Aug 282012

Over the decades I must have sat through maybe a hundred “marketing” meetings on either the vendor or wholesaler side. I’ve seen these in all categories, domestics, imports, crafts and even PAB’s. In almost every case, during the “brand strategy” segments (always early in the meeting), they would present the targeted demographics for the particular brand. It always seemed to be LDA to 34, or with imports/crafts, 26 to 39, professional, income $75K+ and it seemed that the marketing department changed about every two to three years. This always brought in new people, a change in agencies, and of course, a new direction for the brand. The results, as expected, were somewhat mixed, then the cycle started over again.

Much has been written lately about the softness of the premium lights (Coors Light the exception) and we all know about Budweiser and Miller. The big growth numbers are in crafts, PAB’s, Mexican imports, Stella, ciders, and some very high cost specialties. This constitutes only about 20% of the US volume, but seems to dominate all the discussion and interest in the industry! Especially with wholesalers.

That being said, then just why are the domestics struggling? Look at the new Heineken commercials as they are obviously targeted at a much younger generation. I hope they get it, as I don’t, but then again, I’m not the targeted demographic! Then the question becomes, is Heineken purposely forgetting or overlooking their core business of those over 50? It appears to be so, doesn’t it?

A force to consider are the Boomers.  As of today, Boomers are 77 million strong and they “buy things” because they have the disposable income to do so. In fact, in the last 12 months, 47% of all consumer goods and services were purchased by people 50 and older, to the tune of $2.7 trillion! The 50+ population are only going to increase as the Boomers finish moving into that demographic.

With very few exceptions only a few beer companies have marketing campaign targeted specifically toward the Boomers. Coors Banquet is an example, which has had a consistent message for the last several years. The strategy is working, as the brand is now growing after struggling for the past several years. Think about it, have you ever attended a marketing meeting where the brand strategy is targeted at the 50+ up, high income/retired demographics? I haven’t. Then is the question, is it easier to market to a much younger demographic? It must be, or could the question be, is it easier for a 35-year-old marketing executive to market to a younger group then an older group?

My contemporaries do not drink crafts, fruit beers, PAB’s, ciders, or European imports. They drink domestic lights and some Mexican imports. That’s it. Maybe it’s more of the domestic marketing experts taking the Boomers for granted knowing that they will always be there and their challenge (as they see it) is to get the younger drinker? Maybe it’s the nature of the American marketing industry to glorify youth and beauty over age and experience. If that’s the case, then the 77+ million boomers truly are the forgotten generation…..





 Posted by at 8:46 am
Aug 212012

The best definition of growing old, I believe, is when “the past means more than the future!”  You can see that in the writings of the famous Dan Jenkins when he talks about golf.  Jenkins, recently elected to the World Golf Hall of Fame, can’t seem to write an article without reference to the great Ben Hogan.  This is somewhat understandable as Jenkins played golf with Hogan in the 50’s and has attended 50 Master’s tournaments and over 200 majors, so he, if you will, tends to live more in the past.

I can remember when price increases from breweries were 10 cents a case and when they happened, as it sometimes didn’t come often, made all of us very concerned as to the impact on our sales.  From a dime the increases went to a quarter, then fifty cents, on to a dollar, and now to several dollars.  And now the impact on sales?

Back in the summer of 2008 while at Warsteiner, the brewery decided to raise the transfer price up to what then was four price points in the market.  At the same time I was directed to eliminate 12 sales people and cut millions from the marketing budget.  The result?  After 6 months, Warsteiner had lost 39% of it’s US volume.  The CFO, after admitting a mistake had been made said that “we needed to communicate better!” I don’t believe communications was the issue, I believe our fears and concerns fell on deaf ears.  Since European companies either own or heavily influence the majority of the US business now I decided to show their CPI on beer for some key European countries (see below).  You can see clearly why we are experiencing these increases and why.  Understand in some of these countries, as you have read, unemployment is over 20%!  Maybe higher.  Interesting, when you look at the German CPI and wonder why the increases are not as dramatic as the other countries, one major reason is that the largest brewery in Germany sells only “price beers”.  There is no advertising, support, p-o-s, promotions, etc.  Cheap price for a case of cans.  The other guys can’t raise without seeing these guys in their rear view mirror.  In other words, competition.

In the post “You Are What You Are” I mentioned that ABI, in their efforts to control GP in all segments, could focus on pricing as a tool to drain the GP of the middle tier. In fact the DoJ is now looking into the ABI/Modelo deal and pricing could be a key component in their decision.   I see it more and more as referenced by the current price increases.   If you are even wondering for a moment about the future, look again at the chart below.  It clearly indicates what you can expect regarding the future of your pricing.  So just what does it mean?  Well while you think about it, I’ll go and fix me a scotch.




 Posted by at 3:25 pm
Aug 142012

After college in the early 70’s I took a job in Austin as a route salesman for Falstaff beer. At that time, Schlitz was #1 followed by the regionals, Pearl and Lone Star, with Falstaff and Budweiser not far behind. Heavy weights of today, Miller and Shiner, weren’t much back then and of course, crafts didn’t exist and Coors wasn’t in Austin yet. As far as brands were concerned, there were just Schlitz, Budweiser, Lone Star, Pearl, Falstaff, Miller and Shiner… no brand extensions and limited packages. In other words, the beer business was simple.

Late that summer, Miller tested a new beer, Miller Lite, which was priced .10 cents higher (that’s right, only a dime higher) and all the beer guys figured who would buy a beer with less alcohol that cost more? Well, everything changed from that point going forward.

By 1976, Coors had expanded into S. Texas and I was running one of the Coors houses in San Antonio. Coors had decided to test their new light “Coors Light” in San Antonio against Miller Lite which, by now, was established and beginning to grow behind their great ad campaign. The first Coors Light can was buff in color, similar to that of the current banquet package, with the word “Light” in red script. The package was lost in the cooler and the introduction wasn’t going well so after about six months, Coors changed to the silver can and red lettering. The rest is history.

Fast forward to the early 80’s. I was the owner of a large Schlitz operation in S. Texas near Mexico. I had just purchased the Pearl operation in McAllen, and we acquired a number of imported brands which put me in the position of the dominate distributor in imports. Our largest selling Mexican brand was Carta Blanca (true), but I had another beer that came in a brown bottle with a neck label in the colors of the Mexican flag. I couldn’t sell a layer, much less a pallet of the beer, but we kept at it. The next year the bottle was changed to a clear 12 ounce “long neck” in a 20 bottle loose case. It took off, and within two years our annual volume was now around 40,000 cases, obviously it was Corona.

Now add in Budweiser Light (the original name which also didn’t make it) around the same time and you have three new brands, one that was “refreshed,” all in that same decade, and all four in the top five selling brands in the US. Understand that all four needed to have name and/or package changes to survive.

Today what is growing are the PABs;  line extensions, such as BL platinum; flavored beers and fruit beers from Europe. Now does anyone out there think that any of these products will be as big as, say a Coors or Bud Light? I, however, was one of those salesman in Austin that said Miller Lite would never sell! It doesn’t matter what I think, or what you think, it’s what the consumer thinks. So, is it an elephant in the kitchen or just a mouse?

 Posted by at 8:28 am
Aug 072012

I used to love getting certified letters from a lawyer representing one of our distributors informing me of a pending sale to a new distributor.  The letters always asked for my signature “approving” the transaction and had little to no details.  What is really frustrating was that the transaction was to take place at the end of the current month.  Sometimes that was in just 10 days!  Really?

Short notice aside, in the past 7 years or so, I was probably involved in about 40 to 50 distributor changes, mostly due to a buy/sell or a swap of brands.  These covered all types including, small selling to a bigger house, a big house dividing up to many smaller ones, and even some statewide selling the brand up to many others and keeping some markets.  Of course, in some circumstances, we had asked to be sold and the distributor was willing to do so.

As I saw it, most of the acquiring distributors were not prepared for the brands.  Either they didn’t have the internal skill sets to manage imports/crafts and were unwilling to go outside and find the talent, or they determined which of the new brands got the focus, and the others were just added to the pad.  The impact of this on the vendor is dramatic, in fact, so much so, that the distributor really has little to no idea of the impact.  The importer/brewery has financial and sales numbers to achieve, goals to meet, employees to support, and of course, ROI to its owners.  I can recall four major changes, all of which appeared to be for the best, (e.g. moving into a “better distribution system”) that turned into a disaster. In one major market, when the brand was sold from a wine and spirit house to an ABI house, sales dropped 70% over the previous year.   The brand left a large W&S distriutor due to termination and was acquired by the ABI network.   In less than a year, it was swapped out for other ABI brands.  Three networks within one year.  The brand is just now recovering and finally growing after four years.

The worst scenario any vendor can have occurs when a distributor is appointed, then at some point shortly after introduction, decides to DQ the brand and there is no other distributor or option in the market.  It does occur, more frequently than you know.

Today, small vendors, both importers and especially crafts, should really consider a system which provides statewide coverage.  This is well documented.  By following this practice, you have consistent pricing, critical mass in volume, better focus and inventory control.  In Texas, for instance, Ben E. Keith and L&F (Favorite Brands) now offer statewide distribution.  Of course the downside to this system is the potential of one distributor becoming a large percentage of your business.

When the brand moves, regardless of the situation, with the loss of volume, revenue and market share you can anticipate supplier pull backs, budget cuts, employee layoffs, a reduction in marketing spend, and strained relationships.  Collteral damage, everyone loses.


 Posted by at 11:23 am