Oct 232018
 

The last Coors distributor convention I attended was in Hawaii in the early 2000s.  As with many others, the highlight of this convention was Bill Coors’ speech featuring that year’s business overview.  As with every other Coors convention, Bill received a standing ovation from the distributors following his speech.  The ovation was not for his comments, but for his many years of contributions to the beer industry and his decades of successful leadership at the helm of Coors.

In the late 1970s, when the annual Coors convention was held in Phoenix, I was the general manager of Coors of Kansas, one of the five largest volume Coors houses in the nation.  The trip from Kansas to Phoenix required me to change plans in Denver. As I boarded the plane in Denver, I noticed Bill Coors sitting next to an open seat.  I happily joined him on the flight to Phoenix.

At the time, Coors was just beginning to expand their footprint into the eastern U.S.  The expansion was the result of the excessive volume caused by a California Farm Workers and gay right boycott.  Yet, despite the boycott, Coors remained the number one selling beer in their western markets.

During the plane ride, as Bill and I discussed this topic and others, I gleaned additional appreciation for the challenges the brewery was facing.  I was thankful for Bill’s time during the two-hour-long plane ride. Then, as is true now, it was most difficult for a distributor to have the privilege of spending time with such a storied industry leader.

That convention in the late 70s proved to be interesting given what the brewery was facing in California.  Coors had arranged a barbeque for the distributors at an area ranch during the convention.  The conversation on the bus ride to the ranch was focused on the California distributors and their complaints of lost business due to the Coors family’s anti-union policies.  The distributors were having a difficult time understanding why and how our Coors business in Kansas was still growing despite the turbulent times in California.

Many years have come and gone since the Coors convention in Phoenix, but the recent announcement of Bill Coors’ passing puts an end to a period in the beer industry where dynamic leaders backed their beliefs with actions, sometimes to the determent of their wholesalers.

I have had the opportunity to work for, and spend time with, a number of beer industry leaders during my years in the industry including Harry Jersig, Bob Uhlien, Paul Kalmanovitz, Jack Joyce, Bill, Joe Coors, and others.  All have left a lasting legacy on the industry.  Decades from now, the leaders of the craft movement might be viewed in a similar light to these great leaders.  For the well-being of the beer industry, let us hope that holds true.  Their shoes are very big!  Yes, it has been an interesting career.

“I’ve taken my kicks, but I have a fascinating life and I have been richly rewarded.” – Bill Coors

 

Beer Fodder;

 Posted by at 6:00 am
Oct 162018
 

Like many college students, I was uncertain about the direction of my professional career following graduation.  During the summers I worked as an assistant on Coors beer trucks and it was at that time that I developed an interest in the beer industry as a potential career.  It became clear to me that in the industry, one could work for either a brewery or a distributor.

These two employment options remained static until the 90s when the beer industry digested the Bush administration’s doubling of the federal excise taxes.   It took years for the industry to return to its annual growth rate and for companies to begin the hiring process following the legislative act.  During this time the beer business experienced extremes in cultural differences within certain companies.

Perhaps the most desirable beer importer to work for was Wisdom Imports.  This company hosted a growing and fun portfolio along with an employee-centric culture.  All that changed, however, when InBev bought Labatt’s.  Sound familiar?

During the same time period, Modelo was imported by Gambrinus and Barton Beers.  While both companies had similar portfolios, the cultures of the two distributors were polar opposites.  Many previous AB, Miller, or Coors employees who transferred employment to Gambrinus had the perception that they could easily adapt to the Gambrinus culture.  They soon discovered they were only kidding themselves.

Perhaps the personification of a culture change was the dramatic shift instituted by InBev during their take-over of AB.  Most former AB employees lamented those changes as they moved on to other brewers and careers.

Likewise, many of today’s successful crafts have also undergone cultural changes.  When a start-up craft begins to find some traction in the market, the company’s culture begins to shift.  Over time, brewers like Sierra Nevada, New Belgium, and Founders have discovered that experienced and professional beer executives are needed to continue the growth curve.

With 7,000 breweries currently in the market and more to come, the talent pool is limited.  A big challenge is for potential employees to decide with which brewery to hang their hat.  Will the potential brewer meet the expectations of the employee?  Because many small, start-up brewers work with an unstructured entrepreneurial culture, few provide much in the way of policies or procedures.

Recently a young, highly qualified sales rep with a new brewer was concerned over the lack of structure in his company.  Perhaps this individual would have preferred a more structured and formal company, though he may not have realized such a need for more structure without first experiencing work in a start-up brewery.  This is especially true for those individuals who have high career aspirations.

Many early employees of Sierra, New Belgium, and Founders have moved on as these breweries were no longer a fit.  Finding the right culture is a challenge for both the brewery and for the individual. Perhaps this is the underlying reason that companies attest that they cannot find qualified employees and qualified employees say they cannot find top jobs.

Keeping customers is about the experience, and frequently the employees control the culture and temperature of the business.  Never forget that.

 

 

 Posted by at 6:00 am
Oct 092018
 

There is no doubt that the beer business has many convoluted laws governing the industry.  The law dealing with beer packaging, however, might take the cake.  Take, for example, the law that required Florida and Texas to implement 12-ounce packaging restrictions.  In Texas, a beer with 5.0% ABV or less could only be sold in either a 12-ounce package or a 32-ounce package. The law stated beer of that ABV had to be in a 288-ounce case.  Schlitz, thinking outside the box, came with a 12/24 ounce can.  This package turned out to be a huge success for Schlitz.

So do creative packages like Michelob’s teardrop bottle aid in sales?  The Michelob bottle and Corona’s clear longneck bottle might be considered the two most successful packages in years.  Even with the success of the Michelob, Schlitz, and Corona packaging, however, these containers two of them are long gone, and only the Corona packaging continues today.

A couple of years ago, ABI increased the can volume from 24 to 25 ounces in their single serve c-store cans, thus providing the consumer with an extra ounce of beer for the same price.  Perhaps this technique has not worked like no other major brewery has followed ABI’s lead.

The c-store trade channel which has long been dominated by both AB and MC has now become a target of the craft industry.  In recent years, this channel has seen Constellation Brands, with their single serve offerings, chip away at both the AB and MC’s market share.

Both Texas and Florida changed their packaging restrictions years ago by eliminating the 12-ounce requirements, thus opening the door for imports to move from their .355 ounce packages to their .33 (11.2 ounces) package. This 11.2-ounce package is now used worldwide as it is more convenient for international breweries.

Crafts have discovered the 19.2-ounce package.  By reducing the amount of liquid in the can or glass container, as other CPG companies have done, the volume can be lessened instead in lieu of increasing the PTC. As an example, the product might be in a 12-ounce product but instead of a price increase, the product is now an 11.2-ounce package.

Crafts are offering their beer at a PTC near or at the domestic price, but only giving the consumer a 19.2-ounce package versus a 24-ounce package.  Everyone but the consumer wins with this model.  It becomes incumbent on the craft brewer to prove that their beer is worth the cost versus a larger size competitor.

One wonders how these crafts would do if packaged in a 24-ounce bottle/can when competing against the main domestics or imports?  This c-store trade channel is one of the last remaining strongholds of the domestic premiums.  If these crafts can steal market share from the big boys, then the 19.2 package wins.

Sometimes life gives us lessons sent in ridiculous packaging.

 Posted by at 6:00 am
Oct 022018
 

Grupo Modelo was founded in Mexico in 1922, and within just three short years the Mexican brewery introduced Corona and Modelo Especial.  Now, 93 years later, Grupo Modelo maintains a more than 60% market share in Mexico and is part of ABI.  In the U.S., Constellation Brands now owns Modelo, with Corona and Modelo Especial being the number one and number two imported brands, respectively, in the U.S.

In the last fifty years, perhaps only the success of Bud Light, Miller Lite, and Coors Light, equals that of Corona.  In the early 1980s, Corona was packaged in a stubby brown bottle and was predominantly sold in border cities, sales, however, sky-rocked when Grupo Modelo began packaging Corona in a clear long neck bottle.  For decades, the brand grew at double-digit rates.  Fueling Corona’s growth were the sales teams of Barton Beers and Gambrinus. The relationships developed with wholesalers, and increased package additions, which included 12-packs, seven-ounce bottles, cans, single serve, and draft, all added to Corona’s sales explosion.

Modelo Especial’s growth, however, was much slower, taking years to establish a foothold.  Part of that sluggish growth was due, in part, to the poor quality of Modelo’s packaging, but also because both importers’ primary emphasis was on the growth of Corona.  In recent years, however, Modelo has caught fire with some truly effective advertising and support.

Modelo and Corona are the two great success stories of the beer industry.  Wholesalers who have had Modelo for years are envied by their competitors.  While Modelo Especial continues to produce double-digit growth, the recent scan data proves that something is happening to Corona.  Corona and Corona Light are beginning to show a decline in sales.  In fact, Corona Light is down as much as -13% in the recent four-week period.

Much of Corona’s waning can be attributed to Constellation’s roll-out of new products, including Corona Familiar, and the very successful Corona Premier, targeted at Michelob Ultra.  The beer industry has historically shown that when a successful product produces offshoots, the flagship brand begins to lose volume. Or can Corona’s slow decline be attributed to the much-discussed product lifecycle?  After over 35 years of growth is the consumer looking at Corona as another product of the past generations?

Many brewers’ brand-marketing groups view line extensions as an easy way to add instant volume and increase the brands’ retail space.  But perhaps the question is: what is the real cost of line extensions?  The argument can easily be made that if the overall portfolio grows, then the brewer wins!  The real cost of these extensions, however, might be paid by the wholesaler considering the warehousing, logistics and manpower investments that have to be made.

The industry can only wonder what other future line extensions are being planned by Constellation brands.  Perhaps wholesalers will see Corona Lime, Corona Light Lime or Orange in the coming years?  Why not?  It seems to be working for Bud Light.

The next five years will be interesting for the Corona family.  Success is a lousy teacher.  It seduces smart people into thinking they can’t lose!

 

 Posted by at 6:00 am