Jul 172018

This post begins the seventh year of Beer Business Unplugged. As has been typical, I will comment on past posts and the beer industry in general. 

This year, there are three topics in the industry that continue to be of importance.  The first is the continued decline of the overall industry volume. Second, is Constellation’s transformation from leadership under Bill Hackett to today’s company in which wholesalers are intently watching Constellation determine how the company will work with its distributors.  And third is the rapid rise of cannabis and how this plant will not only affect overall beer sales, but also a discussion around the most profitable method for the beer industry to ensure a foothold in the growing industry. Each blog brought a number of comments, making the above three topics the most responded to blogs of the past year. 

The post, Whatever Happened To? however, was the blog that brought the highest number of responses.  A surprising phenomenon for me.  It seems Krombacher is trying to reverse its scorched earth U.S. policy of the last six years!  I wish them the best of luck! The news of Warsteiner’s recent fines by the TTB was very disturbing, but to some degree, not unexpected given the challenges importers and brewers are facing in growing their brands.  Expect more of the same in 2019.

I always enjoy receiving the responses from readers. Although the majority of responses come directly to me, some are posted on the blog.  The number of subscribers, all of whom are in the beer industry, continues to increase into the thousands, this year surpassing 125,000 reads. Thank you all for your interest and loyalty.


As always, I will continue to write weekly throughout the year.  Going forward I will cover industry topics based upon your continued interests.  Thank you for all your kind comments and feedback.  They are fun and informative.  And now, year seven begins……

 Beer Fodder:

 Posted by at 6:00 am
Jul 102018

Bill Hackett of Constellation Brands has long advocated that the beer industry is all about the brand building which, in his opinion, is lacking from suppliers. For decades, the industry has followed the line extensions model as this has been the path of least resistance.

Light beers were the first line extensions and were by far, the most successful of all with the major selling brands being Bud Light, Miller Lite, and Coors Light.  Budweiser, Coors, and Miller are, of course, still viable selling brands in and of themselves.  Bud Light continues to expand on their light extension with additional extensions: Bud Light Platinum, Bud Light Lime, and Bud Light Orange.  Only the future will reveal the next extension from Bud Light.

Years ago, AB tested Michelob Ultra, a line extension from Michelob, and, as they say, the rest is history.  That line extension is now THE brand.  Ask any AB wholesaler today and they will tell you Michelob Ultra is on fire.  While other brands with the same wholesalers are losing ground and struggling, Ultra continues its remarkable growth by staying true to its branding. Ultra, like Bud Light, has its own line extensions: Ultra Lime Cactus, and recently, Pure Gold.  Both extensions are growing by feeding off the mother brand.

In the 1970s, Miller Lite, which was originally dismissed by most breweries as a viable brand, soon hit pay-dirt with consumers.  Shortly thereafter, both AB and Coors followed Miller’s lead with their respective light beers.  Although other breweries produced their own light beers, they had little to no success.  The two biggest failures were Schlitz, with at least three light beer efforts, and Pabst.  Neither brewery could establish a light brand.  The same story was true for the regional beers. No brewery could establish a light challenger.

In the past year, the industry has seen two challengers to Ultra’s dominance. The first was Amstel X Light, a line extension of Amstel.  Soon thereafter Corona Premier followed.  Both these extension lines are the produce of major importers. As predicted by this blog, Amstel’s X Light, once a Heineken Light offering, would not become a viable brand.  X Light is now hanging on for life as many key retailers are discontinuing this SKU during their summer resets.  Unless something unexpected is occurs, X Light will become just like its predecessor, Amstel, a brand of the past.

Corona Premier, a line extension of Corona, targeted directly at Ultra with low carbs and calories, has become a viable new product making the top lists of new products.  Corona Premier’s scan numbers continue to grow.  Constellation Brands and Corona appear to be stepping up to be Ultra’s main competitor.

Heineken’s major mistake was to use Amstel as the line extension instead of using Heineken.  Corona Premier has major support behind it, and with its initial success, expect Constellation to step up its spending against the brand.  Corona has Corona Light and Corona Premier pitted against Ultra. Heineken, however, has only a somewhat successful Light in Heineken Light.  Heineken’s new CEO, an American, has her work cut out for her and it will be interesting to see how she addresses this segment.

Rest assured that the other majors including MC will soon attack Ultra with their own offering of low carbs.  Miller Lite experienced success with their low carb campaign but eliminated that campaign some time ago.  The next 18 months will be interesting.

Every great brand is like a great story…

Editor’s note:  It was reported yesterday that Scott DeMartine of Columbia Distributing passed away recently.  I was fortunate to have worked with Scott when he headed up Star Brands.  He will be missed.


 Posted by at 6:00 am
Jul 032018

The evolution of the beer industry is quite remarkable. While the industry itself has changed a great deal, perhaps nothing has evolved more in the industry than the beer wholesaler.

From the end of WW II, until perhaps the late 60s/early 70s, the industry remained consistent.  Small wholesalers, one brand, a limited number of packages, very little discounting, simple one-bay trucks…life in the beer business was good.  Things then started to change.

First, was the push to add new or carry an increased number of brands. For example, an AB or Schlitz wholesaler would carry Bud, Michelob, and maybe Busch.  Schlitz wholesalers carried Schlitz, Schlitz Malt, and Old Milwaukee.  Bigger trucks than came next first with eight bays than on to 16 bays along with shelving in bays.  Bulk trucks still are used today.  Next came pre-selling, followed by orders that were built-by-account, and then the addition of shrink-wrapped pallets which were delivered to the retailer.  Warehouses became digital using, UPC codes, and packages are now moved thru scanning and conveyor belts. Salespeople went from handhelds, to computers, to iPads; portfolios exploded with new brands and packages; and brand management is now the title-de-jour for in-house managing of current and upcoming new vendors. All this, yet the overall beer sales in the U.S. continue to decline.

We all have heard the many assumptions from the pundits as to why beer sales continue to slide, but perhaps the statement by Bill Hackett of Constellation Brands frames it best.  When discussing the lack of brand building, Bill says “this (lack of brand building) will be the death knell of this industry, we have to focus on building brands.”  From the supplier side, no truer words have been spoken.

Lacking extensive and effective brand building, today’s distributors are looking past their suppliers to ways to survive the future, and they may have found the survival tool: cannabis.

Just like the Oklahoma land rush of the 1800s, there is a mad rush to determine who and how legalized cannabis will get to market and ultimately to the consumer.  State beer wholesaler organizations are rallying and lobbying their local legislatures to use the wholesalers’ distribution system for cannabis. On the surface, this seems to be the logical way for states to proceed since beer wholesalers are federally and state licensed.  Owners need to be approved by the TTB to obtain a federal permit. Wholesalers can even act as the tax collector for cannabis just as they do for beer.

It would seem that very little needs to be changed or added to legalized wholesalers to enable cannabis distribution to become a reality. In fact, it might even be easier for beer wholesalers to become the cannabis wholesaler than to up-end their current model in an attempt to provide a more effective sales and marketing program for beer. Perhaps beer distributors should leave it up to the suppliers to improve beer sales.

No one will know the total impact of legalized cannabis sales for years, but now is the time for beer wholesalers to act.  Truth be told, the current beer suppliers (those not tied to cannabis) are probably not very happy.  Maybe they should be spending more on the brand building then they would not have to worry.

Business is constantly changing, constantly evolving.


 Posted by at 6:00 am
Jun 262018

Many distributors would rue the day they turned down the opportunity to distribute Modelo products in the early to mid-1980s.  In fact, once Corona became a viable import, many of the distributors who had once declined the offer, made a quick reversal and aggressively pursued the brand.  Some distributors were successful, but many were not, as those distributors who had taken on the brand were reaping the potential benefits of Corona.

As has been discussed in past posts, I acquired Corona through an acquisition when I owned Texas Beers. At that point in time, the beer was in a brown bottle, and because my distributorship was on the US-Mexican border, the packaging made sense.  Once Corona switched to the clear, long neck bottle, the brand’s sales jumped.

Bill Hackett, who was then the sales manager for Barton Beers, and I spent hours discussing the potential of Corona.  As with many current and past wholesalers, Bill has always maintained great relationships with the distributors.

By the mid to late 90s, it was clear that for Corona to continue its growth, the brand’s distribution needed to increase. Both Barton and Gambrinus introduced Corona 12 packs and soon other package extensions were also presented.  One by one, many of the wine and spirit houses, including the Julius Schepps Co. in Dallas, sold the Modelo distribution rights to the beer network.  Even in those days, the case multiples, which seemed so high, are now considered a joke when looking back at the brand’s unbelievable success.

Most of the current Modelo distributors are in the blue network, but there are many distributors who are not in the blue or red network that do have Modelo. One could make the case that without the Modelo portfolio these houses would have sold out years ago.  Because of Corona’s success, many distributors hung in there long enough enabling them to sign many upstart crafts who today are established and important beers.

As the sales manager, and later President of Barton and Constellation Beers, Bill Hackett knew that for Corona to become a viable brand, it was important to establish strong relationships with the wholesalers.  Bill, probably more so than anyone in recent years, was the leader at relationships.

Constellations recent decision to move their portfolio from their long-established wholesaler, Markstein in San Diego, to Reyes, caught the industry by surprise.  The move by Constellation, however, should not surprise anyone who has been in the industry for any length of time.  It is simple, Bill Hackett knew that Barton needed the wholesalers more than the wholesalers need Barton.  Today, it is just the opposite, given the recent trends of AB and MC, the Modelo wholesalers need Constellation more than Constellation needs them.

Constellation is doing exactly what a highly successful brewer does:  line extensions, new beers, buying multiple forms of media, sponsoring all types of professional sports, staffing up, chain domination, and on and on to include wholesaler realignment if they believe they can benefit from a change.  Tighten your seat belt, more is yet to come.

We built a business on relationships, and that’s what matters to us…



 Posted by at 6:00 am
Jun 192018

When Catherina Cramer took the leadership role at Warsteiner, she was the ninth generation of Cramer’s to lead the brewery, but the first female in this prominent position.  The brewery had been run by males for eight generations dating back to the early 1700s.

Catherina had always questioned why Warsteiner Importers Agency did not employ more female employees.  Warsteiner’s pay scale was such that when a qualified female was hired, trained and placed in the marketplace, in most cases, the employee would be pouched by a competitor.  Inevitably, the competitor could pay a higher salary, give larger bonuses, and had superior, bonus programs, benefits, and typically a car.  It was very frustrating and expensive for Warsteiner.

Decades ago the beer industry was male-dominated.  The only females in the business were widows of husbands who had owned distributorships.  It was not until I got to Coors of Kansas in the late 70s that we started to recruit women.  Breweries were the same way.

The first brewery to really utilize females was Boston Beers, whose sales director was Ronda Kallman.  By design, the sales force of Jim Koch and Ronda Kalman sales was predominately female.  Boston Beers’ success with females did not go unnoticed by other breweries.  A change was underway.

In today’s beer industry, women play a major role. Many craft breweries are run and owned by women.  Perhaps the best known is Kim Jordan of New Belgium who founded the company over 25 years ago.  New Belgium is one of the largest crafts in the country now.

No woman has led a major U.S. brewery or importer. Last week, however, Heineken appointed Maggie Timoney CEO of their U.S. business.  This appointment goes beyond gender, Maggie is the first American to lead Heineken in years.

Heineken has been in catch-up mode since Corona flew past Heineken as the number one import beer.  The acquisition of importing rights years ago, combined with Heineken’s transfer of their distribution from a predominately wine and spirits system to the beer network made an impact on their sales.

Heineken’s packaging changes, coupled with the long neck bottle, did little to help, and their media programming was questionable at best.  Many, if not most, of these decisions, were driven by Heineken leaders from Holland.

The story is the same and, unfortunately, frequently repeats itself: the new leader, not knowing the inner-workings of the U.S. market, initially visits the major wholesalers and gets an ear-full.  He then visits key retailers and attains feedback.  And, of course, the agency visits are part of the initiation process.  The U.S. learning curve is typically about five years.  Before this five-year window ends, the CEO is replaced with another CEO and either moved to the home office or is off to “pursue other interests.”

The industry will be following Maggie Timoney very closely, not because of her gender, but because of what is riding on Heineken’s brands.  Many of Heineken’s wholesalers are gold wholesalers, and given what Constellation is doing, Heineken’s time is running short.

As usual, behind every great woman is an idiot…





 Posted by at 6:00 am
Jun 122018

In past posts, when the topic has covered facets that make the beer industry so great, the answer has always been centered on the people. The people in this industry are what make it outstanding.  When discussing the beer industry, there never seems to be any middle road. One either loves this business intensely or dislikes it.  When speaking to college students one of the key points I make is that the beer industry is not a 40-hour-a-week job.  The reality is that the beer business is 24/7, and that may not be for everyone. Just ask those in the craft industry.

In January of 1976, three months before we were targeted to open the San Antonio Coors market, we began interviewing for the sales positions.  Since former astronaut, Charlie Duke was the owner, and with the Vietnam War drawing to a close, we also made an effort to recruit former military veterans along with experienced beer salesmen.  Sales were all DSD with only one product and just a few SKUs.  As planned, we ended up with a mix of both veterans and beer people in our sales force.

One of the veterans that were hired was a young man named Rudy who was from San Antonio.  Rudy had joined the army right out of high school and served in Vietnam.  After his discharge, he took advantage of the GI Bill by enrolling at Southwest Texas State (now Texas State University). When Charlie and I met Rudy, he had just graduated from college.

Rudy saw working at Coors as a path to a solid career. Because he had just spent four years in college in San Marcos, we assigned Rudy that surrounding territory.  At the time, the distributorship in Austin had not yet opened and Rudy’s territory backed up to the Austin region.  As a result, Rudy’s sales were inflated because the consumers were driving south from Austin into the San Marcos area to buy Coors.  Unfortunately for Rudy, that perk quickly ended with the opening of the Austin market.  Rudy, however, continued to do well and Coors became a major-selling brand in San Marcos.

Not long afterwards, Charlie sold the Coors operation to the Azar family from El Paso. Rudy left and applied for a State Farm Insurance franchise.  Not surprisingly, he was awarded the business.

In the early 1980s, I dropped in to see Rudy and check on his new career. Now in his fourth year at State Farm, Rudy mentioned that his first year had been tough, but the ensuing years were getting less difficult and he was doing well and was quite happy.

Just last summer, 35 years later, I received a phone call from out of nowhere. It was Rudy! We had a great conversation, catching up on life since he had left Coors.  Rudy had recently retired from State Farm as a very successful agent and his wife, too, had retired from USAA after 30+ years.  Both of Rudy’s sons were completing college and all was well with Rudy and his family.

As we were ending the conversation Rudy said he really called to simply thank me for helping him get started in the business world.  He wanted me to know he appreciated my honesty and the fact that I treated him with respect.  Even after all those years, Rudy never forgot.

I have been fortunate to work with countless great professionals, many of whom I have maintained friendships with throughout years, however, the call from Rudy was especially meaningful.

If fortunate, we all have someone who made an impact on our careers.  The same goes for my career as well, but that story will be for another post.

One is never too young or too old to be a mentor…









 Posted by at 6:00 am
Jun 052018

In order to stay relevant and to effectively make use of their limited resources many of the established craft breweries have reduced or limited their brand’s footprints.   The recent collapse of Green Flash Brewing is the personification of a company that expanded too fast without the proper planning and resources.

Long established breweries including St. Arnolds and Summit Brewery, to name just two, pulled back their U.S. footprint to include only their home market and state along with some adjoining markets.  Again, these breweries have found out, perhaps the expensive way, that the further from their home market they move, the more difficult it is to get any traction.

Some breweries, like New Glarus in Wisconsin, have never left their home state and have been very successful in building their brands.  Karbach in Texas, now part of AB, has done the same.  Industry pundits have been supportive of crafts not expanding outside their home footprints.

While local is the industry model de jour, just how does that work for imported brands?  Sure, there are a number of small, expensive European imports that are not general market beers who only focus on metro specific areas such as New York, Chicago, San Francisco and others that demographics index toward their brands.  This model has worked well with most of these importers.  Some breweries have either pulled out or way back, such as Bavaria, who had a great U.S. business but left years ago due to the unfavorable exchange rates.

The story of Warsteiner has been well chronicled in past posts. This is a company which, when at the top of their success, was the number one selling beer in Germany.  At that time Warsteiner made the decision to develop the U.S. market and spent years so doing.  Now, with sales declining in both countries, Warsteiner’s future is very cloudy.

Krombacher, on the other hand, is somewhat a mystery.  This brewery is dominating sales in Germany as not only the largest brand, but the largest brewery.  Similar to Warsteiner, Krombacher decided to return to the U.S. in 2010 after a failed attempt to establish themselves in the late 1990s.

Within the first two years, Krombacher had established wholesaler networks in Florida, Texas, Louisiana, Georgia, New York, Illinois, Arizona, South Carolina, North Carolina, and Tennessee.  Since that time, they have left almost all those states except New York and Chicago.  The question is why?

Krombacher is not a company without great success and resources, but perhaps it is the personification of ownership that is blind to what can be accomplished versus, what they are being told is happening and being done.  Perhaps Krombacher is being led by people who have agendas different from that of the long-term success of Krombacher. Perhaps the leadership has their own short-term plans.

This happened at Warsteiner, now it could be happening at Krombacher.  Wholesalers in states where Krombacher pulled away have their own story to tell, but adding feet on the street with no direction or US. leadership can only be a dead end for all.

Krombacher has had some success in Chicago and New York, but after eight years of investment, one would think that ownership would question why Krombacher is pigeon-holed in the U.S.?

Whatever happened to Krombacher?



 Posted by at 6:00 am
May 292018

On Sunday, May 27th, Jim Koch’s turned 69, and as has become tradition, this post will recognize Boston Beers this week.  More than any other in the industry this year, Boston Beers was been on a true roller coaster ride.  In just the last 12 months, Boston has made a complete turnaround, going from trending negatively to once again trending in the positive direction.   We have seen this story before.

Regardless of how one defines the Boston Beer Company, it is fair to say that Jim has transformed this organization from a craft brewery to one now known as a specialty drink company.  Some industry analysts are reluctant to endorse SAM even though their first quarter depletions were up +8% versus last year’s depletions which were down -6%.

The product mix of Boston Beers, led by Twisted Tea, Angry Orchard and Truly Spiked & Sparkling are currently 70% of Boston’s portfolio. This has RBC’s Nik Modi to rename Boston Beers to “The Boston Tea Company.”  This makes sense, given their product mix.  The continued success of Angry Orchard’s Rose will simply move that percentage more towards the Tea Company label.

Boston’s success with these products has caught the attention of others as the competition from similar brands, including Spiked Arnold Palmer, Smirnoff Spiked Sparkling Water, White Claw, and Spiked Seltzer, continues to grow.  Even Small Town Brewery is creating line extensions of NYFRB to compete with SAM in the cider and tea segments.

Since 2000, Boston has introduced a number of new products, including the above, plus the addition of Sam Adams Light and Rebel IPA.  To some degree, all have been successful and have played a key role in SAM’s portfolio.

At the writing of this post, SAM shares were up +27%, certainly a welcome number for all investors and employees.  RBC is forecasting a growth trend of +2% to +4% for Boston in 2018, which if they achieved, would be remarkable in a today’s declining industry.

Even with 2018’s early success, rumors abound regarding a potential sellout of Boston Beers.  As with many other key senior management positions at SAM which have been changed in recent years, it took Jim and Boston Beers the better part of a year to find a new CEO.

Next year will be the 35th anniversary of the founding of Boston Beers and Jim Koch’s 70th birthday.  With the possible exception of Pete Coors, at MolsonCoors, no other individual in the beer industry is as tied to their company as Jim Koch is to Boston Beers.  There is no doubt that the next 10 years will show what might become the final transformation of this company.

There will be a day when Jim will leave the limelight of the industry. As hard as it might seem to believe, all good things come to an end.  The good news is, however, is that we are not yet there!

Happy 69th birthday Jim!  Until next year….


 Posted by at 6:00 am
May 222018

In less than one month, the world’s largest sporting event, The World Cup, will begin.  The World Cup, which takes place every four years, perhaps is only rivaled by the Olympic games.  The teams, represented by 32 countries, play their way into the event with the host country’s team getting a bye into the event.  It is the most watched and anticipated sporting event in the world estimated audience is 3.5B.

There is a hand full of sponsors and partners for the World Cup, one of which is ABI and Budweiser.  While ABI is much maligned where its marketing is concerned, the World Cup sponsorship has to be a real win for ABI.  There may not be any better format than the World Cup to fit ABI’s global strategy.

A number of years ago, on a trip to Peru with Crystal beer, I visited a bar in Lima when a televised soccer game Peru was playing in America’s cup was on.  With one minute to play, Peru scored, tying the game.  The bar exploded with excitement and every piece of furniture not nailed to the ground was flying around the bar!  The place was crazy with excitement.

During the 2010 playing of the World Cup, while in Germany for Warsteiner we watched the game between Germany and Britain.  We were watching in a hotel bar in a small northern town with a large screen projected TV and all the customers were painted from head to toe, Germany colors with Germany hats and flags.  The party really did not start until the end of the game when Germany defeated Britain, 1-0.  The partying ended around 4 AM when the sun began to come up!

These two examples of just how much passion these countries have for their teams will play into ABI’s strategy.  One can just see ABI’s country-specific marketing plans around the World Cup focusing on Budweiser and supported by all the TV and social media support.

Unfortunately for ABI, the United States did not qualify a team for this year’s World Cup.  How this will play out in the TV and overall media ratings will be interesting giving the declining ratings of most major sports.  This includes professional football and now, even the recent Olympic games ratings were way down.  The question is, will the American fans watch the other countries games in the upcoming event?  No doubt the die-hard World Cup fans will, and many sports bars will be featuring the games and you can bet they will do well, but not well if it was a US team playing.

At Warsteiner our sales flew during Germany’s games no matter the time of the day when the game was on TV.  Will Budweiser sales do the same this year?  ABI has a global strategy for their three key brands and the World Cup is the best platform for ABI to develop these brands without a doubt.

It will be interesting to see how the ratings come in after the event is over but more so, just what Budweiser looks like in four years globally from today.

Brands must become architects of community..



 Posted by at 6:00 am
May 152018

If one were to earmark the date of Warsteiner’s slow decline it would be August 2008.  In the third quarter of 2008, Warsteiner Importers Agency of the U.S. set a record in STWs, STRs, and profit.  At the same time, in Germany, Albert Cramer, the eighth generation Cramer family member to lead the brewery, fired his longtime CEO.   Albert had learned of multiple questionable and illegal transactions that were taking place in South America and Africa.

At the same time, Albert faced several personal tragedies, including the loss of his longtime spouse who had been thrown by a horse spooked during a summer storm, followed shortly thereafter by the announcement of his incurable cancer.  These tragedies resulted in Albert’s decision to turn over the leadership of Warsteiner to his daughter, Catherine Cramer.  Catherina at this time was in her early 30s.

Catherina, with the support of the lead accounting staff, instituted what is referred to as the four-eyes business model. Warsteiner company-owned importers implemented a policy requiring each department head to report directly to the corresponding department head in Germany.   Simply put, accounting in the various countries reported to accounting in Germany, and likewise with the sales and marketing departments.  This resulted in countries across the world having no direct leadership.

The consequences of Warsteiner’s actions are best illustrated by the downturn in the U.S. sales.  Within six months of implementation of the four-eyed leadership model, the U.S. operation lost almost 40% of its total volume with countries around the world experiencing similar results.

After 10 years, Warsteiner has not altered this model.  The volume loss continues today, however, the industry has recently learned of another unfortunate result of this model.  In the last several weeks, the TTB announced that it had fined Warsteiner Importers Agency $900,000 for violating FAA acts.  These violations include an exclusive outlet, tied house, commercial bribery, and consignment sales.  The violations occurred between January 2015 and continued into 2018.

Last fall, Warsteiner lost or replaced a number of U.S. employees whose positions have now been filled.  It appears that the managers in the U.S. retained their jobs, the brewery, however, the export director is no longer employed.  More than likely his leaving is a direct result of this fine.

There is little doubt that Warsteiner Importers cannot pay the required fine. The brewery will have to step in and pony up.  Rest assured once the fine is paid, there will be a new long-term liability on Warsteiner’s balance sheet in the amount of $900,000.  This will certainly handcuff the next individual who will lead the U.S. operation.

So the other question is: how do the U.S. Warsteiner distributors and retailers view this penalty and fine?  Is this the beginning of the end of what little is remaining of the Warsteiner U.S. business, and if so, could Warsteiner close down the agency and assign importing rights elsewhere?

It is quite clear that this four-eyed model does not work and needs to change immediately. Only Catherina can make that decision.  Her legacy is tied to the success of the brewery and there is still time for her to make the necessary changes.

Be prepared for more fines and penalties coming from the TTB.  Mistakes are always forgivable if one has the courage to admit them…



 Posted by at 6:00 am