Jun 252019

Over the years, we have visited various beer industry shifts in consumer preferences. Many changes have been the result of the consumer altering the beer segments and brands. Such swings have included the rise in light beers and the growth of imports, led by the Mexican beers, primarily Corona. In the last 20 years, we have seen craft beers develop, create their own segment, rise rapidly in popularity, and in recent years, we have witnessed a slowing of growth in crafts.

Consumer shifts in beer products do not happen often, but it seems the industry is now experiencing one such move. Industry pundits have unloaded as to why the industry is contracting and why crafts have slowed. It is, however, becoming crystal clear to all that the Millennials are shifting their consumption from crafts to now preferring low ABV, low carbs, clear liquid, and gluten free FMBs and Seltzers.  This is not a shift characterized by moving into the “better” beer segment, as has been witnessed in the change from domestics to crafts; it is more along the lines of shifting to healthier made products… at least in the eyes of the Millennials.

A post from Labor Day last year highlighted the success that FMBs and Seltzers were having with product placement, usually being positioned in the high-priority end-caps in the liquor stores. In that article, we highlighted the early success of this segment but also questioned if these products were only seasonal or if they truly possessed what it would take to become long-term players. It is clear that FMBs and Seltzers are not the typical one-and-done creations.

It is also clear that the distributors are supporting FMBs and Seltzers. Distributors are chasing many new products in this segment as witnessed by the Mark Anthony group and the fact that White Claw went to distributors outside Mike’s current network. This is taking a page out of the old G. Heileman book which had distributors compete against each other by awarding Heileman products to different distributors.

The focus in which the distributors have been placed on this segment has negatively affected the sales of crafts.  The shift shows that the consumers of such products are coming from the craft segment as verified by the monthly shipment reports.

FMBs and Seltzers are packaged in cans, have great margins, and play in the premium price segment. What more could a distributor ask for?  The products are coming from large vendors, not the typical small, under-financed craft brewer; and the results are across-the-board-marketing, chain support, and field sales support. All the parts are there to make this segment work.

The craft segment, much like the domestic light beers, will not disappear; however, one can expect the craft segment to continue to struggle, even as many crafts shift from hop-bombs to lighter craft liquids.

Where this seltzer segment ends up and where the next new segment comes from will be interesting to see. The next generation will soon tell the beer industry what it needs to be.

If you do not change direction, you may end up where you are heading.

 Posted by at 6:00 am
Jun 182019

Last week’s post highlighted the story of the Mark Anthony Group. The account of Mark Anthony is not as much about their hot product, White Claw, as it is about how the company made a complete turn-around. This is a bit of an anomaly in the industry as most turn-around stories are about the brands themselves, not about the actual beer company.

There have been a myriad of stories about Schlitz in these posts. A brand that could not have been saved despite the fact that multiple leaders tried and millions of dollars were spent. Pabst is another story, albeit one with an asterisk. Notwithstanding a small revival some years ago, and multiple owners, Pabst is now struggling.

Many regional brands, long since departed, have attempted comebacks under different ownership. None have succeeded, although several appear to be riding the proverbial roller coaster. Examples include Rainer and Lone Star, both of which are owned by Pabst, and both of which have managed to become more relevant in their regional markets.

Because crafts, many of which have not been existence for 10 years or more, have a shorter history, they do not fit into this category of come-backs. Older crafts like Sierra Nevada, New Belgium, and Boston have either morphed their portfolio to ensure success, or have simply ridden the ups and downs from year to year. The glaring exception is Yuenglng, which, under the same ownership, continues to excel regardless of how or what the industry is doing.

Wholesaler’ degree of success is not relevant when discussing the topic of turnarounds because success is more directly tied to that of their suppliers. Even wholesalers, whose volume for decades consisted of brands like Schlitz or Pabst, survived if they could capture a brand like Constellations Brands or Heineken in their house.   

Obviously, wholesalers who were not as fortunate to have afore mentioned vendors, have since sold out or closed. A wholesaler who finds themselves in a crisis is most likely in that position due to their portfolio; and in almost all cases it does not matter who is in charge. Without the bullets, you are firing blanks.

Importers are the one segment where a change in leadership can and does make a difference. With the right leadership a restructuring and direction change can turn a small to medium-size importer around.

The beer industry is not one of turn-arounds. This is an industry which needs the right product at the right time; a product that will be supported and enabled to move in the right direction with a clear understanding of who and what that product is.   Victory is never going to happen when a beer attempts to be something that it is not, can never be, and prevents the brewery and the products from ever being successful.

Spending resources in an attempt to be something that will never happen is a waste and a pathway to failure. A crisis in beer is not about leadership, it does not have to be a crisis if the proper leadership is in place.

Careers are made in times of “crisis.” 

 Posted by at 6:00 am
Jun 112019

An article in Beer Business Daily last week focused on the Mark Anthony Group and their hot brand, White Claw. As a company, the Mark Anthony Group could be considered the personification of what it means to move from insignificance to viable vendor, for yet the second time.

In the 1990’s, Mike’s Hard Lemonade, a front runner among FMBs, was one the hottest brands of their time. Not only was their product selling at record pace, the company’s culture was envied by many. But in 2000, that all changed and Mike’s sales started to slip. New management was brought in, many of whom were from Gallo, and immediately the culture changed, key employees left, and the company began to struggle.

A year or so later, Mike’s annual sales meeting was held in Las Vegas. What was typically an easy location at which to entice distributors to attend turned into a challenge to get distributors to show up.  In some cases, distributors were so reluctant to attend the convention that field reps even had to persuade them to do so. And once at the convention, many distributors walked out just 10 minutes into the opening session as they were so disgusted with the comments.

Eventually, Mark Anthony made changes, however, it was not until Phil Rosse took the lead role did Mike’s begin to move in a positive direction.  Phil stated, “Businesses today need purpose, and the next generation of employees is looking for so much more than just a job. You need a reason to feel deeply connected to companies, businesses, and brands. So for many years now, we have been working hard to make Mike’s a different type of place to work. And by different, we mean something that attracts folks that want to be part of something special that we’re trying to build, and a place where every employee plays a critical role.”

Phil goes on to say, “We have been trying for many years now to create an environment where everybody wins. Obviously, there’s ownership, there’s management, but winning must be felt by all employees and all our partners. We want everyone associated with this business to feel like they are a part of the success. That, in our mind, is the Mike’s culture and we believe organizational culture can be as much a disruptor in today’s world as a new product can.”

The article in Beer Business Daily is extensive, but there were two other comments which provide additional insight on how Mike’s goes to market. Sanjiv Gajiwala, the marketing chief commented on consumer targeting: “We have not in our marketing been trying to identify or associate who, or what, a White Claw drinker looks like.”  Phil added, “My perspective on category management, shelf sets, and space at retail is that it has always been our number one opportunity as a company. I think it (category management) is truer now than ever, is our number one opportunity as a company.”

There is no discounting the fact that superior products such as Mike’s and White Claw speak volumes in the success of any company, but in Mark Anthony’s case, Phil and his leadership team have implemented a winning culture.

It is apparent that Mike’s learned from their past, the question is: why is it others cannot see that, too?

Culture eats strategy for breakfast.

 Posted by at 6:00 am
Jun 042019

When Jerry Jones bought the Dallas Cowboys in the early 1990s, Texas Stadium was not owned by the football franchise; therefore, the venue was not subject to the rules of the NFL corporate sponsorships.  After Coors passed on the offer, Jones sold the beer-pouring rights to Miller. Today, Miller Lite remains the beer sponsor of AT&T Stadium and finding another beer at AT&T is difficult at best.

Selling the pouring rights to sporting events is embedded in the beer industry and has been an issue for decades. In recent years, college stadiums and basketball arenas have sold their pouring rights. While one can find other brands to purchase at these venues, it is typically difficult as other brands are sold in out-of-the-way locations

The state fair of Texas hosts an open-air concert stage called, The Dos Equis Pavilion. At the pavilion, one can buy a plethora of beers brands, however, the name Dos Equis is liberally splashed throughout the pavilion. The amount of money spent by breweries on these venues is enormous, but this is part of the business and has been for many years.  

The industry appears to be oblivious to the growing number of vendors who have been fined for illegal payments.  Constellation Brands is the latest brewer to find themselves in a less-than-favorable position, having recently agreed to a $420,000 dollar fine for buying draft placements. This comes on the heels of Heineken’s agreement to a $2.5 million fine in April. Prior to these fines, Eagle Brands was hit for $1.5 million in fines and, of course, Warsteiner paid $900,000 in fines just last year. Remember, some distributors have also been fined. Brewers Distributing paid $350,000 and Elgin Beverages paid $325,000 in fines, both for illegal activity.

It is no secret that brewers, importers, and distributors are pushing hard for volume and market share regardless of the cost. But the question is: how do buying rights to a stadium or venue differ from the buying rights of a draft handle in an account? Is this another gray area? The industry sees the blurring of lines across all three tiers as brewers, distributers, and wholesalers brew and sell beer at the brewery and act as a retailer.

Any way you look at the current situation; it seems the industry has become oblivious to announcements that another fine has been levied for some type of illegal activity or payments. As the size of the pie continues to constrict downward, expect to see more fines.

Gradually, many of the previous restrictions in the industry have either been eliminated or loosened.  An example of such is the fact that professional athletes are now able to represent a brewery or beer. So where does this end?  Or perhaps a more appropriate question is: in what direction will these actions lead and how will the consequences affect the future of the beer industry?

Not listening results in misunderstandings and conflicts.

 Posted by at 6:00 am