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.

Feb 122019
 

These pages have often referenced the historic struggles experienced by the Jos. Schlitz Brewing Co. In its efforts to remain not only relevant and to enhance the stock prices, a corporate decision was made around 40 years ago to quicken the brewing fermentation process.  The unfortunate result negatively altered both the taste and clarity of the liquid.  Frank Sellinger, the new President of Schlitz who had come from AB, and was a brew master by education, quickly changed the formula back to its original recipe.  He subsequently delivered that message to the public.

Frank’s initial message to ensure the public of the beer quality, unfortunately, did not affect the negative sales trends. Consequently, Schlitz went after Budweiser and Miller by conducting televised taste tests.  These ads did not attack the quality of Budweiser or Miller they did, however, focus on the taste of Schlitz verses the taste of Bud and Miller.  History has shown the ineffectiveness of these commercials.

It was not long after the Schlitz ads ran that Coors Brewing Co., in an effort to get more traction with their eastern expansion, ran newspaper ads citing fusil oil as a by-product of the brewing process of both Schlitz and Budweiser.  August Busch III called Pete Coors in an attempt to have these ads pulled for the sake of the industry.  Pete complied and ended that campaign.

In recent years, the industry has seen ads declaring products with fewer calories and fewer carbs than competitors.  With the advent of the seltzers, where their labels/ads promote low ABV, carbs, calories, and in some products, no carbonation, the highlight attributes of their products are self-promotion and do not lambast the competition.

AB’s much-discussed Super Bowl ads highlighted both Coors Light’s and Miller Lite’s use of corn oil in the brewing process. While AB claims it does not use corn oil in its brewing process, controversy has none-the-less started anew in the industry.  MC has fired back by taking the high road and not attacking AB but instead explaining how corn oil is used and which AB brands use the oil.

The controversial ads had other responses: Boston Beers distanced itself by tweeting, “No corn syrup AND no rice. #barley#hops#water#yeast.”  Adam Collins, vice president of communications and community affairs for MC, reflects what some in the industry believe: “The Bud Light ad says more about their market position than it does about any @MillerCoors products.” Collins added, “When was the last time ABI used their Super Bowl ad to attack a competing brand?  Miller Lite has been gaining share for 17 straight quarters and someone’s feeling the heat!”

If it was ABI’s intent to drive the social media mentions, they succeeded.  By half time AB social-mention spikes were close to 47K.  The follow-up continues thus leading one to believe at least from that aspect, that ABI must be pleased.

It could be possible that unless ABI’s trends change to the positive, we could see additional ads with similar messaging. The fall out could extend well past ABI and MC.  Craft brands that cut corners on their ingredients will have to address their consumer’s questions, “What’s in your beers?”

Advertising does not create a product advantage.  It can only convey it.

 

 

 

 

 Posted by at 7:00 am
Feb 052019
 

It was January 16, 1919, just over 100 years ago, that the 18th Amendment was ratified.  Prohibition began 100 years ago.  Then on December 5, 1933, the 21st amendment repealed the 18th amendment and Prohibition ended. Or did it really?

Sure, the 21st amendment made it legal to buy and consume alcoholic beverages, but now that 100 years have come and gone, did prohibition really end?  When the 18th amendment passed in 1919, there were approximately 669 breweries operating in the U.S.  By the end of 2017, that same number had increased to 6,266 (8,863 TTB permitted). Some estimate that there could be almost 7,000 operating breweries by the end of 2018.  Granted the current number includes a myriad of different types of breweries, but either way, growth has been incredible when one considers that in 1978 there were only 89 breweries, according to the BA!

With the repeal of the 18th amendment, we saw the creation of the three-tier-system. The purpose of which was to ensure there would be no tied houses between breweries and retailers. And for the most part, the three-tier-system has worked. Now, however, with the advent of brewery-based on-site taprooms; and where legal, brewery-off-site taprooms exist, we have a blurring of the tied-house issue.

While the number of breweries has exploded in recent years, the number of wholesalers has decreased from 4,595 in 1980 to less than 3,000 today.  The number of breweries continues to grow while the number of wholesalers continues to retract.

The growth of the breweries can be traced to certain states that, from the end of prohibition, did not create laws which prohibited the start-up of small or craft breweries.  The majority of these states were on the east or west coasts.  Even with laws favorable to crafts, however, these states still limited consumers’ access to buying beer.

Las Vegas could be considered the only city that truly eliminated prohibition.  If a consumer wants a beer in Las Vegas, that beer is available 24/7.  One can even walk down the Vegas strip at any time of the day or night with an alcoholic beverage in hand and not be in violation of the law.  If Vegas can deal with this environment, other states should also be able to follow the same laws.

All states today restrict, in some form or fashion, the time and day of the week an establishment can open and/or sell alcoholic beverages.  In Texas, there is a movement to allow liquor sales on Sunday, a situation which has been unlawful in the past. As with many states, this change in the Texas law is ultimately about increasing revenue to the state more than ensuring the consumer has the freedom to purchase alcohol when desired.

The United States is changing rapidly, just note the spread of legalized cannabis across the country.  Pundits believe that we will legalize cannabis within the next three to four years!  If that is the case, why cannot prohibition in all forms end?

Prohibition has made nothing but trouble.

 

 

 

 

 Posted by at 7:00 am
Jan 292019
 

 

The career options for young professionals in today’s beer industry are much different than they were years ago.  As a college helper on a Coors truck, I became convinced that I wanted to pursue a career in the industry.  Working on a beer truck did not give me a clear picture of how a brewery representative operated; however, it did give me a well-defined idea of the inner workings of a distributorship.

I knew I wanted to own and operate a beer distributorship, which was an achievable goal at that time.  I soon realized that dream, but the demise of Schlitz put an end to my distributorship.  I seriously doubt that in today’s economy I would have an opportunity to own my own distributorship under any circumstance.

There is one standard today that did not exist 40 years ago, and that is the craft brewers’ model.  There are multiple opportunities for young professionals today in the craft industry and most of these jobs involve learning all facets of the business, including an education about breweries that self-distribute.  Because crafts brewers provide many opportunities for this generation, there may not be a better job for a recent college graduate than being a brewery rep. in a major town.

When I taught a class for the beer certificate program at Portland State, the students were highly committed to their beer, wine, and/or cider operations.  These students were like the proverbial pig in the breakfast menu; the chicken is part of the breakfast, the pig, however, is committed!  The students at Portland States left no doubt of their resolve to the industry.

When I discuss the industry to a class or group one point I always drive home is to ensure those with whom I am speaking understand that the beer industry, no matter what tier one is discussing, is not a 40-hour-a-week industry.

I recently had dinner with a long time executive-search owner who specializes in the beer industry. During our conversation, he mentioned the challenges he is having finding Millennials to work in the industry.  I have heard this same story multiple times. It has become quite difficult to find an employee who is willing to put in the necessary time on the job to be successful.  Many wholesalers are struggling to find good and hard-working employees.  I sometimes wonder if I would have stayed in the beer industry knowing that acquiring ownership in a beer distributorship would be virtually impossible.  Perhaps limited opportunities are seen by today’s young professionals? This point is obviously a generalization of a generation. There are many, hard-working, dedicated Millennials who love what they do and are committed to their breweries.

As past posts have discussed; there are ways in which a distributor might structure their working environment to attract and keep Millennials.  Providing Millennials what they are looking for in a company, perhaps they could simply return the wholesalers’ effort by putting in the work that is required.

By the end of the next decade, the last of the Baby Boomers will have retired, and Generation X and Y will be approaching retirement.   The Millennials will remain to be the key to the industry.  One wonders what the beer industry will be like when this generation assumes the leadership role!

Wherever you go, go will all your heart!

 Posted by at 7:00 am
Jan 222019
 

As I write this blog, the governmental shut-down continues.  In fact, this governmental shut-down is now the longest in history.  We all know that such action means the TTB label approval process has ceased.  It has been reported that for every day the TTB is closed, three additional days are added for the label approval process.

Obviously, one would think that this situation is not good for the industry. There are some, however, that believe this shut down might not be so bad considering the markets are not currently being flooded with new or updated beers.  Many of the craft brewers survive by selling seasonal or one-off products with new or different flavors.  The bigger brewers are probably in good shape as their label approvals were completed last year, however, plans for later this year or next could suffer.

While the industry sits on new brands, more and more small local and regional crafts are closing their doors.  As noted in last week’s post, many of these financially strapped breweries are no longer able to raise or generate the funds needed to expand and/or stay in business.  Some industry pundits believe this is the long overdue industry shakeout that many have been expecting.

So the question in early 2019 is:  how is the beer wholesaler managing the uncertainty and turnover in brands in their respective markets?  It is no secret that the craft’s biggest issue with wholesalers is the lack of focus given to crafts.  As many crafts/breweries are closing and many brands are tabled, we see that the current environment is a personification of this lack of focus.

When a craft closes its doors, for whatever reason, how does a wholesaler retain and/or change that draft handle in their market?  If the wholesaler is an AB or MC distributor, is that handle converted to one of the AB or MC craft brands and at the expense of the local crafts?  Is such action fair to the locals who did what the wholesaler asked by putting people on the street and hustling chain authorizations?  Crafts experiencing such a situation could feel not only left out but perhaps even believe they have been lied to.

A craft brewer who has dedicated people, resources, money, and commitment to a wholesaler may perceive that they have no future with that wholesaler if that brewer is not on a wholesaler’s priority list.  If this is true, then that brewer has few options.

This is a no-win scenario for the wholesaler, brewer, and the consumer.  It is easy to believe that the wholesaler will support their “rainmaker” supplier but then not focus on their struggling brands or those that are more brewery-supported.  Either business model has a similar effect.

As more and more craft breweries close, along with the coming flood of new labels and brands, wholesalers should look at the ensuing push-back from their suppliers.  It will soon be coming to a head.

Action expresses priorities.

 Posted by at 7:00 am
Jan 152019
 

In the late 1970s and early 1980s, the prime rate for loans was in the mid-teens and prospective homeowners faced interest rates of up to15%.  Because the cost of money was so expensive, most people interested in purchasing a home or business looked for creative financing options, which typically meant the owner carrying back all, or part of the loan. Even at that, one would have been lucky to obtain rates lower than two or three points of prime.

Because an investor could invest in short-term CDs with no risks, it was unlikely that anyone during this time period would consider purchasing a beer distributorship with high rates.  This is exactly the position I was placed in when purchasing the Schlitz distributorship in South Texas.  Of course, this was also the era of highly leveraged buy-outs.  Purchasing any business with little to no equity, coupled with loans that were tied to the prime rate plus-one led to a road map for disaster.  While the distributorship had positive cash flow, the interest on the loans was too much to handle.  The interest rates, the selling of Schlitz to Strohs, and the unexpected collapses in the market, eventually quelled that opportunity.

On December 21st, Big Bend Brewing Company announced that they were closing their doors.  Big Bend, which opened six years ago, is located in the far West Texas town of Alpine.  While Big Bend enjoyed success in West Texas, the cost of freight across the state put the brewery at a disadvantage against other local beers. Big Bend thus decided to build a brewery in San Antonio in the hopes of easing the freight costs.

One year ago, Big Bend leased a building and reportedly paid Diversified Metal Engineering (DME) of Canada one million-plus dollar for the brewing equipment.  Soon thereafter, DME went into receivership reportedly owing $13.5 million.  Big Bend faced other challenges including difficulty in raising additional capital to build the San Antonio brewery.  Today, Big Bend continues to look for new capital but faces an uphill battle.  The brewery does have options:  they could sell their labels and the Alpine Brewery, but any new investor will demand control of the business.

With the Federal Reserve raising the prime rate coupled with the publicly announced future rates, the craft industry now faces its biggest challenge.  Big Bend could be the beginning of the real shakeout of the crafts.  Investors can now invest in low-risk notes or CDs with an acceptable return.  The question is: why would one invest in the brewing industry, an industry that many see as saturated.

The cost of entry into the craft industry is relatively low, however, as the industry has learned, long-term growth in crafts is capital-intensive, without the ability to finance or raise the funding, brewers such as Big Bend will hit a wall.  2019 might be the first year that the industry sees more breweries closing than opening.  The days of zero interest rates are gone, as are the venture capitalists.

Nobody likes high-interest rates.

 Posted by at 7:00 am
Jan 082019
 

A review of the past fifty years reveals that there were years which not only defined a product but also changed the industry.  In 1975, after several years in test markets, Miller Lite was launched nationally.  This brand was not only successful, but its introduction created an entirely new category of beer.  Even in today’s market, the light segment remains the most viable.

In 1983, Corona transformed its bottle from a short, stubby brown container to the current clear longneck.  That alteration alone was the most successful package change in the history of the beer industry.  Corona’s victory drove the growth of Modelo Especial and all other Modelo products.  1983 was another defining year for the beer industry.

Five years later, in 1988, the craft segment secured its future with the founding of Rogue, Deschutes, Great Lakes, Brooklyn, Goose Island, North Coast, and Wynkoop breweries.  These breweries and others including Anchor, Boston, and Sierra Nevada have fueled a segment that has again transformed the beer business.  Such successes have led the industry to a record high 7,000 operating breweries.  During the last thirty years, the craft segment has provided wholesalers with the opportunity to add volume and margins while simultaneously solidifying their future.  Crafts have also enabled wholesalers to be less dependent on their main suppliers.

In 1999, AB tested a product in Florida which they believed would resonate with Baby Boomers.  That product was Michelob Ultra.  Twenty years later, Ultra is, and has been the industry’s fastest growing product and shows no sign of slowing down.  The lower ABV and carbs, tied to an active lifestyle, transcends all segments and demographics.  Craft brewers, now realizing the volume potential of the lifestyle segment have jumped on board with their offerings of sessionable beers.  Again, 1999 defined a growing and changing industry segment.

The next defining year in the beer business may well be 2018, given the impact of alcoholic waters and seltzers.  End caps, displays, and shelf space of local retailers are becoming more dominated by these products.  Investment money, from both inside and outside the beer industry, is pouring into this segment.  Seltzers with low ABV, low carbs, low calories, and soon, no carbonation, along with organic and natural ingredients have hit the mark with the Millennials.  Many in the industry see this segment as a short-lived one.  Many suppliers, however, do not see it that way. Boston Beers ’Truly, is planning to double their 2018 volume for 2019.  In fact, Boston Beers recently announced that their wholesalers are already building Truly inventory.  Expect other major suppliers to build inventory in anticipation of substantial growth.

Millennials believe spending six dollars or more for a Starbucks’ cappuccino is worth every penny, yet this same group will cut the cord for cable providers as they see no value in a cable.  Likewise, Millennials will spend the money on an 11.2-ounce seltzer as it fits their lifestyle.  This in itself will define the seltzers category.

Years from now the industry will look back on 2018 as a year that defined industry standards, as did 1999, 1988, 1983, and 1975.

Every new beginning comes from some other beginnings’ end.

 

 Posted by at 7:00 am
Dec 182018
 

Lone Star Brewing Co. was like many other successful regional brewers in the early 1970s. With the onslaught of AB, Schlitz, Miller, and Coors, Lone Star was losing volume and market share. At the time, Harry Jersig, the founder, owner, and boyhood friend of LBJ, decided to change things up and brought in a number of executives from Schlitz and other national breweries.  Harry felt a change was needed to ensure Lone Star’s survival and competitive nature in the marketplace. One of the executives that Harry hired was Ray Teutsch, who he appointed as Lone Star’s Sales Manager.

At the time, I was a route supervisor for the Julius Schepps beer division, which had Lone Star.  After about seven months on the job, Schepps decided to cut their supervisors from five down to three and, being the youngest, the company felt it would be easier for me to find a job elsewhere, so I was were laid off.  Shortly thereafter, I had lunch with Ray in San Antonio, and within a week had been hired as a district manager for West Texas. A year later, when the current district manager left, Ray moved me to Dallas.  This put me back in charge of Schepps.

Lone Star was touting the redneck rock music and the reintroduction of the Lone Star Longneck bottle and the brand was on fire.  In spite of numerous meetings that Ray and I had with Schepps, the company continued to resist investing needed funds into the beer division to ensure adequate service to the market.

Schepps had made George Schepps, then close to 80 years old, in charge of their beer division.  George had a professional background in owning and managing professional baseball teams. It soon became clear that George was spending his days at the Ranger’s ballpark instead of helping sell beer.  Being a longtime friend of Harry Jersig, George used that relationship to protect his job.  George complained to Jersig of being targeted by Lone Star and Jersig responded by having Ray remove me from the market.

At this time Ray suggested that I decide how best to deal with this turn of event and that he, Ray, would support my decision.  I asked for, and was granted a meeting with Jersig on a Friday.  During the meeting, Ray stood next to me and supported my actions with facts and details of Lone Star’s successes in DFW.  Ray also filled Jersig in on all of Schepps’ actions and ended the meeting by suggesting a new wholesaler might be the better option in Dallas.

Jersig relented, and I was back in Dallas.  Within several months Ray and I had persuaded Schepps to agree to a sell-out. Schepps sold to Billy Bob Barnett (Billy Bobs of Texas, which is another blog) and Steve Wooster, the former All-American football player for Texas.

I soon left Lone Star for Schlitz and shortly thereafter, Ray also left Lone Star for Standard Sales of West Texas.  Ray became President of Standard Sales, an AB distributor with operations in Texas, Colorado, and Mississippi.  Ray ended his successful career at Standard and retired to a ranch in central Texas.

To this day, I am grateful for the support Ray provided me. He could have easily moved on without me, but instead, he stood with me and provided support.  It was a very powerful lesson for me and one that I have never forgotten.  Ray’s actions spoke to his character.  Ray Teutsch, the rancher.

2018 – Ray Teutsch – AB Distributor

2017 – Charles M. Duke, Jr. – Coors Distributor

2016 – Carter S. Huber – Schlitz/Miller

2015 – Albert Jaenicke – Hops

2014 – R.D. Hubbard – Coors Distributor

2013 – George Henricksen – Royal Imports

2012 – Diane Fall – Warsteiner

THIS IS THE LAST POST OF 2018.  I WISH EACH OF YOU A HAPPY HOLIDAY SEASON AND A MERRY CHRISTMAS.  NEXT POST WILL BE ON JANUARY 8, 2019.  

Geoff

 

 Posted by at 7:00 am
Dec 112018
 

Just a couple of weeks ago, the University of North Carolina announced it had hired Mack Brown as its new head football coach.  Coach Brown had previously been the head coach at NC, but left that position for a 10-year stint to the University of Texas. While at UT, Brown experienced a great deal of success, including winning a national championship in 2005.

After the announcement that Brown would return to the University of North Carolina, a sportswriter wrote a column in which he explained why Brown had left the university and why he, Brown, had now decided to returned.  During those years at NC, Coach Brown had built the school’s football program into a powerhouse, even in competition for a conference title.  Brown was twice undefeated with 10-win-seasons but had no success beating Florida State University which had runs for the national championship.

The thrust of the writer’s article was that Coach Brown had improved the football program to the point that fans, alumni, and administrators had unrealistic views of where that program should be, given that the university did not provide the resources to NC that were available to Florida State and Alabama.  Coach Brown bolted to Texas and the NC program has struggled since.

During the years I ran Warsteiner Importers Agency, our ultimate goal was to grow the brand to the size of Beck’s, a competing import from Germany.  Beck’s, at that point, was almost two and a half times larger in the U.S. than Warsteiner.  We were, however, able to make some progress until the end of 2008. At that time Warsteiner decided to increase prices and cut marketing and staff.

Despite the cutbacks, the talk continued as to why Warsteiner had to play “second fiddle” to Becks.  While I supported the goal to grow Warsteiner to the size of Becks, I reiterated the point that I needed the financial investment to reach those volumes.  The brewery’s response, however, was always the same: if you want that support, generate it internally in the U.S.

Ten years later, Warsteiner is still half of what it was in 2008, this time, however, with more internal issues than before.  Warsteiner, not unlike the University of North Carolina, did not understand the success they were experiencing at the time.  One could say that neither Warsteiner nor the University of North Carolina knew what they had until it was gone.

Coach Brown will return and will now face more realistic expectations from the NC.  Ten wins a year is truly a good season, and it appears the fans, alumni, and administration have come to accept that fact.  Warsteiner, along with many crafts and other imports have yet to reach this point of realization.  No doubt it is, and should always be, a goal of all brands to grow.  One needs, however, to have realistic expectations.  There is only one Corona!

Wholesalers continue to hear from their suppliers as to the size they desire their brand to, but is such a goal always realistic and achievable?  More likely it is not.  The rush by craft breweries to increase in size is one of the main reasons that this segment struggles today.  Had these owners been realistic when considering the investment, we might not be where we are today.

You are not defeated when you lose.  You are defeated when you quit!

 

 Posted by at 7:00 am
Dec 042018
 

In the 1960s, Willowbrook Distributing warehouse, used by Coors of Dallas, was considered an upscale building.  The facility was large, the trucks were able to load indoors, the warehouse temperature was controlled and there were rail sidings.  The warehouse also provided multiple offices, a break room, locker rooms, a hospitality room, a check-in area, and of course, executive offices.

Until this time, I had little knowledge of the differences between beer warehouses.  While at Lone Star, I had two distributors whose warehouses were actually old barns.  Both warehouses were similar with a couple of pallets of beer and a forklift.   There was an Oklahoma distributor who operated out of a former railroad station.  The trucks would pull up alongside the passenger docks and the beer was hand loaded onto the vehicles.  Obviously a great deal of manual labor was involved.

In Chicago, a number of the current beer warehouses still have roots dating back decades with little to no updates.  This is difficult to understand considering the onslaught of new brands, flavors, and SKUs.  In today’s high tech market, warehouses are computer driven with little that remotely resembles the beer facilities of 50 years ago.  Interestingly, the one exception to this rule is the beer pallets, which remain basically unchanged.

A four year old West Texas AB house is a great illustration of a state-of-the-art beer warehouse.  The storage area is computer operated, the temperature is controlled with high tech equipment, and the facility boasted all the bells and whistles one could imagine.  And, of course, the warehouse was built with future growth in mind. Interestingly, when taking a tour of the facility we discovered that the sales department was dark and empty. It was also immediately apparent that the modern-designed desks were not in use…there were no computers, no phones, no papers, no p-o-s, no glasses…empty.

The only people in the building, outside of the warehouse, were the reception and financial staff in the front of the facility.  The most heavily used portion of the building; however, was the new gym and workout facility installed by the distributor.  The distributor indicated that the gym was most heavily used by the staff during the early mornings, late afternoons and on the weekends.

The question in today’s beer industry is what will the modern beer facility look like and how will it function?  It is obvious that a sales department, now automated, is out selling.  There is no need to go into the warehouse, except for meetings.  Will such an arrangement be sufficient going forward?  Should the empty desks be removed and a game room added?  Maybe provide a ping pong table, a couple of X Boxes and big flat screen TVs with overstuffed chairs and music.  Many of the companies who want to attract younger, educated Millennials are modifying their offices to meet this generation’s expectations.

It is safe to say that parts of the beer industry are slow to change, warehousing, however, is not.  Companies have to keep up with industry trends and this should apply to their current and future employees.

The future belongs to those who prepare for it today.

Editor’s Note.  Attention all former Schlitz employees and Schlitz Distributors: The family of James Haire is searching for a booklet created by Jim during his tenure at the Schlitz training institute years ago.  The booklet is approximately 20 pages in length with a plastic cover complete with Jim’s photo.  If you have a copy, or know where one can be located, please let us know.  The family would like be most appreciative.

 

 

 Posted by at 7:00 am
Nov 272018
 

Last week it was announced that Scott Metzger, the founder of Freetail Brewing Co. of San Antonio, had, after 10 years, left the company he created.  Despite Freetail’s success, Metzger brought in the Turner family two years ago to provide support in growing the business.  It is hard to know if this was part of Scott’s initial exit plan, but either way, Freetail will benefit from the increased support provided by the Turner family.

Freetail, like other breweries that have sold to a major brewery or capitalist, will grow in the short term. The question is, how do distributors see these somewhat successful, local breweries as continued players in their portfolios?  Which would be of more interest to a distributor: a start-up local craft brewer or an established, successful, imported brand that had never attempted to develop the U.S. beer market?

Even if the local craft has the financial support, experienced team, lab, brewpub, and commitment, the distributor might look at the local brewery with some skepticism.  Will that craft sell or will it fold?  How much time, effort, and money should be invested in this brewery?  If the brewery succeeds and sells out, will it sell out to one of my current suppliers?  Remember what happened to Goose Island, Ballast Point, Lagunitas, Revolver, Karbach, Golden Road, and others who became a key part of their buyers’ companies, a move which made their wholesalers happy.

There are other crafts that employees purchased.  Full Sail was acquired by their employees, who in turn sold the brewery to an investment firm, thereby maintaining their jobs.  New Belgium employees still own their brewery.  These breweries and others continue to do well.  But at what point does the distributor take a risk and at what point are they forced to draw the line?

This summer, after almost 100 years in business, Great Western Brewing Co. of Saskatoon, SK, Canada brought their beer into the U.S.  On the surface, a distributor might look at Great Western as a local craft.  Great Western is the predominate brewery in that part of Canada with outstanding products and a top brewmaster.  Its brewing capacity is well over 300K HL. Unlike a number of crafts, the Great Western strategy is to grow and build their volume while maintaining their long-term ownership.  They know building a U.S. market will take time, and they are committed to doing so with a strategy.

The odds are that Scott Metzger will return to the industry in some capacity and, of course, Freetail will continue to be a viable brand for its wholesalers.  Great Western will expand in the U.S. as planned.  The success of either brewery, like other breweries, will be tied to their commitment.  In the end, that is the distributor’s dilemma.

Get out, stay out, and don’t come back!

 Posted by at 7:00 am