Jan 212020

This week, MillerCoors announced the closing of its Irwindale brewery which comes as no surprise for beer industry people. Pabst Brewing Co. has an option to purchase the brewery but their window to exercise this option is short. Pabst’s response might give the industry an insight of the brewer’s future.

A day after the MC announcement, a local Ft. Worth brewer, The Collective Brewing Project, announced it had closed. The Collective Brewing Project, founded in 2014, was noted for their wild and sour beers. The timing of both closings is ironic in that the industry is simultaneously experiencing the cessation of both one of its largest and smallest breweries.

It will be a while before the industry publishes its final 2019 numbers, however, we do know that there are currently over 8,000 working breweries in the States. What will be interesting is the ratio between the number of breweries opening verses the number of breweries closing. For years the number of those opening has dwarfed the number of those closing, however, that difference has recently narrowed. The day is coming soon when we will experience more closings than openings. 

Aside from the dramatic size difference between MC and The Collective Brewing Project, the two breweries have one thing in common: neither brewery is selling beer.  If they were selling, the plants would not be shutting down. MC does have the funds to keep their brewery open, but they are obviously trying to stay ahead of the costs and maintain production capacity at their other two breweries. The Collective Brewing Project probably has a similar sales trend, however, the owners may have decided that enough is enough and they want to limit their financial exposure by pulling out. Neither brewery is growing or offering beers that consumers are eager to purchase. 

The new leadership at MC seems to grasp reality and has started to adjust the company to ensure the structure fits the current sales and market position. This does not mean that each quarterly financial statement that reports a loss of sales will be followed by a statement of MC’s increase in market share. Traditionally, MC looses sales, but increases share of market with their light beers, but this only means their losses are less than AB’s losses.  

Like more and more struggling breweries who finally call it quits and move, on MC and The Collective Brewing Project did what each had to do. People will lose their jobs, money will be lost, dreams will end, but that is the beer industry today. Needless to say, 2020 will be interesting, but the condition of the industry in 2030 will really be attention-grabbing.

Sometimes we stare so long at a door that is closing that we miss the fact that another that is opening.

 Posted by at 7:00 am
Jan 072020

One week into a new decade, the 20s, is for me, the start of my seventh decade in the beer industry. This might seem a little misleading as I started in the last year of the sixties and this is only the first year of the twenties.  It still works out, however, to seven decades!

This is 401st post since starting the page. While the blog began as a comment on a handful of industry topics, the response from readers that first summer was quite positive, and I have continued writing about past and current matters.  The thought was that the industry might consider looking at issues in a different light. While the subscriber base, which has contained itself to beer industry readers, continues to grow as posts should pass 200K views in 2020.

So, what can we expect and what will the beer industry look like in 2030? Go back to 2010…did anyone think that there would be over 7,000 operating breweries today? Did anyone know what a seltzer was much less see the coming explosion of seltzers? The major domestics continued to lose volume and share as many of their line extensions had seen only minor success. 

A decade can be defined by the changes in the industry.  Take, for example, the 60s, a decade in which AB and Schlitz battled for industry leadership while other nationals, like Pabst and Falstaff were just hanging on. The 70s could be defined as the decade of Light beers and the beginning of the end of the regional beers. The 80s brought the close of big brewers like Schlitz, Pabst, and G. Heileman with Coors expanding east and regionals began the process of consolidation. The 90s could be best known for the rise of Corona and the beginning of crafts. In the 00s, we remember the crafts’ growth, the selling of AB, and the merger of MillerCoors. Finally, the last decade as highlighted above, saw the growth of breweries and the beginning of seltzers. It could also be defined as the end of the big AB and MC brands, but we will know for certain in 10 years. Toward the end of the last decade, a number of large, successful craft breweries had sold to foreign owners, while many medium and small crafts had closed, downsized, or modified their business model.

The famous John Kenneth Galbraith, once said, “There are two kinds of forecasters: those who don’t know, and those who don’t know they don’t know.” We will know in 10 years and while I will address these beer industry changes as they happen, it will no longer be on a weekly basis, but instead when the time is right.  I plan to periodically write on beer industry issues and the posts, when written, will still be published on Tuesday mornings.

Again, thanks to all the readers and the interesting and kind comments sent to me over the years, but it is time to scale back. Who knows, you might still hear from me for many months to come, but maybe not. Until the next post, let us see how this decade unfolds.

I haven’t quite gotten the hang of this retirement thing.

 Posted by at 7:00 am
Dec 172019

The interview process I experienced during the late 1980s for the general manager’s position at Coast Distributors was definitely unique. Although I spent the majority of the interview time with owner of Coast, I also had dinner with the GM’s three director reports:  the Director of Operations, the CFO, the Director of Sales, Jim Cline.  I was offered the GM position and accepted it in early 1988. 

Shortly before accepting the GM position, Coast had been awarded distribution rights to Coors in all six of their Oregon houses. At the time, they were the largest Pabst distributor in the country. Hamm’s was their number one brand and the best selling beer in Oregon. Coast also had a multitude of other imports including: Modelo, Heineken (in some markets), and others, along with a wine portfolio, which produced 10% of revenue. Jim Cline played a key role, not only in aiding Coast with the Coors expansion, but he also had a vision for the future and had agreed to acquire Rogue, one of the earliest crafts. Coast was Rogue’s first wholesaler.

Jim grew up in Oregon and had gone to the University of Oregon where he aspired to play football. Unfortunately for him, the football career did not materialize, but Jim did earn a degree in biology. One of Jim’s favorite sayings was that he might not know how to sell beer, but he knew how to make it. Using his strong work ethic, Jim performed his way up thru the ranks at Coast to become a key member of the management team. Jim, more than another vital employee, was a major factor in the success of Coast. He quickly became my right-hand man and was a great help in negotiating new union contracts for Coast’s five local shops.

After several years of profitable sales, at the request of the family, I helped sell the company to Dick Lytle.  Dick changed the name of the company from Coast Distributors to Mount Hood Beverage, which in turn later became Columbia, the giant multi-state house.

Jim stayed during the transition from Coast to Mount Hood, but as is typical, he departed after the new management assumed control.  Jim was quickly picked up by Jack Joyce, the owner of Rogue Ales.  This decision led to one of the beer industry’s best leadership groups with Jack and Jim growing Rogue into not only one of the top selling crafts, but also one of the top selling brands.  Following the strategy of jack and Jim, Rogue expanded across the country. Jack retired and passed away some time ago, but his son took over from him and continued, with Jim’s help, to grow Rogue.

Jim was one of the beer industry’s unique leaders in that he took a traditional long-time family owned distributorship and grew it it into one of the nation’s top ten.  Not only does Rogue Ales span multiple states, the company also has a definite grasp on the future of the beer industry.  

After decades at Rogue, Jim has now retired to spend time with his wife Amy and his beloved horses. When I see a can of Coors or a bottle of Rogue, Jim comes to mind. Jim Cline, the Oregon Duck. 

2019 = Jim Cline – Rogue Ales

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


 Posted by at 7:00 am
Dec 102019

Almost 50 years ago when the tobacco company Philip Morris was flushed with cash, they purchased the Miller Brewing Company. Miller immediately had access to PM’s marketing expertise along with the resources necessary to attack the beer industry. Miller created Miller Lite just as the baby boomers were turning 21, and the rest is history. One could argue that Philip Morris’ purchase of Miller Brewing was a defining moment in the beer industry

This acquisition by Philip Morris started a shift in the beer industry that continues today. Schlitz Brewing, in trouble for years due to their brewing process, finally sold out to the Stroh Brewing Company, also a struggling brewery. The massive debt Stroh had incurred with the purchase of Schlitz might cause one to wonder how Stroh ever believed they would survive. And they did not.

The G. Heileman Brewing Co. had been successful with the acquisition of regional brands, support of those brands, and the expansion of other brands. A key to Heileman’s success was the fact that they would award brands in a market to different distributors, thus pitting the distributors against each other. This model was effective until distributors got together and changed state laws to prevent such action from occurring.

Alan Bond, acquired G. Heileman in a takeover.  Bond had so much debt that the company had no chance to succeed, especially given their declining brands. Standing in the wings was Paul Kalmanovitz, who was also buying struggling breweries, but instead of spending against them, he stripped them of their assets, cut marketing, and reduced staff. Brands struggled and died but Kalmanovitz made money.

In the last 20 years, the beer industry has seen AB purchased by InBev, and Miller combine with Coors. Both companies have lost market share and volume while simultaneously experiencing rapidly growing margins. These two companies have been successful in aggressively purchasing key craft brewers.  The craft segment, however, is struggling with the growth of seltzers.

Recently the industry has seen a number of large successful beer companies sell out.  Most recently New Belgium Brewery, an employee owned brewery, sold to Kirin. Perhaps the most eye-awaking of all such transactions, was the recent news of Constellation Brands selling Ballast Point to Kings & Convicts. Constellation Brands is said to have paid $ 1 Billion for Ballast Point which caught the industry by surprise. Four years ago, Ballast Point’s sales were at 430K bels. while in 2019 the sales volume will be less than 300K bels.  In recent years, Constellation Brands had several impairment charges which indicated that Constellation had overpaid for Ballast Point.

The question is: why did Constellation overpay for Ballast Point? Why did Constellation sell Ballast Point for only $75 million after just four years? In so doing, Constellation walked away from their distributor’s commitment to the brewery. Constellation is not a beer company that is struggling because they have Modelo. Constellation has resources very few companies have.

Expect Kings & Convicts to be successful with Ballast Point because the brand will be the priority for the brewery, not a bolt-on brand or one that is there to support egos. If that were the case, then do companies make a brand or does a brand make a company?

Don’t let your ego get in the way of your ignorance.

 Posted by at 7:00 am
Dec 032019

In the early 1980s, Stroh Brewing Company purchased the Joseph Schlitz Brewing Company.  Stroh quickly reduced market support in an effort to revise Schlitz’s downward trend.  At the time, marketing was limited to media, p-o-s (point-of-sale), and price supports.  Although Schlitz had been declining prior to being bought by Stroh, once Stroh took over, Schlitz’s decline accelerated, and the brand soon lost their market leadership position to Miller Lite.

In the 1980s, wholesalers were predominantly a one-trick-pony and I was no exception as 90% of my volume was Schlitz.  Yes, I had the regionals:  Pearl, Lone Star, and Shiner along with all the imports, (with the exception of Heineken), but Schlitz was my bread-and-butter.  Desperate to save their companies, many Schlitz distributors repositioned Schlitz pricing under Miller Lite and Budweiser in the hopes that the consumer would see value and come back to Schlitz. The repositioning had no chance without support from Stroh, and that, unfortunately, never came and the rest is history.

Corona had just transitioned to the clear bottle and Shiner was years from being bought out by Gambrinus. Needless to say, these beers did not have the traction they have today. Currently, the wholesalers’ portfolios are diversified enough that if one brand begins to slide the net losses are mitigated with the other numerous brands in the portfolio. If the wholesaler has White Claw or Truly, there is no real bump.

With the beer industries’ effort to upsell the consumer, now in its 12-year, wholesalers are ratcheting up pricing at every possible junction.  Some are raising prices even without the suppliers’ knowledge; the supplier is not raising their prices to the wholesaler without their knowledge.  Selective pricing, without supplier involvement, could be costly for the wholesaler; not as much in the wholesalers’ existing footprint, but in the event that the wholesaler has multiple warehouses and operations.  Targeted vendors will likely look elsewhere to find different wholesalers who are willing to work with them as they expand. In addition, new vendors, or those opening up markets, might want to rethink their strategy when interviewing or appointing distributors. Breweries may even attempt to add additional language in their contracts regarding pricing and strategy.

As more, large, multi-state distributors evolve from the traditional beer house to beverage companies; expect to see these companies create pricing professionals who study pricing trends and seek opportunities for the wholesaler. Many smaller vendors will come to rely on the wholesalers’ expertise in understanding the price points that are most beneficial for both companies.

There is much more at stake than just the premization of beer. The Schlitz wholesalers might have been better off not to reposition Schlitz but to wait and ride it out until the end with the best pricing model available. When you have only one pony to ride, however, you do not want to be thrown off.

There is no victory at bottom basement prices.

 Posted by at 7:00 am
Nov 262019

My first assignment, 20 years ago when I joined Glazer’s, was to oversee the statewide rollout of New Belgium for which the distribution rights had been awarded to Glazer’s. Texas was New Belgium’s fourth state with the brewer already having a presence in Arizona, New Mexico, and of course, Colorado. 

Glazer’s felt that New Belgium was going to be the key brand the distributor needed to build a world class malt portfolio. Even without any internal malt structure, and a delivery system not built for beer, the first order for New Belgium products consisted of 20 trucks of bottles and three trucks of kegs. New Belgium did not have the cooperage to fill that first order so they postponed the rollout date until New Belgium could fill the kegs.

That first year Glazer’s sold more than 500,000 cases without a malt infrastructure, without cans, and with only three brands and no single serve packages. Had this all been in place, it is not unrealistic to think 750,000 cases could have been sold. New Belgium started with only two rangers in Texas and one did not last long.

New Belgium has had great success with their sales footprint; yet like Glazer’s, both entities were attempting to find their own way in the beer industry. As New Belgium grew they encountered multiple challenges including hiring experienced beer managers, while simultaneously ensuring the cultural integrity of their founders.

By 2008, Glazer’s entire view of the beer industry had changed. The distributor began selling off their beer brands in markets where they had no Miller/Coors houses. Other distributors were more than happy to pick up New Belgium along with a multitude of other fine brands including Sierra Nevada and numerous imports. Glazer’s, however, kept the fine brands in their core MC markets.

New Belgium expanded across the country, hired top beer people, and soon became employee owned. Many of the employees were invested after just one year and remained with the brewery. In recent years, New Belgium built a world-class brewery in North Carolina to service the east coast, but this created a huge debt load.  After growing to becoming the fourth largest craft brewery in the U.S., New Belgium appeared to have hit a wall with their growth, and even though the brewery has begun to grow again, the employees decided to sell to Kirin’s Lion Little World in an all cash transaction. You can rest assured the New Belgium employees had a good weekend.

The acquisition of this craft brewery by Lion is just the most recent purchase of a major U.S. craft brewer by a foreign brewer. Others include: Laginatis, Founders, Anchor, and to name a few, all acquired by non-U.S. brewers…and why not? The U.S. and Canada are where the world goes to get gross profit. China, India, and Africa have people, North America has money.

Over 300 current and past New Belgium employees will divide up over $190 million from this sale, and with Lion’s global resources, their professional careers look secure.

Treat employees like partners and they act like partners.

 Posted by at 7:00 am
Nov 192019

During my tenure as the head of U.S. operations for Warsteiner, the German management team attempted to centralize global marketing and decision making for the brewery. This was a time consuming process which required me to make multiple trips to Germany for face-to-face meetings with the owner and her team.  While we disagreed on many issues, at the end of the evening we all congregated at the bar to enjoy a cold Warsteiner. Though the meetings were often contentious, those evenings spent enjoying beers were enjoyed by all and many friendships were made that continue still today.

Simply put, what makes the beer industry special is the beer.  Beer is the vehicle by which many extraordinary moments and relationships are created both within and outside the industry. There is not a meeting or a convention that does not end over beers.  There was a bar at the U.S. Warsteiner corporate office which enabled us to all enjoy a beer at the end of the day. For many years, wholesalers opened their hospitality rooms for employees to have a cold one after work.  Coors Brewery had taps in the lunchroom for employees to enjoy Coors beer.  Unfortunately, the days of hospitality rooms are gone, but the relationships are still being created. 

It is not uncommon for friendships to develop over a cold beer, whether it is in college, while serving in the military, or working to perfect one’s career, most social events include beer.  Beer is often the means by which great friendships are created. I think back to the years and friendships that have come and gone, those made both in the industry and out, and inevitably these friendships were formed over beers.

These posts have highlighted a number of outstanding beer industry heroes who have passed on. The memories of such great beer professionals as: Paul Murray; Albert Cramer; Diane Fall; Pat McEntee; Jim Barrett; Paul Harvey; and Scott DeMartine revolved not so much around their expertise, but around those afternoons and evenings where beers were shared over industry talks.  Great times and great memories. These relationships have become more meaningful as the years have passed.  Some people leave the beer industry and move on, but often the friendships continue and grow throughout the years. Often when one reconnects with past friends, it is over a cold beer!

The beer industry is changing quickly, more so now than ever before. The magnitude of the seltzer segment is yet to be determined, but rest assured those real, long-term friendships will continue to be created over cold beers. That glue will remain intact.

Remember, the most valuable antiques are dear old friends.

In memory of my close friend, and the one with whom I shared my first beers, Dennis Koustoubardis.

 Posted by at 7:00 am
Nov 052019

Last week it was announced that the boutique wine, spirit, and beer company, Artisanal Beverage Distributor, is being acquired by Ben E. Keith in Dallas. The small, successful portfolio of Artisanal will ensure BEK’s ability to build their new spirit division in the distributor’s non-AB footprint markets across the state of Texas. 

Artisanal Beverage was founded by long-time industry veterans, Mark Monfrey and Jeff Daniels just five years ago. Prior to owning Artisanal Beverage, both Jeff and Mark worked together as beer importers. Mark’s uncle, the legendary John Monfrey of San Antonio, was one of the largest Falstaff Distributors of his time.  Monfrey was also employed with Miller Brewing and Molson. Prior to the creation of Artisanal Beverage, Mark had been employed with Pyramid Brewing, but in an effort to cost-cut, Pyramid moved Mark from the role of employee to that of consulting; a realignment which subsequently started Mark on the road to creating his own consulting and importing company.

Jeff Daniels was a longtime employee of Glazer’s and eventually assumed the role of state beer manager. Like Mark, Jeff found upward mobility at Glazer’s to difficult and made the life-changing decision to join Mark in the consulting and importing business. Not a bad move for two dispatched managers.

The story of Mark and Jeff is not uncommon in the beer industry, as there are many with similar accounts. “Sam,” a seasoned sales manager for Glazer’s in El Paso was also dismissed from the company. He was soon discovered by a German beer importer and excelled in his work with chains, a move which did not go unnoticed by Republic National. “Sam’s” love of the wine industry led him to accept a position with Republic where he now holds the title of Senior Vice President and he is a key member of management.

After a successful stint selling wines with Republic, “Sue” made the transition to Glazer’s as a member of their beer selling team.  She later transition into Glazer’s training division, but soon thereafter, hit the glass ceiling,  Upon leaving Glazer’s,  “Sue” joined an eclectic training company, accelerated their program to new heights, and purchased the business.   She built the establishment into a training powerhouse with renowned corporate clients including Ford, Target, American Airlines, and AT&T.  “Sue’s” business continues to be highly successful today.

The professional stories of these four individuals have one factor in common: companies who will not, or cannot, identify their employees’ skill sets and talent, lose them and the talented individuals move on to become highly successful in their chosen fields.

Booming brands can cover up a company’s lack of talent and leadership, however, when said brands begin to slide, the leadership gaps surface. Mark, Jeff, Sam, and Sue, had they been given the opportunity at Glazer’s or Pyramid, could have made a difference. Unfortunately for their former employers, it did not happen.  The irony of the story is that none of these individuals looked back; they are not bitter at their previous companies, in fact, they are grateful. If they had not been treated in the way they were, the four may not have become the success stories they are today.  

Motivation will always beat mere talent. 

 Posted by at 5:00 am
Oct 292019

The SMU football team is currently undefeated and ranked 16th in the nation. As college football fans know, the SMU program was given the death penalty during the mid-1980s for numerous NCAA violations. For over 39 years, the SMU football program suffered severely from that penalty and each year brought the school another losing season. Due to this fact, the NCAA has never given another school the death penalty. It is somewhat surprising that SMU just did not abandon its football program all together, but they did not and remained persistent.

Recently the NCAA revised their transfer rules for athletes. Prior to the revision, an athlete could not transfer and play without first sitting out a year. The exception applied to athletes who had already graduated and remained eligible.  The newly revised regulation now allows the athlete to enter the transfer portal and move to another school where he or she can immediately play. If a top athlete is not playing at their desired school, for whatever reason, they can enter the portal, transfer to their school of choice, and receive immediate playing time. Perhaps no other school has benefitted more from this new rule than SMU’s football team, which has received more than 30 transfers. Most of the players relocated from top schools, including the University of Alabama and the University of Texas.  All wanted an improved opportunity to play and showcase their talents. The new ruling is certainly a win-win for SMU and other schools, including the University of Oklahoma,  which is now potentially hosting a third consecutive Heisman Trophy quarterback.

So, the question is, if the NCAA can modify their “pigeonholed” rules, is it possible that wholesalers can/will create a transfer portal for brands who want out? Unless a state has a buyout provision in their franchise statues, a vendor cannot leave under any circumstance. Even when a distributor decides to sell their business, there can be numerous restrictions for a vendor who desired to pass the buyer on to another distributor.  A wholesaler has the right to obtain fair market value for their efforts in developing a brewery; however, a vendor should also have the right to choose its preferred wholesaler. All parties should be able to work through such issues without threatening letters or correspondence from lawyers. In many instances such letters only serve to aggravate progress and potentially cause undo delays.

Is the college transfer portal changing the landscape of athletics? Probably not yet, but it has given many athletes the opportunity for another chance. Perhaps brands and breweries should be given this same opportunity?

Every team feels they are better after the transfer. 

 Posted by at 6:00 am
Oct 222019

From the 1960s until the early 1980s, when a brewery team announced an upcoming crew drive, it typically meant one thing: the brewery was out to get the wholesaler. The brewery team’s purpose was to document deficiencies within the wholesaler, including out of date beer, out of stock beer, and distribution gaps. Depending upon the state of where the wholesaler was located, the timing for termination could have been drawn out for several months, supported by performance letters to the distributor. These crew drives were not fun.

The other type of crew drive during this time frame involved a three-day event with the wholesaler being graded on their performance. This was typically the result of the wholesaler’s nomination for that brewery’s “Wholesaler of the Year” category. These crew drives, of course, were fun and interesting because of their involvement with high performing operations.  With the arrival of the 1980s, however, crew drives shifted focus to QA performances. Brewers wanted fresh beer and incentivized the wholesalers with dollars and awards. These crew drives could have swung to the positive or the negative, but all in all, they typically went well.

Fast forward to today’s crew drives that deal with rollouts of either a new vendor or a new product.  When a wholesaler launches a new breweries’ product, a team of brewery people come to the wholesaler’s market and for one week, team up with a salesperson from that wholesaler’s team. The teams’ focus will be on the on-premise side of the account and will deal with draft handles and package placements. The overall success of these rollouts usually boils down to planning and pre-selling by the wholesaler. The wholesaler, with the brewery’s input, understands the brewer’s overall marketing and strategy.  Based upon the brewer’s communications of their vision, the wholesaler can drill down and target the right channels to provide the new brands with the best opportunity for growth.

The highest performing wholesalers are the ones who make the effort to send not only management, but also key sales and marketing staff to the new vendors’ breweries. When the wholesaler makes this commitment, the payoff can be tremendous for both companies. Wholesalers who do not visit the brewery will initially fall short of their rollout goals and the subsequent effort by the brewery to educate the team can be difficult. 

The success of the rollout dictates the immediate success of the brewer, the brand, and the wholesaler.  A poorly planned rollout makes it difficult for the brand to grow. Even with a strong and well-planned rollout the long term result is still not guaranteed, but why should any of the players take a chance?

Yesterday is not ours to recover, but tomorrow is ours to win or lose.

 Posted by at 6:00 am