Beer Business Unplugged

For decades, the Wholesale Beer Distributors of  Texas has published a monthly report analyzing beer shipments into the state.  This report begins with a summary of the entire state’s beer by volume, by brand, and by package.  The report also converts the brand totals into barrels.  Obviously, this is a pretty handy report as it provides a clear indication of volume rankings, who is hot, and who is not.  Talking points, if you will.  The remainder of the report is categorized by distributor, not by market. The report does, however, list distributors by the city in which the distributor receives the beer.

In the 1980’s, as Coors expanded into Texas, the brewery appointed four Coors distributors in San Antonio and five distributors in Houston.  In San Antonio, these four distributors competing against one Budweiser distributor, one Miller distributor, and one Schlitz distributor, in addition to several other distributors including a Pearl, a Lone Star, and a Falstaff house.

Acquiring accurate shipment numbers reflective of one’s standing in the market, obviously took some creative accounting.  The one-house operations typically had only one county to service, however, all the Coors houses had a part of San Antonio, plus to three to four more counties outside the city.  Therefore, one had to attempt to line up counties as best as possible.  Certainly not a perfect system, but it worked.

The Wholesale Beer Distributors of Texas was published monthly, along with other industry publications, including Modern Age Blue Book and Beer Marketer’s Insights published on orange paper. At the time, these were the only publications reporting on the industry.

In the 1960s, and into the 1980s, there were still a number of very small beer distributors in the state.  Almost all were in rural counties, producing small volume, so at times, these small distributors had no beer shipped to them, and thus, there was no report.  By the end of the 1980s, most of these small operations had been purchased by larger distributors.

For years there was only one Hamm’s distributor in the state, a very small operation in Mission, Texas.  In addition to owning the distribution rights for Hamm’s, the distributor in this little southern Texas town, also sold Femsa products, mostly Carta Blanca and Tecate.  The town of Mission is on the Rio Grande River, a Mexican border town, and a seasonal destination home for many retirees during the winter months.  Because many of the retirees were from the upper mid-west, there were a plethora of Hamm’s consumers in Mission during the winter months.  All of which is surprising considering that these old, small, operations are the forerunners of today’s start-up craft/import distributors!

Today is the last day of this year’s National Beer Wholesalers Association convention in Chicago.  As is the norm, most attendees are AB or MC operations and suppliers.  While attendance is around 2,000 people, the beer industry saw 12,000 present at May’s Craft Brewers Conference; a huge difference in attendance between the two conferences.

The distributor tier could now be experiencing the same growth as the craft brewers have enjoyed.  The number of distributors operating today is growing, as more and more, highly focused distributors open representing only the crafts segment of the market.  These operations are experiencing the same issues as craft breweries: undercapitalization, lack of knowledge, shortage of experienced professionals, logistic and operational challenges.

As with craft breweries, those companies that are aware of their weaknesses, and work to improve them, will be successful; while those that do not recognize their weaknesses, they will die out.  Some will grow, some will sell, and others will fade away, but these start up craft distributors are here and growing.  Soon there will be new faces at the annual NBWA convention and we will not know them!

Across professions, consistency is a direct product of work ethic….

Shortly after Jerry Jones purchased the Dallas Cowboys he sold the beer concession rights to Texas Stadium.  What was unusual about this deal was that Texas Stadium, at that time, was not part of the Dallas Cowboys, because the NFL had a sponsorship with AB.  When Jones sold the rights, the football team was experiencing several back to back losing seasons, having won just one game in the recent season.  The price was reported to be one million for stadium rights. Initially, Coors turned down the sponsorship right, but Miller jumped on the opportunity.

The rest is history, including the fact that the Cowboys are now in AT&T stadium and Miller continues to hold the concession rights.  As a side note, Miller’s purchase of the sponsorship rights in the early 90’s, fortunately for the distributor, coincided with the Cowboy’s ride to three Super Bowl titles.  The beer sponsorship also includes The Star, the new, state-of-the-art, Cowboy practice center, along with signage, the Cowboys preseason camp, etc. It is close to impossible to find any brand other than Miller Lite in AT&T stadium. Not a bad investment for Miller!

Professional sports sponsorships are nothing new.  As the NFL grew in popularity, so did the rising costs of sponsorships, but measuring the overall effectiveness of said sponsorships on market sales is, at best, challenging.

Wholesalers benefit when their supplier obtains the rights to sponsorships.  The benefits include not only direct sales, but also the the spill-over effect into the wholesalers’ market from the leveraging of tickets, events and other activities with the team.  It is hard to beat that kind of excitement.

The industry is changing rapidly, including traditional media methods of marketing.  In the craft world, social media has become the media giant of this segment of the industry, in many ways, defining crafts.  The craft industry owns social media, live social media and depends upon social media.  While all beer companies use social media, social media is the life blood of the craft industry.

So the question for the major breweries is how can they effectively market their products?  Especially, how can these major breweries market their product to the young consumers who are cutting the cord for cable TV.  So far, traditional marketing has not worked, nor have their efforts in social media.  Numbers do not lie.

ABI might be forced to produce a radical marketing strategy that can truly make a difference over time.  First, their NFL-team-themed cans, while not a new idea, should drive volume.  Home town fans will support their NFL team by buying such cans, not only at the stadium, but for tailgating parties, barbecues or simply because loyal fans enjoy a beer at home.  How can you have a get-together to watch your favorite NFL team without serving beer in your favorite teams’ can?  Logo beer cans will be manufactured for all but four NFL teams.

As smart as the NFL sponsorship is, ABI has gone one step further.  In recent years many colleges have gone wet in their football stadiums and basketball arenas, making beer available to all attendees, including LDA students.  The students are going to drink anyway, why not make some money by selling them beer at the event?

A recently announced commitment between with AB and Texas A&M is similar to the transaction between AB and the NFL.  AB will now be able to produce and display signage and logos on campus and near campus pubs, plus, AB will receive the media rights, and probably scoreboard logo rights for A&M.  Not only will ABI have access to these young LDA students, given the political and social environment of the U.S. today, one might expect the lowering of the legal drinking age to 18 or 19.  This puts AB in a prime position to market their products directly to these young college consumers.  Expect a land rush by AB and MC to sign a plethora of major colleges, especially in the five powerhouse conferences.

This is the type of marketing that crafts are not eligible in which to play.  While crafts own the social media, AB and MC will own the sponsorship channel, and over time, it will make a difference in the amount of revenue generated.

You’ll never lose a game if your opponent doesn’t score….