Jun 262018
 

Many distributors would rue the day they turned down the opportunity to distribute Modelo products in the early to mid-1980s.  In fact, once Corona became a viable import, many of the distributors who had once declined the offer, made a quick reversal and aggressively pursued the brand.  Some distributors were successful, but many were not, as those distributors who had taken on the brand were reaping the potential benefits of Corona.

As has been discussed in past posts, I acquired Corona through an acquisition when I owned Texas Beers. At that point in time, the beer was in a brown bottle, and because my distributorship was on the US-Mexican border, the packaging made sense.  Once Corona switched to the clear, long neck bottle, the brand’s sales jumped.

Bill Hackett, who was then the sales manager for Barton Beers, and I spent hours discussing the potential of Corona.  As with many current and past wholesalers, Bill has always maintained great relationships with the distributors.

By the mid to late 90s, it was clear that for Corona to continue its growth, the brand’s distribution needed to increase. Both Barton and Gambrinus introduced Corona 12 packs and soon other package extensions were also presented.  One by one, many of the wine and spirit houses, including the Julius Schepps Co. in Dallas, sold the Modelo distribution rights to the beer network.  Even in those days, the case multiples, which seemed so high, are now considered a joke when looking back at the brand’s unbelievable success.

Most of the current Modelo distributors are in the blue network, but there are many distributors who are not in the blue or red network that do have Modelo. One could make the case that without the Modelo portfolio these houses would have sold out years ago.  Because of Corona’s success, many distributors hung in there long enough enabling them to sign many upstart crafts who today are established and important beers.

As the sales manager, and later President of Barton and Constellation Beers, Bill Hackett knew that for Corona to become a viable brand, it was important to establish strong relationships with the wholesalers.  Bill, probably more so than anyone in recent years, was the leader at relationships.

Constellations recent decision to move their portfolio from their long-established wholesaler, Markstein in San Diego, to Reyes, caught the industry by surprise.  The move by Constellation, however, should not surprise anyone who has been in the industry for any length of time.  It is simple, Bill Hackett knew that Barton needed the wholesalers more than the wholesalers need Barton.  Today, it is just the opposite, given the recent trends of AB and MC, the Modelo wholesalers need Constellation more than Constellation needs them.

Constellation is doing exactly what a highly successful brewer does:  line extensions, new beers, buying multiple forms of media, sponsoring all types of professional sports, staffing up, chain domination, and on and on to include wholesaler realignment if they believe they can benefit from a change.  Tighten your seat belt, more is yet to come.

We built a business on relationships, and that’s what matters to us…

 

 

 Posted by at 6:00 am
Jun 192018
 

When Catherina Cramer took the leadership role at Warsteiner, she was the ninth generation of Cramer’s to lead the brewery, but the first female in this prominent position.  The brewery had been run by males for eight generations dating back to the early 1700s.

Catherina had always questioned why Warsteiner Importers Agency did not employ more female employees.  Warsteiner’s pay scale was such that when a qualified female was hired, trained and placed in the marketplace, in most cases, the employee would be pouched by a competitor.  Inevitably, the competitor could pay a higher salary, give larger bonuses, and had superior, bonus programs, benefits, and typically a car.  It was very frustrating and expensive for Warsteiner.

Decades ago the beer industry was male-dominated.  The only females in the business were widows of husbands who had owned distributorships.  It was not until I got to Coors of Kansas in the late 70s that we started to recruit women.  Breweries were the same way.

The first brewery to really utilize females was Boston Beers, whose sales director was Ronda Kallman.  By design, the sales force of Jim Koch and Ronda Kalman sales was predominately female.  Boston Beers’ success with females did not go unnoticed by other breweries.  A change was underway.

In today’s beer industry, women play a major role. Many craft breweries are run and owned by women.  Perhaps the best known is Kim Jordan of New Belgium who founded the company over 25 years ago.  New Belgium is one of the largest crafts in the country now.

No woman has led a major U.S. brewery or importer. Last week, however, Heineken appointed Maggie Timoney CEO of their U.S. business.  This appointment goes beyond gender, Maggie is the first American to lead Heineken in years.

Heineken has been in catch-up mode since Corona flew past Heineken as the number one import beer.  The acquisition of importing rights years ago, combined with Heineken’s transfer of their distribution from a predominately wine and spirits system to the beer network made an impact on their sales.

Heineken’s packaging changes, coupled with the long neck bottle, did little to help, and their media programming was questionable at best.  Many, if not most, of these decisions, were driven by Heineken leaders from Holland.

The story is the same and, unfortunately, frequently repeats itself: the new leader, not knowing the inner-workings of the U.S. market, initially visits the major wholesalers and gets an ear-full.  He then visits key retailers and attains feedback.  And, of course, the agency visits are part of the initiation process.  The U.S. learning curve is typically about five years.  Before this five-year window ends, the CEO is replaced with another CEO and either moved to the home office or is off to “pursue other interests.”

The industry will be following Maggie Timoney very closely, not because of her gender, but because of what is riding on Heineken’s brands.  Many of Heineken’s wholesalers are gold wholesalers, and given what Constellation is doing, Heineken’s time is running short.

As usual, behind every great woman is an idiot…

 

 

 

 

 Posted by at 6:00 am
Jun 122018
 

In past posts, when the topic has covered facets that make the beer industry so great, the answer has always been centered on the people. The people in this industry are what make it outstanding.  When discussing the beer industry, there never seems to be any middle road. One either loves this business intensely or dislikes it.  When speaking to college students one of the key points I make is that the beer industry is not a 40-hour-a-week job.  The reality is that the beer business is 24/7, and that may not be for everyone. Just ask those in the craft industry.

In January of 1976, three months before we were targeted to open the San Antonio Coors market, we began interviewing for the sales positions.  Since former astronaut, Charlie Duke was the owner, and with the Vietnam War drawing to a close, we also made an effort to recruit former military veterans along with experienced beer salesmen.  Sales were all DSD with only one product and just a few SKUs.  As planned, we ended up with a mix of both veterans and beer people in our sales force.

One of the veterans that were hired was a young man named Rudy who was from San Antonio.  Rudy had joined the army right out of high school and served in Vietnam.  After his discharge, he took advantage of the GI Bill by enrolling at Southwest Texas State (now Texas State University). When Charlie and I met Rudy, he had just graduated from college.

Rudy saw working at Coors as a path to a solid career. Because he had just spent four years in college in San Marcos, we assigned Rudy that surrounding territory.  At the time, the distributorship in Austin had not yet opened and Rudy’s territory backed up to the Austin region.  As a result, Rudy’s sales were inflated because the consumers were driving south from Austin into the San Marcos area to buy Coors.  Unfortunately for Rudy, that perk quickly ended with the opening of the Austin market.  Rudy, however, continued to do well and Coors became a major-selling brand in San Marcos.

Not long afterwards, Charlie sold the Coors operation to the Azar family from El Paso. Rudy left and applied for a State Farm Insurance franchise.  Not surprisingly, he was awarded the business.

In the early 1980s, I dropped in to see Rudy and check on his new career. Now in his fourth year at State Farm, Rudy mentioned that his first year had been tough, but the ensuing years were getting less difficult and he was doing well and was quite happy.

Just last summer, 35 years later, I received a phone call from out of nowhere. It was Rudy! We had a great conversation, catching up on life since he had left Coors.  Rudy had recently retired from State Farm as a very successful agent and his wife, too, had retired from USAA after 30+ years.  Both of Rudy’s sons were completing college and all was well with Rudy and his family.

As we were ending the conversation Rudy said he really called to simply thank me for helping him get started in the business world.  He wanted me to know he appreciated my honesty and the fact that I treated him with respect.  Even after all those years, Rudy never forgot.

I have been fortunate to work with countless great professionals, many of whom I have maintained friendships with throughout years, however, the call from Rudy was especially meaningful.

If fortunate, we all have someone who made an impact on our careers.  The same goes for my career as well, but that story will be for another post.

One is never too young or too old to be a mentor…

 

 

 

 

 

 

 

 

 Posted by at 6:00 am
Jun 052018
 

In order to stay relevant and to effectively make use of their limited resources many of the established craft breweries have reduced or limited their brand’s footprints.   The recent collapse of Green Flash Brewing is the personification of a company that expanded too fast without the proper planning and resources.

Long established breweries including St. Arnolds and Summit Brewery, to name just two, pulled back their U.S. footprint to include only their home market and state along with some adjoining markets.  Again, these breweries have found out, perhaps the expensive way, that the further from their home market they move, the more difficult it is to get any traction.

Some breweries, like New Glarus in Wisconsin, have never left their home state and have been very successful in building their brands.  Karbach in Texas, now part of AB, has done the same.  Industry pundits have been supportive of crafts not expanding outside their home footprints.

While local is the industry model de jour, just how does that work for imported brands?  Sure, there are a number of small, expensive European imports that are not general market beers who only focus on metro specific areas such as New York, Chicago, San Francisco and others that demographics index toward their brands.  This model has worked well with most of these importers.  Some breweries have either pulled out or way back, such as Bavaria, who had a great U.S. business but left years ago due to the unfavorable exchange rates.

The story of Warsteiner has been well chronicled in past posts. This is a company which, when at the top of their success, was the number one selling beer in Germany.  At that time Warsteiner made the decision to develop the U.S. market and spent years so doing.  Now, with sales declining in both countries, Warsteiner’s future is very cloudy.

Krombacher, on the other hand, is somewhat a mystery.  This brewery is dominating sales in Germany as not only the largest brand, but the largest brewery.  Similar to Warsteiner, Krombacher decided to return to the U.S. in 2010 after a failed attempt to establish themselves in the late 1990s.

Within the first two years, Krombacher had established wholesaler networks in Florida, Texas, Louisiana, Georgia, New York, Illinois, Arizona, South Carolina, North Carolina, and Tennessee.  Since that time, they have left almost all those states except New York and Chicago.  The question is why?

Krombacher is not a company without great success and resources, but perhaps it is the personification of ownership that is blind to what can be accomplished versus, what they are being told is happening and being done.  Perhaps Krombacher is being led by people who have agendas different from that of the long-term success of Krombacher. Perhaps the leadership has their own short-term plans.

This happened at Warsteiner, now it could be happening at Krombacher.  Wholesalers in states where Krombacher pulled away have their own story to tell, but adding feet on the street with no direction or US. leadership can only be a dead end for all.

Krombacher has had some success in Chicago and New York, but after eight years of investment, one would think that ownership would question why Krombacher is pigeon-holed in the U.S.?

Whatever happened to Krombacher?

 

 

 Posted by at 6:00 am