Beer Business Unplugged

By the time the 21st amendment was ratified in 1933, the country was in the Great Depression.  Unemployment numbers were not sugar-coated in those days as they are now, and the jobless rate was reported as high as 25%.  One in four adults was out of work.  Once the depression had reached its depth, the brewers got smart.  By rescinding the 18th amendment, the brewers had explained to Congress and the President that, not only could the government realize the benefit of the tax revenue stream, but more than 10,000 direct jobs would be created along with thousands of in-direct jobs.  Tied houses could be eliminated by using a three-tiered system.  Congress was convinced. The great experiment had failed, the 21st amendment became law and the rest is history.

Last week the WSJ chronicled the craft brewers’ efforts to change the beer laws in Michigan.  The brewers want to raise the definition of a microbrewery to 60,000 bbls, from 30,000 bbls.  A second bill would raise to two the number of on-premise retail sites that a brewery can directly sell beer for consumption.  The current limitations on local craft brewers have halted millions of dollars in investment for the state.  One brewery pulled the plug on a million-dollar plus renovation that would have created 20 new jobs.  Another brewery stated they scaled back their growth by putting on hold a $2 million dollar expansion and over 100 new jobs.

The article goes on to highlight statements by State Sen. Howard Walker, who has introduced an omnibus-style bill in the senate which would cut out a wide range of “laws that were designed in the ’30s.”  The bill, however, has been bottled up in committee for a year and half, blamed on the lobbying by the Michigan Beer and Wine Wholesalers.

Through extensive lobbying, wholesalers, in conjunction with retailers, have gotten state laws passed which were favorable to their individual and collective interests.  At the time, opposition to these changes was minimal.  The changes, however, were certainly not limited to laws which included cash upon delivery, franchise protection, no dock sales, territorial protection, three tier restrictions, no dueling of brands and many more.  The wholesalers have been very successful and continue to be.

The rise and dramatic growth of the crafts are forcing the states to revisit these laws as the number one concern for the crafts are simple:  crafts need access to the marketplace.  As previously mentioned, carve out laws help to resolve crafts’ and imports’ issues with wholesalers’ lack of focus on their brands.  So the real question is, are these strategies the most effective ones for crafts?

Michigan, with bankrupted Detroit, appears as if it could play out as a template for all craft brewers by using the prohibition era-position strategies that AB, Pabst, Schlitz, Falstaff, Miller and others used to get the 18th amendment appealed.  Attacking the laws written and modified over the years by the wholesalers directly is, at best, a long-term process.  States need money and jobs, crafts can now provide that with their dramatic growth.  For craft brewers, it’s the economy stupid!

Right after college I was a Falstaff route salesman in Austin.  My route was the east side of town, in fact; I had east 3rd street before it was the place to party.  Most of my accounts were bars, usually one to two cases per stop, but I did service Bergstrom Air Force base and a couple of grocery stores.  My truck, a 1957 IH one bay, was  loaded with 100 returnable long necks and 300 six-pack cans.  Remember, this was all DSD.  Fridays were rough, as the day ran from seven am to seven pm, and I usually went through two ticket books.   When I turned in my resignation, Falstaff hired a recently retired Air Force Sergeant.  He rode with me on the route for my last week  Immediately I could see that being a beer salesman was not what this gentleman thought it would be.  The sergeant did not last one month.

In the recent US jobs reports, the fastest growing segment of the employment population is part-time positions (under 30 hours).  It’s been touted that Obamacare, along with the recession, are the drivers of this segment, as companies seek to acquire additional staff that do not require full-time benefits.  Going forward, how does the beer industry fit into this segment?

On several occasions I employed part-time staff while running beer houses.  In Kansas, we hired young college students to work as weekend merchandisers and to clean the lines. Most distributors use summer college help is one way or another, but that is usually where it ends.  On several occasions while working at Warsteiner, I was asked to accept interns from Germany, knowing full well that they would later be hired by the brewery.

The question arises, can, or will the industry be able to create positions that use professionals in a part-time function?  This summer I had some discussions with a successful winery that is expanding across the country.  In talking with the company’s recently appointed president, a longtime associate, the topic arose as to whether or not I could function as their expansion director on a contract or ad hoc basis.  I had similar conversations with another small importer offering the same services.  From a supplier view, a number of positions can be outsourced, but the distributor side is a different model.

As Corporate Director of Malt Beverages during my years at Glazer’s, I functioned predominately as an internal consultant, a position which could have served as an external consultant on retainer.  Many large or even statewide beer wholesalers have used professionals to bring them quality new suppliers filtering out those not considered a good fit and bringing only those with the right product and business model.  Again, the purpose is to fill a roll as a consultant and in so doing eliminate wasted time for the wholesaler.

Day to-day distributor operations and the various functions within, would be difficult to operate with part-time employees, but not impossible.  Part-time warehousing, merchandising, and special events excluded, can there be part-time positions for marketing? Or do distributors believe, “we have deep depth!”