Beer Business Unplugged

My first summer on a beer truck, 1969, was also the last year Pearl Beer was the number one selling beer in Texas.  Pearl had been in that top position for the previous 15 years, but their biggest markets were all in south Texas.  That summer, the brewery workers at AB had gone out on strike, and by July, there was no Budweiser in Dallas, so the Bud drivers picked up empties at the local bars.  At the time Coors, where I worked, had all 10 states and a portion of Texas on allocation.  Dallas was allocated only 10% of what Coors sold in 1968.

The Dallas warehouse was totally empty every morning when we arrived for work with the trucks still full from the railcars that arrived during the night.  Each truck had a print out of their daily accounts with a sales history.  My job as a college student and helper was to tell the salesman just how much each account was allocated.  As you can imagine, there were some pissed off retailers.

Schlitz, a strong number two in sales, rented the empty Falstaff warehouse and filled it with inventory.  While there was no Budweiser, and limited Coors in Dallas, Schlitz had beer everywhere.  By the end of the year, Schlitz has surpassed Pearl and had become the largest selling beer in Texas.  In the summer of 1970, it happened all over again.  AB went on strike, Coors again was allocated, and Schlitz took advantage of this situation and continued to grow market share.  In fact, Texas became the number one volume state for Schlitz. The brewery made Texas a division with a sales team devoted solely to the state.

Because of the importance of Texas to the brewery, Schlitz gave the Texas wholesalers quite a bit of attention and the wholesalers responded with an organization called “The Gusto Club.”  To support the wholesalers, Schlitz had put together a very effective state sales team.  During the late 60s and into the 70s, many of these Schlitz field sales people were hired by the wholesalers to run their operations.  Some were even able to buy into ownership of the Schlitz houses.

By the early 80s, the self-inflected problems of Schlitz finally caught up with them and the brewery was sold to Stroh.  Miller Lite was now on fire in Texas, while Schlitz was losing ground at an alarming rate.  The Schlitz wholesalers started to either sell out or acquire Coors in their markets.  Coors never established any market share in S. Texas so the wholesalers struggled. The combination of Schlitz and Coors seemed to work at that time.

With declining Schlitz sales and the fact that Stroh never got established, Stroh started to consolidate and the lay-offs began.  Many of the Schlitz field sales people ended up at Gambrinus and other importers including Molson’s, Labatt’s and Femsa.  Some of these companies did well but, most did not and ended up like Schlitz, selling out or being acquired by another beer company.

After years of great success with Schlitz, many of the field sales personnel stayed in touch and even today continue to communicate with each other although most are now retired.  These men lived through the high times and the death of what they loved, and because of that, they truly are this band of brothers….

If there was ever a city that could be called an incubator for craft beers, it would be Portland, Oregon.  When I was with Coast Distributors in the late 80s, crafts were at a one percent share.  Now crafts are over 30% share in volume, and over 40% share in dollars.  More than ten years ago while visiting Portland, my son, a budding musician at the time,  took me to an old converted warehouse where rock bands rented space to practice their music.  The building had been converted into small rooms enabling the bands the ability to practice and not disturb others.  When we walked into my son’s room, I was surprised by the empty beer cans, all of which were Pabst Blue Ribbon!  My son informed me that he and his friends all drank Pabst, then considered an anti-establishment and cheap beer!

PBR today is the personification of a retro brand.  In 1980, Pabst Brewing Co., after a number of acquisitions, sold over fifteen million bbls. of beer.  By 2000, PBR was virtually nonexistent, but due to the resurrection of PBR and its success, Pabst has been the reason more retro brands are being marketed.

There are a number of brands similar to PBR that, while they did not totally die, did come close.  Many are now experiencing some rebirth.  Brands like Schlitz, which has not gotten any traction even though there has been some money behind it; Pabst, which owns Schlitz, targeted south Florida some years ago with billboards, than went to Chicago and Milwaukee, with limited success; and Coors has done a great job and experiencing steady growth once they quit blending the liquid and went back to the original beer and retro label.    Then there are some regionals, like Lone Star which is selling better.

Investment companies have also been involved in the retro reboot; North American Breweries with Genesee and High Falls used a major influx of cash and did well.  The owners recently divested their ownership and moved on.  Iron City in Pittsburgh, also owned by an investment group, and with new management, is once again attempting to pump-up sales with the possible intent of selling the brewery and moving on.

Then there are those brands like Henry’s, owned by MC, who have reinvented themselves into more of a craft beer and have seen success.  Stevens Point is another of the breweries that have quite a history across the upper Midwest has plans to expand in 2014.

Outside of PBR, Narragansett has been very successful in coming back, reporting sales near 1 million cases.  Likewise, Henry’s has developed flavors with their name attached to the beer.  More retro brands are coming as Pabst has plans to re-introduce Jax, a former big brand from Jackson Brewing Co. of New Orleans.  Another now in some markets is Drewrys.  Once a 1.3 million barrel brand out of Indiana, Drewrys was bought out by Heileman and closed down in 1972.  Drewrys is now planning to expand into the Midwest states this year.

Retro brands are different from crafts as they have a history and a story to tell.  Distributors should take a hard look at these brands and what is behind them.  With the right team and the right support, a brand like Drewrys could be a nice addition to the portfolio.  For retros to be successful in today’s market, they need to be different, better or cheaper.