Business planning, as the industry knows it today, did not exist in 1970. At that time, the industry was in the early stages of transitioning from a pre-World War II model into what we know today. Single brand DSD distributors did little, if any, planning. Supervisors were glorified route salesmen who, when not filling in and pulling a route, sat in bars and bought rounds of beer. Brewery reps were expected to do the same, buying beers from the time breakfast ended and throughout the evening. Some brewery reps had trade expense accounts greater than their monthly salaries.
By the mid-1970s, however, planning began to take shape. The national brands focused on a simple, yet effective model of vertical and horizontal distribution. This model tied into their account classification, which was tied to their volume. Accounts were classified as AA, A, B, or C accounts.
The annual plan was simple: maintain the volume in the hand-full of AA accounts while working to move the other accounts to the next higher level. Such movement was typically achieved by expanding packages in distribution and retail execution for ad activity and displays. This was a simple yet effective plan.
AA accounts were always off-premise, while the on-premise accounts were all about tap handles. Distributors had a report on each on-premise account that included all the beers on tap. Rotating handles did not exist as each wholesaler had their targeted account list. Incentives were designed to get those competitive handles. And the incentives typically translated into the form of a bounty.
Monthly business reviews did not exist either. In fact, when a brewery rep came to visit, their focus was on checking inventory, placing orders and reviewing current sales trends. The rep’s goal was to determine if they were on track to make their sales goals. This basically translated into: “Are you going to help me make my annual bonus?”
Fast forward to today and the business plans are all over the board. Many craft brewers have no idea how to construct or manage a plan, much less execute one. Wholesalers are now driving the planning cycle by developing their own in-house planning and monthly reviews. Distribution is now centered on the type of account. In other words the account focuses on a certain type of beer style. Chains focus on ROS (rate of sale) and POD (points of distribution).
In addition to a concentration on the number of reps in the market available to see one’s beer, wholesalers today are concerned about a vendor’s support effort and model. Considering the number of vendors a wholesaler now represents, does this really surprise anyone? This lack of focus on the brand explains why craft brewers continue to push back on the wholesaler.
Monthly reviews or recaps are necessary to measure the expected performance of the brand, as well as the performance of both the brewer and the wholesaler. Such reviews can be very productive despite the fact that the results are frequently not what one would expect. Under these conditions, both sides have to be realistic and open to discussions regarding moving forward.
Over time, these meetings will ultimately determine the type of relationship each party expects and wants, but they can be uncomfortable.
You change your business plan to anticipate and adapt to changes in the marketplace…