Aug 292017
 

By 1980, after years of market dominance by Coors in both Kansas and Oklahoma, it was clear that those states had been targeted by AB.  At Coors of Kansas in Wichita, the largest distributor in Kansas, we had a market share of 61+%.  There were markets in Oklahoma and western Kansas where Coors had a share at, or near, 70%.

During this time, Coors Brewing Co. was battling the beginning boycotts of their beer in California, while simultaneously ramping up national expansion.  The expansion was to offset volume losses coming from the west coast.  Being concerned about AB’s push in Kansas, I flew to Denver to meet with Coors’ senior management.  As I laid out my concerns about AB, it was clear that Coors was preparing to increase efforts in both California and Texas, not in Kansas or Oklahoma.

A one percent volume of market share increase in Texas or California provided a volume increase that I could only achieve with a 10% increase which, when sitting on a 60+% share, was impossible to accomplish.  My position for Coors was to protect its backyard.  Coors’ management went the other way, and as a result, within the decade, AB and Coors had reversed market share in both states.

The Coors distributors in these states felt betrayed and abandoned.  Many sold out, some bought existing brands and wholesalers, but all had to make major changes to continue.  It was a difficult time and many people lost their jobs.

Recently, in Bump Williams’ conference, the topic, the industry’s lack of leadership, was in part, a conference on what is wrong with the beer industry today.  Former industry executives, Tom Carmella, Bob Lachky, and Luis Duran, all agreed that breweries need to either focus on brand stories or efficiency.  Breweries cannot be both at the same time.

Another major point which was highlighted during the conference included the rapid price increase for economy and premium brands, an increase which is much more rapid than that of wines or spirits.

It is very clear, after 10 years, that ABI, focusing on ROI and efficiency in the U.S. market, is using their monetary success to develop their global brands, Budweiser, Corona and Stella, in other countries.  There are over a billion people in China and India, so why not develop those markets?  Throw in South America and Africa, both underdeveloped, and which do NOT have a three tier system, and all ABI sees is the upside.

MolsonCoors, for the most part, has just followed ABI’s lead in the U.S. by not jumping on the opportunity provided by ABI to increase volume and share.  Tammarron’s recent survey results, indicate the lack of confidence MC distributors have in MC’s leadership.  “You are what your record says you are,” Bill Parcels.

New Belgium’s recent hire of a new CEO also indicates which direction they intend to head, more of a global or international path instead of focusing on the US market.  The question is: how do New Belgium’s wholesalers feel about this hire?

As Bump’s conference stated, wholesalers should focus on efficiency which seems highly likely given that the leadership void in the industry which will leave wholesalers with no other option if they want to survive.  Similar to what happened to the Coors wholesalers’ in the 1980s in Kansas and Oklahoma; these wholesalers today are feeling abandonment and frustration.  Ask the former Schlitz wholesalers about this from the 1970s.

The definition of leadership is about taking responsibility, not making excuses.

 

 

 Posted by at 6:00 am
Aug 222017
 

The U.S. beer environment during the 70s and 80s was similar to that of craft beers, in that it is similar to the way wholesalers thirty to forty years ago envisioned the future of imports.  Successful European brewers who were importing into the U.S. were, decades ago, highly desirable brands with good margins, despite the fact that finding a wholesaler for the brand was challenging.

It took Diane Fall, Warsteiner’s first U.S. President, over a year to get a wholesaler in Denver where she established the U.S. office for the brand.  This was in 1980.  By the time I took over Warsteiner’s U.S. operation 25 years later, Warsteiner had approximately 260 wholesalers in all 50 states.  Annual volume was 134K+ HL.

My top 10 distributors in the U.S. handled 60% of Warsteiner’s total volume, when one included the next 10 distributors, the volume percent rose to 80%.  Bottom line was that approximately 20% of our U.S. business was done by 240 distributors.  I never considered either leaving or pulling out of any of those markets, ever!

Several weeks ago, Scott Metzler, founder of Freetail Brewing Co. in San Antonio, stated at the Distributor Productivity Conference, that breweries should not expand.  “But for the most part, I think the era of national brands and even regional brands in the scope is long gone…The ship has sailed,” stated Scott.

He continued by stating that all new start-up breweries should have a goal of 500 bbl., rely only on on-site sales, they should have no market distribution and they should “be happy” with that life. At the conference, Scott participated on a panel when he made this statement, a statement which was followed by support from other participants, including some craft distillers.

John Henry, a founder of El Buho Mescal, had this comment, “If you are not going to service a new market like your own backyard, then don’t go.”  That statement alone might be where these owners fall short.

The question is: does the same model used in your home market apply to other markets?  If that were true, then as President of Warsteiner, I might have pulled out of 200 distributors in the U.S. and have only done business with 50 distributions. That would have meant turning my back on 80% of my distributors.

At one time or another, AB, Schlitz, Miller, Pabst, Coors and others were local, but they all expanded nationally.  Even a brand like New Belgium embarked on a national expansion plan, but it was almost 10 years after they started the brand.

Warsteiner put their annual marketing and tactical spending against their volume, but did not forget the other 20% of business.  We focused on off-premise chains and hired experienced and knowledgeable beer pros who managed a number of states and wholesalers.  In some cases, including upstate NY, we used a broker who drove grocery volume thru Wegmans.

It might be that the highly successful local model as it is currently structured does not work for expansion or out of state markets. Perhaps simply developing a market presence in chains managed by experienced beer pros would work.

A local tap room selling 500 bbl. with some food works, the industry knows this, but there are many brewers who have larger dreams.  All they need to do is understand that what works locally will not necessarily work in out-of-state markets, but there is one model which will work.

It is easy to be brave from a safe distance…

 

 

 Posted by at 6:00 am
Aug 152017
 

While the belief is that the beers driving the retro craze are brands that have already died, the reality is, those beers have truly never died, depending on one’s definition of what dead means.  A couple of national brands, Pabst and Coors, have experienced growth for years, while Miller High Life is showing some signs of returning.  Recently, some regionals have managed to come back to life again, including: Rainer, Lone Star, and even Hamm’s.  On the other hand, other beers have yet to see any real life in their comeback.

Coors and Miller High Life simply turned the clock back by using the core themes that made each brand viable years ago.  Coors is again using the Rocky Mountain theme, while Miller is rerunning its classic theme: If you’ve got the time, we’ve got the beer.  Both brands seem to have hit a positive nerve with the consumer.  Pabst, on the other hand, has tapped into the anti-establishment crowd with young drinkers as an alternative to corporate brands.

The other brands, all tap into their regional roots, but also lean back to previously successful marketing and pricing strategies that make sense in today’s environment.

In 1993, Coors Brewing decided to roll out a clear liquid they named “malternative” beer. This was perceived as the solution to consumers who did not like traditional beers.  At the same time, other CPG companies were experimenting with clear liquids, including Crystal Pepsi and Miller, the later of who tried a liquid called Clear Beer.  Neither product proved to be successful.

In 1994, Coors reportedly spent over $38 million marketing against Zima, a figure equal to, or perhaps more than was spent on marketing for its own Coors Light! While it has been estimated that over 70% of America’s regular beer drinkers sampled Zima, most of those consumers were not repeat purchasers.  That year, Coors sold over 1 million bbl. of Zima.

1994 marked the highest sales for Zima, as the brand quickly found that their demographics skewed young female, with males being adverse to the product.  College kids mixed Schnapps with Zima, making the liquid into a cocktail.  David Letterman even picked up on Zima and added it to his top-ten-list of things to chastise in his humorous remarks.

In an effort to attract males, in 1995, Coors introduced Zima Gold, a higher ABV liquid with a bourbon-and-coke flavor.  Zima Gold lasted only a few months.  By 2000, Coors reformulated the brand once again. This time the product tasted similar to Sprite and the brand was advertised as a thirst quencher for the summer.  Interestingly, this reformulated brand sold 600K bbl.

Two more reformulations were attempted, the first in 2004, by once again increasing the ABV to 5.9% and naming the brand Zima XXX with flavors such as Hard Punch and Hard Orange.  This market, however, was now being dominated by Smirnoff Ice.

Three years later, Coors reversed itself and went back to marketing to females.  Zima was reformulated again with lower ABV, fewer calories and several fruity flavors.  Some think the brand might have made it, however, label changes in Utah, along with higher taxes in California, ended any chance Zima could survive.  Zima was officially laid to rest in 2008.

Once again, however, Coors has resurrected Zima, although for a limited time.  Classified as a seasonal beer, with its iconic bottle and a new formula, Zima seems to have found some legs.  If Zima survives this time, it will be the only product that was resurrected from the dead and lived.  The industry will soon know if Coors will decide to continue with the production and sales of Zima.

Perhaps Coors sees a demographic no one else does: millennials and their Rose wine.  Given the condition of the industry today, no one would be surprised.

Reincarnation occurs because we decide we haven’t learned enough lessons….

 

 

 Posted by at 6:00 am
Aug 082017
 

Mike’s Hard Lemonade was founded in 1999 and headquartered in Lakewood Colorado.  At the time, it was a Canadian company and the liquid was spirit-based, however, due to U.S. restrictions, Mike’s was malt-based when they opened the U.S. market.  It was a very unique product for the time with edgy marketing and the brand quickly took off.

While Mike’s was unique and different, which helped get consumer attention, it was Mike’s culture, at that time that was helping to drive sales.  The western half of the U.S. was led by Paul Harvey.  Paul was in his mid 40s and was highly respected by both wholesalers and employees.

Mike’s team in Texas had a state sales manager in addition to six to seven other sales people.  Their numbers rocked.  During this time period Paul, who, after a business dinner in Denver, was conducting meetings with a wholesaler, failed to show up the next morning for a planned meeting.  After many attempts to contact him, the hotel manager found Paul’s body in bed. Paul had passed away during the night as a result of a massive heart attack.

Paul’s passing began a series of changes that culturally altered Mike’s for years.  Paul’s replacement was a wine salesman from Gallo who brought Gallo’s programs and attitude with him.  People started to leave and were not replaced, and sales began to slow.  By now, other breweries had developed RTDs to compete and made inroads into the category.  But the culture at Mike’s was now toxic.  There were other leadership changes that continued to damage sales and their culture until Mike’s eventually hit the bottom.

A recent story on Mike’s written in Beer Business Daily, focused on comments from their current CEO, who took over in 2012.  He gave great insights regarding the challenges a leader has to overcome after years of negative growth.  By focusing on employees, and creating a positive culture, Mike’s has made a great turnaround.

Slowly, and over the years, Mike’s has experienced double digit growth.  Trimming the SKU number down in their portfolio, while increasing their marketing spend by 75%, added to the fact that management was treating employees positively, showed the industry that beer companies can be successful with the right formula.  It is not that complicated.

Mike’s is one company that shows what can happen by making a change in the positive direction.  Mike’s is a positive example in the beer industry that has, of late, seen so many companies move in a negative direction.

The right leadership says it all.  For example, Bill Hackett’s longtime tenure at Crown made that product a monster in the beer segment, whereas Gambrinus gone the opposite direction.  In fact, Gambrinus could be considered the poster child for negative culture.  Simply talk to any ex-Gambrinus employee, especially the ones from the Modelo era, and you will learn of the less than positive culture of that company.

Many top people from AB, Miller, Coors or others, joined Gambrinus thinking they could handle that way of life, only to be searching for another place of employment within six months.  Other companies including Labatt USA or New Belgium, in their early years, had such cultures which fostered positive growth and positive attitudes. But that has since changed.

Mike’s current leadership has once again been an industry example that a company can be highly successful by just creating an environment that puts people first, not egos.

The manager accepts the status quo, the leader challenges it…

 

 

 Posted by at 6:00 am
Aug 012017
 

Hire sales people who are really smart problem solvers, but lack courage, hunger, and competitiveness, and your company will go out of business” – Ben Horowitz.

Hand held devices, IPads, laptops, cell phones, and computers are all tools of the trade for any beer sales person in today’s market.  There is not a major distributor in the U.S. today that does not provide, or have, the tools of the trade, including state-of-the-art warehousing and logistics, all using the most sophisticated software available.  This evolution of the role of the sales person in today’s beer environment has been nothing but dramatic.

Consider that before the electronic revolution in the time of driver sales, each route maintained a route book.  This route book contained every detail the salesman needed, including the address, buyer’s name, manager, phone number, hours of operation, times of delivery and even what door to use.  The book contained the account sales history and enabled the recording, by the route driver, of each visit and the inventory left from the last visit.  Sales were recorded and displays with pricing were also noted.

The driver knew everything he or she needed to know about each account.  The immediate beer supervisor had access to the same information.  In fact, if he driver was out on vacation, it was easy for the supervisor or swing driver to pick up the book and follow the pages which were delineated by day by stop.  The supervisor and salesman usually met every morning to review any goals or targets.  The process was very simple.

Of course, this was the time when beer wholesalers had limited SKUs and only one or two breweries.  The driver had enough time to actually sell, deliver merchandise, rotate, and even clean signs in addition to driving the truck.

The question arises that with wholesalers today representing hundreds of SKUs from numerous breweries, are salespeople as effective as they were when driver-sales was the norm?  When a wholesaler adds three or four new breweries over a year’s time, are these new brands a bolt on to a pad, or does the wholesaler investment spend and add to their sales team.

There have been times when a wholesaler would take on a new brewery while informing the brewery that the wholesaler will deliver the beer, however, the brewery would  have to provide the sales support.  That brewery could be stuck with no other option other to not go into that market.

Plus, there is the financial consideration. While leading Warsteiner, if a certain state or region grew to 5,000+ HL, we started looking into adding a regional sales manager, and once that area hit 7,000+HL, the trigger was pulled on a hire.  In addition, Warsteiner targeted potential markets where people might be added in the future.

We know that the overall industry STRs are not very good this year and while we can speculate, one reason for this might be the expectations and effectiveness of today’s sales person.  Are they really selling or are they just maintaining their business?  Is it fair to hold them to the same standards as the driver salesmen?  There is no easy answer.

Sales may lead to advertising as much as advertising leads to sales.

 

 

 

 Posted by at 6:00 am