Beer Business Unplugged

A number of years ago, during a transition period in my career within the beer industry, my wife remarked that this profession seemed quite volatile and perhaps not the most secure place to build a career.  She had a good point.  A mental review of my life in the beer industry, and the companies in which I was involved, revealed a great deal of change.

Willowbrook (Coors in Dallas) – Sold to Barry Andrews and is now a part of Andrews Distributing.

Bridges Distributing (Falstaff in Austin) – Sold years ago.

Lone Star Brewing Co. – Sold a number of times but is now part of Pabst Brewing Co., a virtual brewery.

Mid-State Beer of Alexandria, La. – One of the largest Schlitz distributors and part of Shreveport Beverage, sold out to Glazer’s years ago along with their liquor/wine house.

Orbit Corporation (Coors NE of San Antonio) – One of four San Antonio Coors distributors who, over the years, sold 13 times and is now a part of Glazer’s Beer Co.

Coors of Kansas, Inc. – Once one of the largest Coors distributors in the U.S, sold to Larry Fleming and still, after 38 years, is part of LDF.

Texas Beers Inc. – The seventh largest Schlitz distributor in the U.S., and also a Pabst, Pearl and import house, sold at least three times and is now a part of Glazer’s Beer Co.

Coors Brewing Co. – Now MolsonCoors.  Enough said.

Coast Distributors – One of the largest volume distributors in the late 1980s, was sold after 100 years of ownership to Dick Lytle and became Mt. Hood Beverage, which later became part of Columbia.

Texas Brewing Co. – Lasted only one year.

The Gambrinus Co. – Still around, minus the Modelo Products.

Glazer’s – Now named Southern Glazer’s, but without the beer.  The Glazer family still owns the beer division.

Warsteiner Importers – Still around, but hanging by a thread

Krombacher U.S.A. – I have no idea.

Without knowledge of how the beer industry works, someone outside the business would recognize the uncertainty of a career in beer.  A number of the above companies, Schlitz for example, were victims of a lack of leadership, while other companies were simply in existence during a time when the brand struggled to find a market. The Coors operation in South Texas is a perfect example of a company who struggled to find a market.  For some, it was all about the money, as was the case with Coast Distributors in Oregon.  Although for others, their failure was a result of poor decision making which cost the company any chance of success.

It seems every week an industry pub announces another brewery has been sold, joined a holding company, merged, or closed their doors, just like the companies noted in this post.  This could mean that the instability of the past, is the reality for the current model and we should expect such instability to continue into the future.  So the question should be: Is instability the nature of the beer industry?  From the outsider’s perspective, it clearly is!

The older you get…the better you were….

This post begins the seventh year of Beer Business Unplugged. As has been typical, I will comment on past posts and the beer industry in general. 

This year, there are three topics in the industry that continue to be of importance.  The first is the continued decline of the overall industry volume. Second, is Constellation’s transformation from leadership under Bill Hackett to today’s company in which wholesalers are intently watching Constellation determine how the company will work with its distributors.  And third is the rapid rise of cannabis and how this plant will not only affect overall beer sales, but also a discussion around the most profitable method for the beer industry to ensure a foothold in the growing industry. Each blog brought a number of comments, making the above three topics the most responded to blogs of the past year. 

The post, Whatever Happened To? however, was the blog that brought the highest number of responses.  A surprising phenomenon for me.  It seems Krombacher is trying to reverse its scorched earth U.S. policy of the last six years!  I wish them the best of luck! The news of Warsteiner’s recent fines by the TTB was very disturbing, but to some degree, not unexpected given the challenges importers and brewers are facing in growing their brands.  Expect more of the same in 2019.

I always enjoy receiving the responses from readers. Although the majority of responses come directly to me, some are posted on the blog.  The number of subscribers, all of whom are in the beer industry, continues to increase into the thousands, this year surpassing 125,000 reads. Thank you all for your interest and loyalty.

As always, I will continue to write weekly throughout the year.  Going forward I will cover industry topics based upon your continued interests.  Thank you for all your kind comments and feedback.  They are fun and informative.  And now, year seven begins……

 Beer Fodder:

The evolution of the beer industry is quite remarkable. While the industry itself has changed a great deal, perhaps nothing has evolved more in the industry than the beer wholesaler.

From the end of WW II, until perhaps the late 60s/early 70s, the industry remained consistent.  Small wholesalers, one brand, a limited number of packages, very little discounting, simple one-bay trucks…life in the beer business was good.  Things then started to change.

First, was the push to add new or carry an increased number of brands. For example, an AB or Schlitz wholesaler would carry Bud, Michelob, and maybe Busch.  Schlitz wholesalers carried Schlitz, Schlitz Malt, and Old Milwaukee.  Bigger trucks than came next first with eight bays than on to 16 bays along with shelving in bays.  Bulk trucks still are used today.  Next came pre-selling, followed by orders that were built-by-account, and then the addition of shrink-wrapped pallets which were delivered to the retailer.  Warehouses became digital using, UPC codes, and packages are now moved thru scanning and conveyor belts. Salespeople went from handhelds, to computers, to iPads; portfolios exploded with new brands and packages; and brand management is now the title-de-jour for in-house managing of current and upcoming new vendors. All this, yet the overall beer sales in the U.S. continue to decline.

We all have heard the many assumptions from the pundits as to why beer sales continue to slide, but perhaps the statement by Bill Hackett of Constellation Brands frames it best.  When discussing the lack of brand building, Bill says “this (lack of brand building) will be the death knell of this industry, we have to focus on building brands.”  From the supplier side, no truer words have been spoken.

Lacking extensive and effective brand building, today’s distributors are looking past their suppliers to ways to survive the future, and they may have found the survival tool: cannabis.

Just like the Oklahoma land rush of the 1800s, there is a mad rush to determine who and how legalized cannabis will get to market and ultimately to the consumer.  State beer wholesaler organizations are rallying and lobbying their local legislatures to use the wholesalers’ distribution system for cannabis. On the surface, this seems to be the logical way for states to proceed since beer wholesalers are federally and state licensed.  Owners need to be approved by the TTB to obtain a federal permit. Wholesalers can even act as the tax collector for cannabis just as they do for beer.

It would seem that very little needs to be changed or added to legalized wholesalers to enable cannabis distribution to become a reality. In fact, it might even be easier for beer wholesalers to become the cannabis wholesaler than to up-end their current model in an attempt to provide a more effective sales and marketing program for beer. Perhaps beer distributors should leave it up to the suppliers to improve beer sales.

No one will know the total impact of legalized cannabis sales for years, but now is the time for beer wholesalers to act.  Truth be told, the current beer suppliers (those not tied to cannabis) are probably not very happy.  Maybe they should be spending more on the brand building then they would not have to worry.

Business is constantly changing, constantly evolving.