is still independently owned.

That said the large American crafts could very well become the next target.  Boston, Sierra Nevada and even New Belgium come to mind as more and more the industry is seeing these highly successful crafts struggle to grow. The belief that the three remaining major players are limited in their ability to expand more, globally, makes these breweries much more attractive, thus driving up their value.  Lagunitas, Goose Island, Ballast Point and others have taken advantage of this opportunity.

In upcoming posts, we will look at how these two writers, Verstl and Faltermeier, positioned each brewery, and have given insights into what the future of the beer industry holds.

Congratulations, I knew the record would stand until it was broken…..

Editor’s note: With this post, our recorded views pass 100K. I would like to thank all those who supported this weekly blog, whether you are a reader, or have provided comments on the various beer industry topics thought out the years, I thank you for your support.

Geoff

 

 

 

 Posted by at 6:00 am
May 092017
 

AmazonLast month, at a retailer appreciation kick-off event for a new brewery, a longtime importer reminded me of a prediction I had made 15 years ago regarding the future of wholesalers.  Given the direction of the industry at that time, it was clear that the biggest change would occur at the middle tier.

With the onslaught of new brands and breweries, it seemed that the middle tier would be over whelmed, and to some degree, this is exactly what has happened.  Distributors are no longer asking for brewery personal support in their markets, they are ignoring breweries that will not position support people or teams in their market.  For example, six months prior to rolling out in Austin, Bells, transferred three experienced sales people to work the market up until the roll-out point.  From the wholesaler’s perspective, the first month’s sales were a success.

For those breweries that are established, similar to Bells, wholesalers are functioning as a warehouse and a delivery system for these breweries.  Wholesalers are demanding that breweries function in this role, and the breweries are delivering on this request. My prediction 15 years ago went even further, as predicted sales would be generated with brewery sales teams and orders would be transmitted to the wholesaler, who would logistically delivery the beer.  Under this scenario, the wholesaler would work off lower margins, assuming the wholesaler has no sales department, or a limited sales department.

Long term vision for wholesalers should narrow to protect the three tier system, not the franchise laws.  The three tiers ensure the continued existence of wholesalers, even if they evolve into just a warehouse, delivery, and merchandising function. One can already make the case that wholesaling is well on the way to that model.

Perhaps the biggest threat to the middle tier is not the craft brewers, or even ABI or MC and others with retail taprooms, but Amazon.  Amazon is, where legal, testing ways to crack into incorporating beer and/or alcohol into their business model.  If Amazon manages to do so, no doubt their involvement will dramatically change the beer industry.

Amazon Prime members do not pay for delivery charges, and one would assume there are millions of Prime members. From a breweries’ perspective, Amazon could be an attractive partner.  Think of all the possibilities!  On the other hand, from the wholesalers’ view, Amazon could be a major nightmare.  The emergence of Amazon delivering beer could signify the end of the middle tier.

If, however, the middle tier would work with Amazon, and become the warehousing and delivery function of Amazon, wholesalers could continue to play a significant role in the industry.  Consumers could order from the Amazon site, Amazon would process the order through their local wholesaler, and the wholesaler would, in turn, deliver the beer order.

Amazon becomes the retailer, and the wholesaler is able to direct-deliver the beer.  This might even evolve into an Amazon order including products from two, or even three different wholesalers, but with only one wholesaler responsible for delivery of the product(s).  Consider all the possibilities.

All the industry tiers should understand that Amazon is not going away. Something will happen that will change the industry and its access to market. It is just a matter of when said change will happen.   Maintaining the middle tier should be the main goal, however, what the middle tier will look like, is up to the wholesalers.

Compromise works well in this world, but only when you have shared goals….

 

 Posted by at 6:00 am
May 022017
 

TexCraft BrewersMarc Sorini, the noted lawyer for the law firm, McDermott, Will, and Emery, recently outlined his opinion, noting that the expansion of brewery owned brewpubs or retail outlets, sometimes referred to as satellite outlets, will not disrupt the market.  He goes on to state that even in California, a state that has as many as six outlets, such brewery expansion would not mean much in terms of market penetration.

Sorini believes that having that many “would be fine,” but he also goes on to state that the industry has to be “vigilant” and not destroy the current system.  Likewise, he believes that taproom expansion is over blown and that every state has limits on the number of brewery-owned taprooms.

It is safe to say that many wholesalers do not have the same point of view as Sorini.   Texas House Bill 3287 clearly states that all license-holder-locations should count toward taproom cap totals for on-site sales. The current law allows taproom sales from a brewery up to 225K bbls. per year, however, when the law went into effect, none of the industry tiers had the foresight to know the ramifications of either AB or MC buying a Texas craft.  Which, as we know, is exactly what happened with the sale of Revolver and Karbach to MC and AB, respectively.

Texas wholesalers, sensing that in such situations as stated above, wholesalers could lose more control over the middle tier, introduced House Bill 3287.  This house bill was meant to modify the law, thus ensuring that all locations would be included with the license holder.  Thus, in the above mentioned case, AB and MC sales would be included in Revolver and Karbach sales, thus making the operation of such taprooms illegal.

The WBDT have asked the Texas Craft Brewers Guild for their support, and at this moment, no member has supported the bill.  Interesting!  While the wholesalers sense these acquisitions as a threat to the three tier system, the craft brewers see it as a possible threat to the value of their business.

Since taprooms are a key part of any breweries’ revenue stream and marketing, if one eliminates the taproom aspect of a breweries’ operation, the value of that brewery will significantly decline.  Such actions also close the door to a breweries’ ability to leverage themselves to potential buyers.

In essence, what this bill brought to light is a snapshot of the direction of beer.  AB and MC, losing massive volume, are buying key crafts in markets that make sense, while at the same time, using their ability to access taprooms to control the retail tier of the three tier system. Wholesalers in Texas are protecting the tied house provisions, while the craft breweries are looking to protect their own interests and keep their ability sell out at a premium or top dollar.

There might not be another situation in this country which is more the personification of the beer industries’ special interests than this HB 3287.  On the surface, there does not appear to be any compromise available, but the industry should know soon.  Stay tuned.

There are times in politics when you must be on the right side, and lose.

 Posted by at 6:00 am
Apr 252017
 

logo@craft brewers conThis year’s Craft Brewers Conference has just concluded, and once again, the event was well attended with over 12,000 industry people. While the attendance was impressive, the initial feedback from a number of attendees was not positive.  From those who attended, many mentioned that the overall excitement from previous years’ conventions was missing.

The early first quarter numbers continue to show a dramatic slowdown in crafts’ volume and dollars.  Longtime established crafts, including Sierra and Boston, have negative trends.  Only New Belgium seems to be ahead of the trends, predominantly due to their 15-pack cans of Dayblazer.  The downward trend was one of the main topics of conversation at the CBC.

Given the crafts’ downward trend, along with the recent announcement or more than 7,000+ active breweries, one can see why the conversations at the CBC centered on the future of the industry.  The two most talked about topics were consolidation and fallout.  Taking a page from Charles Dickens, it was the best of time, it was the worst of times.

Even those brewers that are currently successful are concerned about the industry and its direction.  Many have commented, though not publicly, that if given the opportunity to build again, they probably would not, knowing the standings of today’s industry. Soon the industry could see more brewery closings than openings. Not unlike what happened to golf courses after the 2008 real estate crash.

The question is: will 2017 be remembered as the year that marked the end of the craft growth?  Perhaps, 2017 will be the year that ends the wannabe craft brewers or more aptly stated: will this be the beginning of the amateurs vs. the pros?

Two additional issues always seem to surface: first, finding quality people; and, second, finding distributors for the craft beers.  Regardless of what happens, both of these issues will continue to play key roles in the industry.

In the future, three craft models will continue to be functional.  One is simply the corner brewpub with a restaurant; the second is the small distributor who self distributes; and third is the fully integrated brewery. The corner brewpub has obviously been a successful venture for years.  The small distributor model works given certain guidelines and expectations, as is noted by the many successful brewers around the country. Finally, there are those who have the means, ability, and willingness to achieve a fully integrated brewery. These are the industry pros.  The point that good people are hard to find, should be more in line with good people are hard to find for what I am willing to pay!  From brewers to top beer executives, good people are available; brewers just have to be willing to pay for top hires.

To find distributors, brewers have to understand that there is more to creating and building a brewery, and that hiring good staff requires good compensation.  A successful brewery must build branding, marketing, a sales teams, pricing, promotions, and on and on.  Those who will, and can, will have no issue in finding distributors.  If you build it, the distributors will come.

The craft segment is not dying, nor is it making the shift to consolidate. What the craft industry is doing, is changing to accommodate those who have a clear vision of what is needed in the industry to be successful.

An investment in knowledge pays the best interest….

 

 

 Posted by at 6:00 am
Apr 182017
 

i-see-beer-2When Coors Brewery expanded their Texas footprint in the mid 1960s, the brewery approached each major market looking only for one distributor.  Prior to the 1960s expansion, Coors was only sold in El Paso and Amarillo.  Coors appointed a few distributors in small markets, Mineral Wells being one of them, but the company had only one distributor in Ft. Worth and one in Dallas.  Within 10 years, however, Coors was the number one volume beer in all these markets.

Ten years later, Coor’s second expansion in Texas, saw the Dallas distributor, Willowbrook, now close to five percent of Coors Brewing Cos. total volume.   Willowbrook’s large Coors volume made the brewer uncomfortable in that one distributor could represent such a high percentage of volume.  Given Coors plan not to have large distributors again, Coors appointed four distributors in San Antonio and four in Houston.

This plan was diametrically opposite of AB’s plan, which operated under the belief that larger wholesalers were better equipped to dominate their market, which was a strategy that worked for AB.  Four Coors wholesalers were too small to compete against the larger AB and Schlitz houses and Coors paid the price, as none of the four operations survived.

The AB model helped Budweiser grow, as both the brewery and their wholesalers dominated the US market.  In one sense, their size simply wore down AB’s competition.  In Texas alone, Silver Eagle in Houston and San Antonio; and Ben E. Keith and L&F in Dallas, were in the top five volume AB wholesalers in the U.S.  All of these AB distributors now have brands outside of the AB offering which have taken advantage of their market domination too.

When InBev took over AB, in reality the big asset was not just the brands, but also the AB wholesale network, which is considered the best in the country.  InBev quickly learned that they needed to work with their wholesalers, however, InBev had another agenda.  After 10 years, it is safe to assume that ABI is changing their tune.

The industry is watching how ABI handles the proposed merger of the three large mult-state AB houses in North Carolina, South Carolina and Georgia.  Just in the past several days. AB announced it will not approve this merger citing a number of concerns.

So the real question is: are AB’s concerns legitimate or is there another reason?  If the merger is approved, a real concern for AB could be what would happen if this new super AB house joined several other large AB houses, (perhaps BEK, Silver Eagle or L&F) and created an AB wholesaler group!  The volume these wholesalers would represent for AB would put AB on the defensive and give this proposed new group enough power to negotiate from true position of strength.

Many of the current AB houses were already in place when InBev took over AB, however, some houses, with ABI’s approval, have been created. This scenario, however, now seems now to be coming to an end.  These JV’s could be a serious threat to ABI, especially if current sales trends continue.

We are all born ignorant, but one must work hard to remain stupid….

 

 

 Posted by at 6:00 am