Beer Business Unplugged

In 2006, Maureen Ogle’s outstanding book about the history of the beer business in the US, Ambitious Brew, opens with the arrival of Germans around 1844.  She writes that due to the oppression to the German speaking Europeans, many decided their future was not in Europe, but in the US, so they left their home continent.

The Germans settled in multiple locations, many of which became hot beds for beer production, including, but not limited to Cincinnati, Milwaukee, Chicago, St. Louis, and Golden, Colo.  Like many nationalities that came to the US, the Germans self-segregated.  Even today, in a number of American cities, German American clubs still exist, albeit they are nothing like they were originally.  Along with the many German breweries and retail outlets, these clubs were the social gathering place.

At Coors in San Antonio, our territory included Comal County, one of the many German settlements from that time period.  Today Comal County is still the home of the annual Wurstfest, a 10-day German carnival and celebration of sausage.  As you can imagine, a lot of beer is sold!

These German families assimilated into the US, became citizens, and established roots.  Budweiser, Schlitz, Coors, Miller, Pabst, and many others grew over the decades as the breweries were passed from one generation to another.  The industry often refers to prohibition as the darkest days we faced and during that time, German families and their breweries had to overcome both World Wars and the German backlash.  Despite such backlash against them, these German families survived and flourished for decades.

After 9/11 and the US military involvement in the Middle East, a majority of the country has come to support our troops and their efforts.  This has reinvigorated a nationalism that was not prevalent during the Vietnam conflict.  In fact, such patriotism was very apparent during the recent World Cup as the US team made it into the round of 16.  You could also see it in last month’s Ryder Cup, held in Scotland, and, of course, there is always the US support behind the Olympic teams.

One question: how does this nationalism translate to the beer industry?  Consider ABI.  Bought by InBev and run by Brazilians, who recently promoted another Brazilian to head up the US operation, with a stated goal of repairing relationships with their AB wholesalers!  Really!

Heineken USA is also run by non-Americans.  Breweries such as Bavaria, Carlsberg, and soon Moosehead, ended US operations, went to small importers, and pulled or reduced support.  All there breweries are managed from their headquarters in their home country.  Warsteiner just named a new President, a German, who will run the US operation from Germany.  Take a look at many of these imports and breweries.  Bought, sold and/or run by foreigners.

The sales and profit numbers for Crown and Boston Beers are remarkable.  The same holds true for other American owned and run breweries including Sierra Nevada, New Belgium, Founders, Laganitas, Bells, and others.  The American craft industry is on fire!  Could part of that growth be because they are American owned and operated?

As discussed in previous posts, Europeans and others have different business models, and growth is not their number one priority.  One can argue that ABI employs many Americans, which is true, but tell that to the thousands of former American employees who have been let go by the Brazilians.

So the question is: how many Americans run Brazilian Beer companies?  How many Americans run German beer companies or breweries from Holland or in Belgium or China?  Finally, how many foreigners run craft breweries are in the US?  Perhaps these foreign run companies should consider that if everything seems to be going well, perhaps you have obviously overlooked something!

In the summer of 1996, while working at Gambrinus, I was asked to spend two days with Andrew Oland, who was a member of the family who owns Moosehead in St. Johns.  Andrew at the time was getting his MBA at Harvard, and his summer assignment was to research US beer importers.  Moosehead was looking for a new importer for the US, and this project worked out well for both Andrew and Moosehead.

Andrew and I visited a number of on and off premise accounts looking at all things involving Canadian beers along with Gambrinus products, Corona and Shiner.  We went through all the reports and information used by Gambrinus, along with various procedures and policies.  Moosehead soon made the decision to appoint Gambrinus for the US market, which subsequently led to a 10 year relationship.

After terminating the relationship, Moosehead switched to importing alone with Glenn McDonald as their President.  Moosehead has been an independent importer since that termination with Gambrinus took place, and remained independent until the just announced appointment of United States Beverage as their new importer.

In the 1980s, Moosehead was part of All Brands Importer, a company owned by British companies Grand Metropolitan P.L.C. and Whitbred and Company.  During this time, Moosehead was highly popular with the college students and used the marketing platform of “The Moose is Loose.” One could find Moosehead bumper stickers and t-shirts all over college campuses.

Guinness bought out All Brands in 1990, which included Moosehead, Dos Equis, Sol, Pilsner Urquell, and Clausthaller.  By this time, Moosehead had left the “The Moose is Loose” campaign and now Corona was the hot brand on college campuses.  This subsequently led to Moosehead appointing Gambrinus as their importer by the mid-1990s.

In December of 2006, at a meeting in Denver with Glenn, we began discussing the idea of a JV between Moosehead and Warsteiner.  The idea behind this was to create a company that had the critical mass to allow both brands the marketing and sales support needed to compete.

After running the initial numbers, it was clear to both of us that a JV between both companies was ideal.  Neither brands competed against the other in flavors or price, in the states where Moosehead was strong, Warsteiner was weak; and conversely, where Warsteiner was strong, Moosehead was week.  This JV would create a company whose volume was close to 250K HL.

Another meeting was held in Georgia in the spring of 2007 with representatives from Germany and Canada.  Warsteiner continued to review other opportunities, including working with USB.  A meeting took place in New York shortly after the Georgia meeting.  It was decided that USB, while a company with solid marketing experience, did not fit what Warsteiner was looking for at that time.

By the summer, Warsteiner was open to the JV with Moosehead; however management in Canada had decided to go it alone in the US.  What looked to be a perfect JV between Moosehead and Warsteiner ended?

Now seven years later, Moosehead is once again appointing a new importer, USB.  This could be due to the rapid and continued rise of crafts, or perhaps the desire for more marketing emphasis, but consider that this is the third importer for Moosehead and all the years of self-importing during the last three decades, a pattern of inconsistency definitely emerges. Consistency as Crown or Boston exhibit can be seen in the numbers. Either way what is true is that the early bird gets the worm, however the second mouse gets the cheese!

Beer fodder; www.youtube.com/embed/QFEYC4Z44v0?rel=0”

On last weeks blog for a follow up on golf’s problems.