Jul 212015

Old Lone Star can #2As a young District Manager in the early 1970s, Lone Star Brewing Co. relocated me to Lubbock, Texas.  The market I had been assigned to worked with distributorships in Amarillo, El Paso, Midland/Odessa, San Angelo, Abilene and Wichita Falls.  There were also operations in smaller markets including Brownwood, Pecos and Priddy, Texas!

The distributor in Brownwood, in addition to selling Lone Star, also sold Miller and Pearl and some smaller brands. This business plan made sense.  On the other had in Pecos, which was nothing more than a gas stop on the highway to El Paso in the middle of West Texas, that distributor also sold AB products!  Outside of the rest stop, Pecos was known for oil fields, cattle and watermelon fields!  That is it!

The Pecos wholesaler was a cattle rancher that ran his operation about three days a week.  It was a little puzzling how both AB and Lone Star had a distributor here; however, what was really challenging was figuring out why Lone Star had a distributor in Priddy?

In Pecos there was one hotel, several miscellaneous buildings, and a couple of restaurants, but Priddy, located a little over 10 miles east of Brownwood, consisted only of a gas station which doubled as a general store.  That was the entire town.  There was a small barn behind the general store that housed a two bay-beer truck painted with the Lone Star logo and a tractor. The inventory consisted of two pallets of beer!

One would think that since Priddy was only 1o miles or so from Brownwood that it would have been in Brownwood’s footprint.  That was not the case. It was not long before I learned that all over Texas, especially in south Texas, Lone Star and Pearl had operations in many of these small, rural markets.

After World War II, as Lone Star was experiencing rapid growth, the Vice President of Sales was awarding distributorships.  As it turns out, the VP was asking $5,000 for rights to sell the beer.  He then in turn, purchased Lone Star stock.  Soon he was the second largest stockholder in the brewery, only behind the founder and owner, Harry Jersig.

While the VP was enhancing his personal wealth and position at the brewery, he was enabling an unintended effective marketing strategy.  By establishing small, local breweries in these communities where everyone knew everyone, the locals supported the beer.  Lone Star enjoyed great success with this model during the 50s and 60s.

To some degree, the craft beer industry’s success is similar to Lone Star’s success.  Breweries in local communities rally and connect while supporting their home-grown brands.

Even now, some craft breweries are selling equity to the public.  In Madison, Wisc. a three year old brewery, MobCraft, recently took advantage of a new law to raise $67,000 in growth capital from 52 Wisconsin residents, nearly all of them first-time business investors.  Only two percent was available for purchase at a minimum investment of $525.  Buyers got a detailed, 13 page disclosure documents delineating the company’s history, financial background and growth plans, in addition to a risk analysis as reported in the New York Times.

The question becomes: will this model continue to become more and more available to locals?  As in any investments, you expect to have fun and make money…..

Beer Fodder; IPad Beer at Hofbraeuhaus – Simon Pierro – YouTube

 Posted by at 6:00 am