May, 2013 | Beer Business Unplugged

May 27, 1949

May 282013

Glazer’s operation in Columbus, Ohio represents a nice portfolio of crafts and imported beers, including Boston Brewing Co. products. Since Columbus is the home of Ohio State University, this market was chosen a decade ago to be a test for the new Samuel Adams Light beer. To kick off the new beer, Jim Koch came to Columbus, presented the new product to the sales team in the morning, spent the rest of the day in the retail trade, including hosting a beer tasting lunch at a key retail account, and participated in the usual media interviews. The commitment in terms of marketing dollars spent was impressive and of course, resulted in a successful launch.

Next year will be the 30th anniversary of Boston Beers, which is now the largest American owned craft brewery in the US. It’s seems like only yesterday when Jim Koch made the comment in his address at the NBWA that “AB spills more beer in a day then I sell in a year!” This is ironic in that Boston Beers is still owned by Jim, and AB was sold! Much has been written about Jim’s challenges during the start-up of Boston Brewing, including the quest for wholesalers to represent the brand and the extent to which he founded the craft market.

One strategy Boston used in the early days, was to target airport lounges and key upscale hotel bars. In essence the marketing strategy was to fit the demographics to the brand. The idea being that those traveling for business were in a captive place. The consumer who wanted to catch a quick beer at the airport had little choice, knowing that the beer selection was limited, and there really were no other bars in the immediate vicinity. By placing Sam Adams in airport bars, along with AB products, the consumer was given a real choice in their beer menu. Sam Adams experienced great exposure to the business traveler who had been held captive in airports and hotel settings. Now one can find Sam Adams Bars in a number of airports, serving many of their flavors.

In discussions with many of my distributors, especially in larger or metro markets, the number one feedback from distributors in regards to brand growth was always the same: “You need to be more like Boston Beers, they have X amount of people in my market!” This was problematic for almost all the suppliers as I had 260 wholesalers selling Warsteiner, and while I wished I could have a field staff that large, it was about as reasonable as a distributor having one salesmen per account. I credit Boston Beers for developing the feet on the street concept to really get Sam Adams selling and the focus it needed to get started. Now, however, this is one of the biggest obstacles to overcome when discussing plans with distributors..

Much has been written about Jim Koch and Sam Adams, and much more will be written about their success. Jim and I have some things in common, we both spent our careers in beer and we both share the same birthday, May 27^th. But now, Jim spills more beer in one day than I sell in a year! Happy Birthday, Jim!

42….

Uncategorized No Responses »

May 212013

In the mid 70’s, I took the Sales Manager job at Mid State Distributors in Alexandria, Louisiana. Schlitz, at the time, had a 48% share of the market, and while Mid State was a small house, I had five direct reports, two of whom ran sub warehouses. Of the five supervisors, one was a tall, thin African-American named Bill Manuel. Bill, a commissioned officer in the Army, had recently returned from serving in Vietnam where he had lost a good portion of his stomach in combat. As a result, Bill was unable to eat a normal amount of food at one setting and had to eat five times a day. I quickly learned Bill was being paid 20% less than the other four supervisors. While his overall volume of responsibilities were the smallest of the five areas, I felt he deserved a raise, so I gave him one.

Immediately after I raised his salary, I was called into the corporate office and was told in no uncertain terms, that this wasn’t done and not to do it again. I left the operation at the end of the year and Bill went with me. He worked for me for about the next five years, then returned to Louisiana. The last I heard from him was that he had gone to work for an AB house there.

In other blogs I have written, I have mentioned being contacted with regards to assisting companies in finding experienced beer people. The requests almost always come with a stipulation, the top one being: “the hire must be a female.” Over the years, even I have been eliminated for consideration for key positions because of sex.

Recently, a former colleague of mine at MillerCoors lost his job after 25 years, only two years short of retirement. The Brewery told him there was not enough work for number of employees in the department, but they kept the younger man. Now does anyone believe that a company the size of MC could not have found a position for him where this individual could have made a contribution while working his last two years? Really?

The movie, 42, is the story of the baseball player, Jackie Robinson, and his struggle to break into major league baseball. Eventually Robinson’s overall talent as a ball player, and his character as a man, win out over all the discrimination he experiences. He was named rookie of the year and went on to play in six all-star games. And, of course, he is in the Hall of Fame.

Not unlike the movie 42, the beer industry continues to display discrimination today, whether it’s race, sex, age or even nationality. I hear about it all the time. If you have not seen 42 I would encourage you to go, it’s not only a good movie, but maybe after you see it, you’ll think of people you know today who have the number “42” on their backs! Just like Jackie Robinson, many have the talent and ability, and something that is hard to find, character, they just need to get back on the diamond.

The sun don’t shine on the same ol’dogs rear end every day….

Uncategorized No Responses »

May 142013

In the spring of 2012, I was in Milwaukee to roll out Krombacher. While visiting accounts with one of the salesmen, we stopped at the Pabst Brewery, which had closed in 1997. Developers were in the process of turning the old brewery into a hotel, retail, and residential property. The hospitality building, executive offices and retail outlet had been purchased earlier, and the old hospitality bar was open to the public for meetings, weddings and receptions. The building itself had not changed in years and it was like walking back in time. The owner was there and allowed us to walk through the executive offices, which were connected to the bar. It was like a time-warp, with nothing changed since 1997, including the desks, that still had papers on them, and ash trays, complete with cigarette butts. It was as if time stopped 15 years ago.

Leaving the Pabst, we drove past the old Schlitz Brewery, also converted to offices and used for school administration buildings. Another sad sight for me as I had been in both of these breweries when they were at, or near their peak in sales.

Similarly, the two San Antonio breweries, Lone Star, with its Buckhorn Hall of Horns; and Pearl Brewing, with the Jersey Lilly, have also been transformed from breweries into retail and residential spaces. Jax Brewery in New Orleans, is now a retail center; and the Falstaff brewery is mostly empty. Henry Weinhard’s in Portland; Olympia in Tumwater; and Rainer in downtown Seattle have all been closed for years, some transformed into offices and retail, others just sitting empty.

There are many other stories of closed breweries around the country. What happened to them? All of these breweries were in business in 1970s, most still around in 1980s, but are now gone. If there truly is one point in time when the industry changed, one could point to the purchase of the Miller Brewing Co by Philip Morris…the day the beer world changed forever. With the advent of PM’s millions in marketing, and the awaking of AB to their challenge, one could attribute the death of these breweries to these two factors.

Was the growth of AB, Miller and Coors from their marketing investment? Or was it from the collapse of the other breweries, leaving millions of barrels of volume up for grabs? The logical answer is: both. But what would have happened had those breweries not made the mistakes they did and survived?

Since InBev bought AB, their share of market continues to slip. In recent Nielsen scans, AB in down -5.6% in volume in the last four weeks, and down -4.3% in dollars. MillerCoors is down -4.3% in volume, too. Yet crafts are on fire, growing near +15% this year, on top of double digit growth in 2012 and 2011. Maybe crafts are taking advantage of what AB and MC did to the regionals years ago by sourcing their growth from the volume losses of AB and MC. As they say, “the sun don’t shine on the same ol’dogs rear end every day!”

Don’t solve problems…pursue opportunities…

Uncategorized No Responses »

May 072013

In my professional career, I’ve seen what I consider to be three major shifts in consumer tastes. The first, was when the consumers moved away from full flavored domestics to light domestics. This shift was led by the marketing of Miller Lite from Philip Morris. Lite, followed by Coors Light and Bud Light, are now three of the four largest selling brands.

Next, although not nearly as impactful, was the growth of imports starting in the 80’s with Corona. The rapid growth of Corona, inspired Heineken and others to invest in their US operations. Imports continue to maintain their share, especially with the recent advancement of Dos Equis and the great success of Stella Artois.

We are now experiencing the growth of craft beers, which probably should be described as “explosive” in light of the recent numbers. Actually, this started over 20 years ago in the northwest where Oregon, Washington, and California had laws which were friendly to craft breweries and enabled them to more easily get established. By the end of this year, there will be somewhere around 2,400 breweries in the US. Most of these established in recent years. Colleges now are beginning to create and offer degrees, certificates and continuing education on brewing and the business of beer.

I’ve been asked on several occasions just how big, or where is the ceiling on crafts? Well, no one can answer that, but I do know there is a template: Oregon and Washington. In these two states, volume sales are 30%+ of market share and 40%+ of dollar share. Many us think we are on the cusp of seeing a 10% share of volume within the next several years.

This week I was talking with a noted industry consultant who commented that some people think that the crafts are really hurting the beer business. The term he used to describe the rapid growth of crafts, is that they are akin to a “cancer” to the overall business. An example of this, which I’ve heard on more then one occasion from a number of suppliers, is that when they lose a draft handle, which was selling at a rate of one per week to a local craft, the craft only pulls at half the rate of the previous brand. The supplier loses, the wholesaler loses and the retailer loses. The consumer, however, seems to enjoy drinking a local product, unaffected by the fact that the craft is only producing half the volume of the previous brand.

Then we have the teas and ciders, which have a very small base, but are growing at incredible rates. Early reports show that these products are sourcing their volume from wines, not other beers. If so, this is exciting in that the industry now can reverse some of what was lost to wines. Hard to define those products as a “cancer.”

Crafts will face the classic growth problems, consolidation, fall-outs, bankruptcy, price wars, quality issues and wholesaler concerns. Then the question becomes, are crafts really a cancer to the beer industry? Another word to describe the craft growth might be “steroids.” Crafts are making the industry exciting with new products and flavors, something that has been needed for a longtime. The consumer, especially the younger ones, are driving the growth of crafts. The industry needs the growth. Maybe we don’t have any problems to solve, just opportunities to pursue.