Jun 282016
 

Make it yoursI moved to Kansas in 1978 as the executive vice president of Coors of Kansas.  Although this was not my first exposure to 3.2 beer, it would be my first exposure to selling the liquid.  So-called “strong” beer was sold only in liquor stores and private clubs, whereas 3.2 beer was sold everywhere.  As I recall, 80% of the Coors sold was 3.2 liquid.

I quickly learned that the state addressed strong beer in a much stricter manner than the method used for handing 3.2 beer.  Our trucks would deliver 3.2 beer to a grocery store, while next door sat a liquor store.  Coors of Kansas had separate routes for strong beer and 3.2 beer.  I had the routing changed so routes could service both accounts.  This was done by loading one side of the truck with 3.2 beer and the other side was loaded with strong beer.

Of course, to help this system I had changed the fleet, going from eight bay bobtails to 16 bay tractors.  The employees thought I had lost my mind in so doing, but the change resulted in no issues and by the end of the year, our delivery cost had dropped dramatically.  This reduction in expenses resulted in a 45% increase in operating income.  Obviously the owners were very pleased with the results.

Ten years later, while working at Coors Brewing Co., I was sent to Utah to run a newly acquired distributorship.  Once again, I was in a state where 3.2 beer the dominated ABW.  Of course, working and living in Colorado presented the same issue, 3.2 beer in groceries and c-stores, while strong beer was sold only in liquor stores.

Fast forward 25 years and we are seeing states such as Colorado, Oklahoma, and soon Kansas, changing their laws to allow strong beer to be sold in all trade channels.  Like many industry laws and restrictions, the 3.2 issues were antiquated and should have been changed years ago.  But, by changing these laws now, it creates a new set of problems.

From the breweries’ perspective, consider how a brewery would handle producing 3.2 beer for only one state where it is still legally sold?  For brands such as Michelob Ultra, it is no big deal.  The same situation would hold true for other light beers whose ABV is 4.0% or less.  The consumer would have a limited choice.

The bigger issues, however, are in states where a brewery has duel distributors, such as in Kansas.  A liquor house has the rights to Corona in a strong beer, but the AB network has rights for 3.2 beers.  You eliminate the 3.2 beer issue, and now what happens?  Grandfather both?

The reality is that AB already delivers to the liquor stores, whereas the W&S company does not have the capabilities to deliver to locations that would have been the former 3.2 accounts.  That being said, if strong Corona was available everywhere, the volume in the liquor stores would drop dramatically.  The W&S company will be more likely to sell their rights.

This then becomes a question of value.  If Crown allows for dueling to continue, than it might be in AB’s best interest not to buy when you sell the same beer?  Obviously, this makes no sense.

Crown, and other vendors in this position, have some major decisions to make as these 3.2 beer laws are eliminated.  Prohibition makes you want to cry into your beer and denies you the beer in which to cry….

 

 

 Posted by at 6:00 am