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.

Mar 132018

The upcoming CBC convention is expected to host more than 10,000 people.  This year a participant has the choice of attending an industry convention, seminars, classes or other training sessions most months of the year.  In addition to the CBC, there is the annual NBWA convention, along with similar events hosted by Beer Marketer’s Insights, Beer Business Daily, Beverage Importers Association, and the list goes one.  The aforementioned does not even include all the schools which offer various beer classes or the multitude of online tutorials now available.  Does anyone have any time to actually sell beer anymore?

When Coors expanded into South Texas in the mid-1970s, San Antonio had a local beer wholesaler’s organization.  At this time, the only annual conventions were offered by one’s supplier and the NBWA, the latter of which had a spring and fall meeting.  Remember, this is before the NBWA had exhibition halls full of vendors and new products, all in search of distributors.  The spring event was politically focused, whereas the fall event was industry and supplier focused.  It was that simple.

Local medium-sized and major markets, along with the state, all had beer wholesaler organizations.  All four Coors of San Antonio wholesalers were invited to join the local beer organization.  Attending these monthly meetings was comparable to today’s reality TV.  The meeting consisted of: the local AB wholesaler, Bill Crain, who was seated at one end of the table and John Monfrey, the local Falstaff wholesaler (Falstaff sold over two million cases) who was seated at the other end of the table. In the middle of the table was Jack Williams, the 800 lb. gorilla in the room, and the second largest Schlitz wholesaler in the country with over five million cases. Other attending members included: the Pearl and Lone Star wholesalers, two breweries that were still functioning in the city, and four new Coors wholesalers.

In addition to the fact that John and Bill were typically quite confrontational with each other, the meetings focused on local and state issues, including which political issue and legal issues needed to be supported.  The group also assembled with the intent to aid local charities and events.  As a young sales manager, one could learn a great deal about the industry and one’s competition during such meetings.

I attended the Wichita Beer Wholesalers group while in Kansas as well as the Portland group while in Oregon.  Kansas hosted a state Coors organization and, of course, the state had the Kansas wholesalers’ organization as did the states of Oregon, Utah, Louisiana, and Washington.

As wholesalers began to consolidate throughout the years, the local organizations began to disappear.  Many markets now only have two or three wholesalers, not counting the self-distributing crafts and the independent craft distributors.  Very few, if any, local beer groups exist anymore. Why should they with the myriad of other groups now in existence?  Even at the state level, some states not only have their statewide group of wholesalers; but in addition, they have craft brewers and even state groups of wholesalers with different agendas than the established groups. Many suppliers have wholesaler advisory panels from each state or region.  In reality, a wholesaler could spend all of his or her time just attending meetings.

Those local wholesaler groups have served a purpose for decades and the industry has not been the same without them.

The art of communication is the language of leadership…


 Posted by at 6:00 am
Mar 062018

It goes without saying that the purchase of the Miller Brewing Company by Philip Morris in the early 1970s was a major transformation in the beer industry.  Philip Morris used its marketing muscle, which had been so instrumental in growing their cigarette business, on their newly purchased beer company.  And the rest is, as they say, history.

The lasting effect of Miller’s sellout went far beyond the marketing prowess of Philip Morris.  This moment marked the transformation from breweries being family owned to breweries being owned by corporations and shareholders.  This business model changed the overall picture of how the industry functioned.

Prior to 1970, breweries and wholesalers were family owned.  Both tiers were on the same page with the same interests and same goals.  Philip Morris initiated that shift away from family ownership, but the full effect of corporate/shareholder ownership would take decades to manifest itself.  Even up until 2008, AB was run by the Busch family as a publicly traded company.  While the Busch family today is gone from AB, Pete Coors is still active at MolsonCoors keeping some of the family traditions alive.

These large corporate breweries today have a different agenda than the family-owned distributors of past years.  Even multi-state mega distributorships like Reyes, are still owned by a family.  Only Columbia in the northwest parallels the corporate ownership model.  Publicly held breweries have to answer to their shareholders and Wall Street.  Distributors only need answer to the family.

Executives at these corporate breweries are measured on their ability to increase shareholder value and dividends.  And often, these same executives are receiving their bonuses based upon the value they impart to the brewery.  If the value is not delivered; these executives do not realize their annual bonus, a figure which can be as much or more than their annual salary.

In a distributorship, as long as the family’s lifestyle is maintained, things remain status quo and all move forward.  Sure there is pressure to increase the profitability of the company, but to the family, there is always the next year.

President Trump’s announcement last week regarding his intent to establish tariffs for both steel and aluminum imports, as expected, has created concern in the beer industry.  If these tariffs go into law, then the industry can expect higher costs for cans, kegs, trucks and other equipment used in the beer industry.  This is not good news for the consumer as many of the increases will be passed on to the consumer.  When Bush the elder, broke his “no new taxes” promise and raised taxes on beer, the industry came to an abrupt halt and remained that way for years.

The corporately owned breweries will, without hesitation, raise prices; whereas the craft family-owned brewers must decide whether to raise prices and suffer the pushback, or eat the increased costs, and make less money.   Distributors see the situation differently, but ultimately it will have a negative impact upon their volume as well.  Just ask wholesalers from the early 90s. With the exception of the Modelo wholesalers, all had an increase in price.

Family owned distributors and craft brewers would rather wait, take a step back and see what will happen.   The corporate environment, on the other hand, will most likely rush to ensure their breweries hit their corporate goals.  Welcome to the corporate world!

The beer industry is one big family…


 Posted by at 7:00 am
Feb 272018

Business planning, as the industry knows it today, did not exist in 1970. At that time, the industry was in the early stages of transitioning from a pre-World War II model into what we know today.  Single brand DSD distributors did little, if any, planning.  Supervisors were glorified route salesmen who, when not filling in and pulling a route, sat in bars and bought rounds of beer.  Brewery reps were expected to do the same, buying beers from the time breakfast ended and throughout the evening.  Some brewery reps had trade expense accounts greater than their monthly salaries.

By the mid-1970s, however, planning began to take shape.  The national brands focused on a simple, yet effective model of vertical and horizontal distribution.  This model tied into their account classification, which was tied to their volume.  Accounts were classified as AA, A, B, or C accounts.

The annual plan was simple: maintain the volume in the hand-full of AA accounts while working to move the other accounts to the next higher level.  Such movement was typically achieved by expanding packages in distribution and retail execution for ad activity and displays.  This was a simple yet effective plan.

AA accounts were always off-premise, while the on-premise accounts were all about tap handles.  Distributors had a report on each on-premise account that included all the beers on tap.   Rotating handles did not exist as each wholesaler had their targeted account list.  Incentives were designed to get those competitive handles. And the incentives typically translated into the form of a bounty.

Monthly business reviews did not exist either. In fact, when a brewery rep came to visit, their focus was on checking inventory, placing orders and reviewing current sales trends.  The rep’s goal was to determine if they were on track to make their sales goals. This basically translated into: “Are you going to help me make my annual bonus?”

Fast forward to today and the business plans are all over the board.  Many craft brewers have no idea how to construct or manage a plan, much less execute one.  Wholesalers are now driving the planning cycle by developing their own in-house planning and monthly reviews.  Distribution is now centered on the type of account. In other words the account focuses on a certain type of beer style.  Chains focus on ROS (rate of sale) and POD (points of distribution).

In addition to a concentration on the number of reps in the market available to see one’s beer, wholesalers today are concerned about a vendor’s support effort and model.  Considering the number of vendors a wholesaler now represents, does this really surprise anyone?  This lack of focus on the brand explains why craft brewers continue to push back on the wholesaler.

Monthly reviews or recaps are necessary to measure the expected performance of the brand, as well as the performance of both the brewer and the wholesaler. Such reviews can be very productive despite the fact that the results are frequently not what one would expect.  Under these conditions, both sides have to be realistic and open to discussions regarding moving forward.

Over time, these meetings will ultimately determine the type of relationship each party expects and wants, but they can be uncomfortable.

You change your business plan to anticipate and adapt to changes in the marketplace…






 Posted by at 7:00 am
Feb 202018

Corona Premier, Modelo’s line extension, targeted specifically at Michelob Ultra, is this week rolling out across the country.  Another line extension from AB, Michelob Ultra-Pure Gold, another low carb and low calorie beer will also be rolled out.  Remember, last year, Heineken also went after Ultra with Amstel Xlight, albeit with little success.

In early 2018, IRI numbers are trending similarly to recent years’ trends, with the big three: Bud Light, Coors Light and Miller Lite, all continuing to slide, although Miller Lite was slightly up.  Michelob Ultra continues to fly with an increase of 23%+.  Interestingly, in addition to the major suppliers starting to target specifically Michelob Ultra, more and more crafts are coming up with low ABV, calorie and low carb beers, ALL under the term sessionable!

Given that the industry seems to be shifting back toward light beers, why then are the big three struggling to turn around their sales?  Perhaps the industry is looking at a classic case of these three brands serving as studies in the product lifecycle.  Remember, all three brands were introduced in the 1970s, which means that Miller Lite, the first one introduced, will soon be 50 years old.  Coors light followed Miller Lite, which was followed by Budweiser Light (Bud Light).

So the question is: is the decline in sales for the big three due to the product lifecycle, or is it an issue is a marketing life cycle? Given the success of Ultra, one would think these three beers are declining due to the marketing lifecycle.  If many crafts are entering the market with their version of light beers, it would have to be the marketing.

Oddly, Miller Lite, Coors Light, and Bud light all have one item in common. None of the other beers have the term “light” in their name or on their branding.  Jim Koch, for years resisted introducing a light beer, but eventually did so with the introduction of Sam Light.  Certainly a lighter version of Sam Adams, but Sam Light was not anywhere near the liquid of the domestic lights.  It was a viable brand, but not another Ultra.

Miller Lite, Coors Light and Bud Light were all line extensions, lighter versions of their longtime beers.  For years, these three brands grew regardless of the level of marketing support. It was not until 2008 that these brands turned negative, and they have been in decline ever since.

The brands being brought to market by the crafts brewers, however, are not line extensions. They are new brands with names that indicate “light” without saying “light.” These brands include: All Day IPA, Nooner, and Dayblazer, to name a few.

Is it that simple?  If it was, would not AB and MC already have understood this?  The next latest and greatest beer might be sitting in a wholesaler’s warehouse, in the back corner, on a partial pallet. And 20 years from now, Bud Light, Miller Lite or Coors Light might just be in that same back corner on a partial pallet.

The strength of brand loyalty begins with how your product makes people feel.


 Posted by at 7:00 am
Feb 132018

For as long as I can recall, every major supplier has in some way, focused on marketing their products to the female consumer.  Once again, this topic is front and center at many winter and early spring wholesaler meetings.  As the overall industry continues to lose volume to other types of drinks, one way in which to aid the industry is marketing to the female consumer. This is nothing new.

Before light beers, Coors Banquet was one of the very first beers to actually have some success selling to the female market.  Coors had a tagline, “America’s Fine Light Beer,” and the beer was sold in a tall, slim can, similar to today’s Michelob Ultra packaging.  Light beers aided in adding volume, but when the first RTDs came to market, it looked as though the industry finally had a product-focused straight for women.  Soon Bartle and James arrived on the scene, followed by Mikes Hard Lemonade and others.

While these products resulted in additional female consumers, the beer industry continued to fall behind the sales of wine and flavored spirits.  The most recent product category to impact the female market was the Not Your Father’s Root Beer and related flavors which are sweet to the taste. Retailers quickly created serving suggestions, including NYFRB atop ice cream resulting in a root beer float.  Such specialty drinks did well, but all were short-lived.  As recently noted, NYFRB sales were down 60% and still trending down. Finally, ciders added a small bump with females, but that category, too, has recently moved to negative trends.

A recent extension, based on wine’s success, might be the liquid to finally jump start beers’ market share with the female segment.  Rose’ ales and ciders are the new, latest and greatest flavor to hit the market.  Cidergeist Bubbles, a rose’ ale from Rhinegeist in Cincinnati, is now producing 20% of the volume and growth.  According to the brewery, Rhinegest cannot keep up with the demand.  Now the big boys are all jumping in as Boston Beers has Angry Orchard’s Rose’ and MC will have Crispin Rose’.  Expect AB to add a product in this category.  Although smaller brewers will have a rose’ expect, as always, that the big boys will own this category. Even Ballast Point will have a rose’ supported by Constellation brands and their team.  Look to see rose’ everywhere.

The question is, will rose’ be the long sought-after breakthrough product for females, or will rose’ be just one more product to rocket up and then fall back within a short time?  Distributors and retailers, now in tune with these specialty flavors, will probably stand back and watch at first, making as much profit as they can until the industry sees what kind of legs rose’ possesses.

Will rose’ be another NYFRB, or will it be the next Blue Moon?  Will we know by the end of the year?

Buffalo wings and ciders is all I need…



 Posted by at 7:00 am
Feb 062018

Two major sporting events were held this past Sunday, the Super Bowl, and the Waste Management Phoenix Open.  The water cooler conversations this week has focused on the football game and, of course, the halftime show and the Super Bowl commercials. As we know, many people watch the Super Bowl simply for the commercials.

Over the years, AB has not only been the company with the most commercials, AB has also won the best commercial award multiple times.  This year, a 30-second commercial was said to have cost around $5 million dollars.  At the time of writing this post, the first viewership numbers for the Super Bowl just became available, however, if this year’s trends continue, viewership for the game has been declining by around -7%.  AB, or any advertiser, cannot be pleased with these numbers even though millions still watched the game.

There are a number of reasons viewership of pro football is down.  Much of the reason is due to cord cutting and costs, but no doubt, the political and abuse issue actions by the NFL and their players have had a negative effect on viewers.  More than likely, even if AB chose not to advertise at the Super Bowl, some other major brewery would have jumped in and bought the available spots.  There are still millions of people watching the game.

Yet, some years ago, the Phoenix Open made the decision to be the golf tournament which would be played on the week of the Super Bowl.  This golf tournament, put on by the Thunderbird organization, annually has the largest attendance of any PGA tournament around.  The goal of tournament officials is to end the final round just prior to kick off of the Super Bowl.  And fortunately, this has successfully happened every year.

In last year’s tournament, attendance on Saturday was around 200K people. This year the Thunderbirds are anticipating up to 220K people on Saturday.  Attendance for the week exceeded 700K people, an amazing fact!

The Phoenix Open and the Thunderbirds have used the proceeds from the tournament for various local charities and have given away millions throughout the years. Since 2010, more than $50 million has been donated.  All in all, the PGA tour has given billions to charity. In every city in which a tournament is held, local charities benefit from professional golf.

In 2019, Michelob Ultra, the fastest growing beer in the U.S., might be the second largest selling brand in the country, surpassing both Miller Lite and Coors Light in dollar sales. Ultra has been the longtime beer sponsor of the PGA, a fact that most certainly has helped Ultra.

In fairness to the NFL, they do contribute to charitable organizations and many star players donate to their charity of choice.  The NFL issues are political, drug use and abuse.  On the other hand, the PGA issues deal with slow play and on-course rules.

In some way, it is almost like two sports going in two different directions… not unlike Bud Light and Michelob Ultra.

The character of a people may be ruined by charity…


 Posted by at 7:00 am
Jan 302018

History has proven that in the beer industry, when a brand begins to die, it will eventually end up in the grave yard with little chance of revitalization.  The list of dead brands in this category is long, and could take up this entire post. However, the list of brands that almost died, but did in fact revive themselves, is very short.  One such beer is Pabst Blue Ribbon, with perhaps the number one story of a near-death beer returning to life.

Along with PBR, the Pabst portfolio consists of by-gone labels including: Schlitz, Rainer, Old Style, St. Ides, Stroh’s, Schmidt’s, Pearl, Blitz, Olympia and Lone Star to mention a few.  Many of the Pabst brands are referred to as legacy brands.  Outside of PBR, only a few of these brands are showing growth.  Lone Star and Rainer, in recent years have found their footing again and are showing signs of progress by focusing on their regional roots: Lone Star in south Texas and Rainer in the northwest.

Small Town Brewing and Pabst joined together several years ago enabling Pabst to leverage its marketing and distribution system to aid the growth of the hot new product, Not Your Father’s Root Beer.  Pabst staffed up, adding a number of field sales people across the country, which added potency behind the NYFRB and other Small Town brands.

In today’s market, when the launch of a new product has a dramatic upturn, the downward curve is typically just as dramatic, often resulting in a typical bell curve shape. Accelerated growth leads to accelerated death.  In NYFRB’s case, it appears there was a great deal of sampling (consumer trial), but little to no repeat sales.  2017 numbers indicate a -60% decline for NYFRB.  In response to this brand’s decline, Pabst laid off 70+ people this month.

NYFRB is still a very viable brand, at least going into 2018, but it is almost certain, giving current trending, that the consumer will see NYFRB’s shelf space reduced along with losses in on-premise distribution.  The elimination of that magnitude of staff will certainly have a negative effect.

The question is:  how do the Pabst wholesalers view this situation?  It is safe to say that the NYFRB wholesalers sensed that this product had a shorter life span and thus leveraged that belief by maximizing profits and minimizing market spending.  They did not miss the chance to make as much on this product as possible, and since this brand is still somewhat viable, Pabst expected wholesalers to continue to do the same.

NYFRB might have legs to survive and be a profitable brand going forward for wholesalers, but one wonders what would have happened had Pabst not staffed up to that level and focused on their legacy brands?  It is possible that many of the recently laid off employees had only joined Pabst as NYFRB took off, and that many may have given up jobs at other beer companies?

Pabst, in spite of going from an independent and top five brewery, to several different owners over the years, has beaten the odds and survived.  Pabst’s portfolio is composed of mostly unknown names to the millennial generation, which could be an advantage to Pabst in the years to come.  NYFRB may not survive.

Success is survival…



 Posted by at 7:00 am
Jan 232018

In just the last month I have had a couple of small and new craft breweries, those which opened  within the past two years, with successful taprooms, vent their frustration at process of bringing their beer to market.  One craft brewer already had a distributor in place, while the other wanted to bring their beer to market.   Neither brewer had any direct industry experience prior to building their brewery.

In situations such as the above, two simple, yet effective explanations revolve around comparing the three tier system to an hour glass.  The top bowl is the brewers and bottom bowl is the retailers.  The sand, represented by the beer, has to go from the top bowl to the bottom bowl thru the neck.  The neck is the middle tier or beer wholesalers.  The sand can only shift from the top to the bottom by going thru the middle which is clogged and slow.

The second explanation is simple; it is the history of what has happened in the last 40 years.  In 1980, there were less than 50 production breweries in the U.S. with there were more than 5,000 beer wholesalers.  Now the opposite is true. In 2017, we have close to 10,000 breweries with less than 2,500 wholesalers.  The tiers have effectively turned upside down.

The history lesson examines the death of the small to mid-size regional breweries and the death of mega-brewer Schlitz, both of resulted in a devastating effect on the middle tier.  Now, in 2018, the industry could be re-living the 1980s.

Early shipment and depletion numbers for 2017 are in, and to no one’s surprise, it is not a pretty picture for AB or MC.  Recently, however, the industry began to feel the true impact of the decline of these breweries.  As we know, millions of barrels of beer have been lost by both AB and MC and the trend is set to continue with no end in sight.

Now, however, the industry is seeing a repeat of the Schlitz wholesaler’s responses. Those AB and MC wholesalers who do not currently have the Constellation portfolio are now restructuring their companies.  This is industry speak for layoffs!  The MC or AB houses that are lucky enough to have Constellation and Femsa are seeing their Mexican imports at 50%+ volume and 60%+ in GP in total!

No doubt, in this day and age, the times are substantially different for wholesalers than they were in the 1980s.  Both houses have more brands, crafts and imports.  AB still has the hottest beer in the country with Ultra, and the MC houses have two major light beers.  These houses have relied on the volume from these low calorie beers for years,,

But in 2018, this beer segment may be facing its greatest challenge. Led by Founders All Day IPA, large craft brewers, who are looking for accelerated growth, are bringing low carb and low calorie beers to market. Crafts see an opportunity to increase their volume with the introduction of these reduced calorie beers.  CBA just announced a national rollout of their Sessionable beer and Firestone 805 is doing likewise.  More lights will be produced in the future, including Corona Premier and Ultra-Pure Gold.

If these light beers and other beers yet to come are successful, it will not be good for either MC or AB.  2018 will be interesting.

Millions saw the apple fall, but Newton was the one who asked why.



 Posted by at 7:00 am
Jan 162018

The Julius Schepps Co. of Dallas, a very successful and large wine and spirit house, made the decision to sell in early 1997.  Although Schepps was predominately a wine and spirits house, they did have a very impressive beer portfolio, including the Modelo brands: Shiner, Guinness, Moosehead and other fine imports and specialties.

The wine and spirit company, now known as Republic National, bought the majority of Schepps W&S brands. Schepps offered the entire beer portfolio to the Miller network.  Miller at the time, and still today, is headed by Andrews of Dallas and the Cranes of Ft. Worth.  The other network, Coors, is was at the time headed by Willow of Dallas and Coors of Ft. Worth. The AB house, Ben E. Keith, was exclusive AB at the time so they were out of contention for the brands.

As a buyer, this portfolio was a slam-dunk. Corona and Shiner were on fire. But the main reason this was such a good buy was because Schepps operated as the personification of a wine and spirits house.  Schepps’ service, outside of the package stores, was at best, spotty, especially in the c-store channel.  Both Miller and Coors could literally pay for the brands in a very short time by simply servicing the market, something which Schepps had not previously done.  The demand for these beers was there, the retailers and consumers did not have access to the brands.

For reasons never explained, the Coors distributors dropped out of the negotiating process, allowing the Miller network to buy the Schepps portfolio.  As a result of this action, the Coors wholesalers sold out to the Miller wholesalers within just a few short years.  Today, Andrews is the MC distributor in much of north Texas.

In 1997, Corona was the real prize in the deal.  All the other Modelo brands, Corona Light, Pacficio, Negra Modelo, and Modelo Especial, were no more than bolt-ons.  The marketing strategy was to deeply discount the Corona 2/12 bottles in an effort to drive distribution and sales.  This two-year marketing program was highly successful.  Andrews, excited about Corona, put all the distributor’s efforts behind that brand, and their secondary focus was Shiner Bock, another brand which was also on fire at the time.  Low hanging fruit.

Soon, Gambrinus began to make Modelo Especial a focus brand. Initially, however, Andrews, was pushing back, but they, too, eventually began to also focus on Modelo.  Within two years of the acquisition, Andrews experienced some success with Especial in the Hispanic grocery accounts and independent c-stores. These stores were predominantly supported by Mexican Nationals, consumers who drank Especial in cans in Mexico and wanted the same in the US.  Modelo bottles could be found only in Mexican restaurants.

In spite of the wholesaler’s reluctance to focus on Especial, and with very little marketing support from Gambrinus, it was not long before Modelo took off.  As 2017 came to an end, Andrews set multiple new-volume records with Modelo.  After 20 years, Especial now sells four million cases a year!  Especial, which is much bigger than Corona, is still growing

Especial was just another brand, once thought to be no more than a bolt-on brand. But it became a gold mine for the distributor.  Had the Coors network been successful in buying this portfolio instead of the Miller network, it is certain that the shoe would have been on the other foot.

If you never try, you’ll never know what you’re capable of.


 Posted by at 7:00 am
Jan 092018

George H. W. Bush was elected President, in part, due to his famous line: “Read my lips.  No new taxes!”  The U.S. economy was on fire during the Reagan years, due in part to the fact that President Reagan lowered taxes and removed the price controls put into effect during the Carter era.  The 80s were a time of great economic growth for the country, which drove beer sales to new highs.

Soon after Bush Senior was elected into office, however, he walked back his pledge to the U.S. voters, and raised taxes on a number of items, including taxes on beer.  Bush doubled the U.S. federal excise tax on beer.  His broken tax promise was one of the major points in his failure to gain reelection for a second term. Needless to say, overall beer sales slumped, and remained that way for some time.

In a major strategic marketing move, both the U.S. importers of the Modelo brands, The Gambrinus Co., and Barton Beers, decided not to pass along the tax increase to their consumers, with both companies absorbing the increase in their own margins.  Corona, which had been on a roll since introducing the clear, longneck bottle, was still struggling to regain their momentum due to a previous vicious rumor spread about the beer.  The great majority of all the other beers in the market, however, passed on the tax increase to the American consumer.  Corona did not raise prices, and soon the brand’s sales regained its lost momentum and took off again.  The rest is history.

The new tax bill recently passed by Congress, and signed in law by President Trump, includes the long attempted reduction in FET taxes which reduces the current tax rate to $3.50 per barrel on the first 60,000 bbls. produced for breweries with production of under two million bbls.  The new tax bill also reduces the FET to $16 per bbl. on beer, up to six million bbls. produced.  The law is under a “sunset rule” of two years, meaning these taxes will be reinstated unless the beer industry can show a positive return from the tax cut.

So the question is: what will happen as a result of these tax rollbacks?  It is no secret to anyone that much of the current negative beer sales trends are a result of high pricing.  Price increases for the craft industry as a whole were postponed last fall, with anticipated increases due this spring. Will these craft brewers see the tax reduction as a price increase?  Because their margins have just been aided by the passage of this tax relief, the brewers will not increase any PTW in an effort to increase sales.

No doubt some brewers will raise prices, but will they increase spending in their marketing or add additional field people?  Some crafts will raise PTW and pocket the margins, and their respective wholesalers will see that immediately.  These craft brewers might use the two-year window, not as a positive, but as a negative.

Both Gambrinus and Barton took a huge chance over 25 years ago with unbelievable results.  The industry will be watching, as will Congress, to see how this tax reduction plays out.  If it fuels the industry’s growth, and brings additional jobs and taxes, then one can count on the lower tax rate remaining.  If, however, the craft industry becomes greedy, then one can expect a return to today’s tax rates.

Read my lips: no new taxes…



 Posted by at 7:00 am