Sep 252018
 

It is likely that if you have been in the beer industry for any amount of time, you are aware of either a wholesaler or vendor who has broken state or federal laws.  This is nothing new.

In a past blog, it was illustrated that, as a Schlitz wholesaler with a 30%+ market share, I lost all of my draft handles on South Padre Island just prior to spring break, the largest selling month of the year.  It turned out that AB had obtained my draft accounts. Soon, however, the TABC investigated and discovered inappropriate activity and the AB wholesaler was fined $2,000.  Given this action by the TABC, a wholesaler could assume that a $2,000 fine was the baseline for buying draft accounts.  That being said, the wholesaler or vendor could then determine a risk/reward approach to buying accounts.  Is the account worth the risk of a $2,000 fine?

The recent $900,000 fine paid by Warsteiner for trade violations continues to be a focus for TTB seminars and discussion.  Going forward, this fine could be considered the baseline for penalties against similar sized importers or brewers, regardless of whether the actual violation fits the crime.  If the TTB maintains this standard in fines, does the industry have a 2019 baseline going forward?  If so, then a vendor of Warsteiner’s size, 75,000+ HLs, could assess the risk/reward benefit for incurring TTB violations.

Perhaps the most sought-after venue in the U.S. for any German brewery is the German pavilion at Epcot Center in Florida.  This pavilion hosts over one million visitors annually and depletes over 7,000 kegs.  A multi-year pay-to-play contract for a German brewer and their local wholesaler at Epcot is highly sought after and could facilitate positive momentum for the vendor and their brands. The vendor could totally focus its annual marketing on Epcot’s German pavilion by using the location in a majority of its p-o-s and incentive programs for wholesalers.  Winners of the incentive could receive an all-expense paid visit to Epcot and the German pavilion.  Conversely, the pavilion’s leadership could visit the German brewery, spending time there with brew masters and senior management.  Most vendors will see the opportunity to be showcased in a venue like the Epcot Center as a reward, and might be willing to risk a fine of $900,000.  Consideration for such a fine would include: the keg volume over a three-year period; the opportunity to showcase one’s products in front of over three million people; and having one’s brand be the primary product served.

Warsteiner’s willingness to pay a fine of that size without further negotiations with the TTB may, or may not, motivate other vendors to do the same thing. Or, that amount alone may cause some vendors to remain on the fence.  Either way, do not expect this type of activity to disappear.  Such inappropriate pursuits have been going on for years, and in all likelihood will continue

I have no problem with cheating…whatever you can get away with….right?

 

 

 

 

 Posted by at 6:00 am
Sep 182018
 

When Miller Lite was introduced in the early 1970s, along with AB, Coors, Schlitz, and other light beers, it took the industry ten years to realized that the light segment was not only here to stay, but could make a major impact on industry sales.

When Corona changed from their stubby brown bottle to the longneck clear bottle, sales for the beer skyrocketed. Corona, however, unlike many other light beers, was not taken seriously until the early 1990s, a full ten years after the bottle change.

It can be said that the craft beer segment took about 10 years to develop.  Boston Beer, Anchor, Sierra Nevada, and other breweries were established long before the mid-2000s, but it was not until AB was purchased by InBev that the crafts actually began to soar.  Now, more than 10 years later, crafts are part of the industry fabric even though their overall sales have begun to slow.

In the September 4th issue of Beer Business Daily, Harry highlighted several of the beer brands that realized successful sales over the Labor Day weekend.  Michelob Ultra remains the engine driver for AB, but Bud Light Orange seems to have grown legs.  Natty Daddy and Ultra-Pure Gold maintain their growth, thereby further adding to AB’s successes.  Corona Premier and Corona Familiar continue to look like winners, and with Modelo and other Constellation brands, life is good!  MC’s Keystone Light and Keystone Ice sales are rising, and add Hamm’s and Steele Reserve to the mix and one sees the number increasing. As BBD illustrates, MC does not have a premium growth share until you look at Sol.  Coors Banquet, however, continues to chug along.  Most of these beers are light lagers that are increasing in volume and share.  Once again, the light segment remains alive despite the struggle that Bud Light, Miller Lite, and Coors Light are experiencing.

A recent visit to the local Total Wine store before the Labor Day weekend revealed what might be the beginning of another ten-year change.  While walking into the retail store, looking for the holiday weekend’s beer specials, the end-caps revealed a true surprise. There was not a single end-cap that highlighted either a light lager or a beer.  Every end-cap featured a seltzer!  White Claw, Truly, Seagrams and others were with special PTCs.  Prices on the light lagers and imports were not special PTCs!  I cannot recall a major summer holiday that did not have any lager beers displayed or featured on the floor!  Perhaps this was an enigma, but the fact remains not a single light lager or a beer was starred at this particular retail establishment.

Scan and syndicated data show these seltzer products are on fire this summer.  So the question is: are these products just a summer seasonal or are they here to stay?  As with light lagers, Corona, and crafts, the industry could be on another ten-year growth of a new category.  This time it appears the industry is taking these products seriously.

Whatever happened to “Light Lagers!”

 

 

 

 Posted by at 6:00 am
Sep 112018
 

At around 6 AM west coast time, 17 years ago today, my wife called my cell phone and asked if I was watching “Good Morning America.”  At the time, I was at the MGM Grand in Las Vegas getting ready to attend the NBWA’s annual conference morning events.  Shortly after switching the channel to the news program, I watched the incidents unfold at New York’s World Trade Towers.  It was then that I received another call.

This call was from the VP of Malts at Glazer’s, my employer at the time.  At his suggestion, I quickly contacted the in-house travel agent for Glazer’s and asked to reserve a van at the Las Vegas airport.  Within minutes we were all downstairs in the lobby with other beer industry wholesalers, brewery reps, and state association members.  We were all trying to understand the events that were occurring in our nation.  We had just heard from one of the state executives who had a contact at the White House that there would be no commercial flights until the weekend. All U.S. airline flights had been canceled.

We made the decision to grab the van that I had earlier reserved and make the drive back to Dallas.  The VP and I headed to the Dollar Rental office, where approximately 50 other people waited in line for rental cars.  The Dollar employees handed out bottled water and cookies while the stunned patrons awaited their turn to secure a vehicle.  By the time we got to the counter, there were only two vans left. We quickly secured one of the vans and headed back to the MGM hotel, loaded our Glazer’s team members and stopped by a convenience store to obtain food for the long drive home.

A number of the beer industry people at the NBWA convention had decided to stay in Vegas, but many others searched for ways to return home.  Some people, once they learned there were no more rental vehicles, actually bought cars in order to get home.

Because Hoover Dam was closed, we drove west and around the dam from Vegas to Albuquerque, arriving in New Mexico sometime after midnight.  During the entire drive, we were glued to the radio trying to discern what had happened.  The van was dead-quiet throughout most of the drive.

We left Albuquerque early the next morning, arriving in Dallas late on the afternoon of September 12th. Upon arrival at the Dollar Rental car location at Dallas/Fort Worth International Airport, we found the typical 12,000 rental car inventory at the DFW airport had all been rented. All the lots were completely empty. The return of our rental van from Las Vegas was the only vehicle, not only the Dollar Rental location, but all the rental car locations at the airport. It was an unbelievable sight.

By now the country knew what had happened in New York.  Glazer’s, like many companies, grounded its employees from flying for a while.  Many beer industry people who had stayed in Vegas were able to fly out on Saturday.  Security lines were a nightmare with over five-hour waits to get on the planes.

Today, September 11, 2018, marks the seventeenth anniversary of that fateful day. The world has never been the same.  And, just as the world has changed, so the beer industry has changed dramatically in the past 17 years.

In three years the NBWA convention will return to Las Vegas. Those of us there on September 11, 2001 should gather together and recall that ominous day 20 years ago. It was a day that would define the world.

Whenever I think of the past, it brings back so many memories.

 

 

 Posted by at 6:00 am
Sep 042018
 

By the late 1980s, Coors Brewing Co. had almost filled their U.S. footprint with the brewery’s eastern expansion.  At the time, Coors’ field sales were managed by two U.S. regions: one eastern, and one western.  Coors chose an executive from Pepsi, a man with no beer experience, to manage the western division.  He conducted his first regional meeting in California, during which he outlined his 10 key “turn around” points for Coors.  At the end of the presentation, the executive asked for questions. A young woman in the back raised her hand and explained that of the 10 points mentioned, a majority of them violated either federal or state statutes.  Within two years, that executive from Pepsi was gone.

In recent posts, we have discussed the fact that the major suppliers require that their wholesalers employ an experienced beer executive in the day-to-day management position.  This has been the status quo for decades, while many wine & spirit houses had attempted to break into the beer side of the alcoholic business without an experienced beer leadership team.  The requirement for experience in the beer industry has been mandatory.

Tammarron Consulting annually conducts a reverse survey allowing wholesalers to rate their major suppliers in a number of categories.  Suppliers now take the results of this survey seriously.  It is one of the best measurement tools delineating wholesalers’ input when it comes to a vendor’s performance.

Perhaps this alone is the main reason franchise statutes continued to exist.  Wholesalers do not have any input as to who leads their suppliers; however, the suppliers have a great deal of input over their wholesalers’ senior leadership.  Unfortunately, the industry has repeatedly seen a negative outcome when a brand’s senior leadership is not capable of leading (e.g., many craft breweries).

Franchise laws protect the wholesaler from vendors who are unfamiliar with the beer industry’s rules of operation.  Portfolio diversification by wholesalers adds to that protection, however, when a major vendor changes its executive leadership, the wholesale’s business may be negatively impacted.

This week Warsteiner announced new leadership for its U.S. market.  Given Warsteiner’s recent troubles/fines with the TTB, the company has put themselves in a most difficult position.  Warsteiner has made a number of personnel changes in an effort to correct past leadership decisions that did not follow federal laws.  The company needs a highly experienced and respected industry leader.  That said Warsteiner has named an outsider whose background is in German vacuum cleaners.  Since both companies are German-based, there must be a relationship, otherwise, why would Warsteiner have made this hire?

Larger beer companies have followed this route in the past and it typically takes three to five years for new outside leadership to establish relationships and learn the U.S. beer industry’s functions.  So the question is: does Warsteiner have the time to wait for this leadership change to work?  Obviously, Warsteiner believes they do but do the Warsteiner wholesalers believer they do?  Once again, time will tell.

My slogan is: I’m the least qualified guy for the job, but I’d probably do the best job.

 Posted by at 6:00 am