Beer Business Unplugged

The SMU football team is currently undefeated and ranked 16th in the nation. As college football fans know, the SMU program was given the death penalty during the mid-1980s for numerous NCAA violations. For over 39 years, the SMU football program suffered severely from that penalty and each year brought the school another losing season. Due to this fact, the NCAA has never given another school the death penalty. It is somewhat surprising that SMU just did not abandon its football program all together, but they did not and remained persistent.

Recently the NCAA revised their transfer rules for athletes. Prior to the revision, an athlete could not transfer and play without first sitting out a year. The exception applied to athletes who had already graduated and remained eligible.  The newly revised regulation now allows the athlete to enter the transfer portal and move to another school where he or she can immediately play. If a top athlete is not playing at their desired school, for whatever reason, they can enter the portal, transfer to their school of choice, and receive immediate playing time. Perhaps no other school has benefitted more from this new rule than SMU’s football team, which has received more than 30 transfers. Most of the players relocated from top schools, including the University of Alabama and the University of Texas.  All wanted an improved opportunity to play and showcase their talents. The new ruling is certainly a win-win for SMU and other schools, including the University of Oklahoma,  which is now potentially hosting a third consecutive Heisman Trophy quarterback.

So, the question is, if the NCAA can modify their “pigeonholed” rules, is it possible that wholesalers can/will create a transfer portal for brands who want out? Unless a state has a buyout provision in their franchise statues, a vendor cannot leave under any circumstance. Even when a distributor decides to sell their business, there can be numerous restrictions for a vendor who desired to pass the buyer on to another distributor.  A wholesaler has the right to obtain fair market value for their efforts in developing a brewery; however, a vendor should also have the right to choose its preferred wholesaler. All parties should be able to work through such issues without threatening letters or correspondence from lawyers. In many instances such letters only serve to aggravate progress and potentially cause undo delays.

Is the college transfer portal changing the landscape of athletics? Probably not yet, but it has given many athletes the opportunity for another chance. Perhaps brands and breweries should be given this same opportunity?

Every team feels they are better after the transfer. 

While at the NBWA convention, wholesalers are offered the opportunity to attend a multitude of seminars on Monday and Tuesday mornings from 8 to 9:30.   Distributors can sign up to go to the seminar of their choice, unfortunately however, due to time constraints; it is possible that one cannot attend all the desired discussions. This year’s convention was no exception. 

One workshop offered was led by Joe Verno, one of the founders of The Denver Management consulting group. Denver Management has been in existence for a long time and in the 70s and 80s, their focus was on converting wholesaler driver sales to pre-sales for many distributors. At this year’s NBWA Joe and his son, now consultants in the family business, Verno Consulting, discussed what they believe are 40 things wholesalers should stop doing. Last week Beer Business Daily highlighted these same 40 issues outlined by the Vernos. The subject matter covered all segments of a wholesaler’s operation including, but not limited to: training, delivering, sales, talent, and vendor relations.  The top 40 areas that wholesalers should avoid outlined by the Vernos should be eye- opening to many wholesalers, although many may bypass these important points saying, “It’s not my operation, we are a step ahead of all of these points, my business is doing very well.” 

The wholesalers who are fortunate to have White Claw, Truly, Constellation, or Ultra in their house only have to look at their bottom line and smile. Using technology, almost all wholesalers have improved their overall operations and logistics while adding a number of new vendors and now, many carry non-alcoholic products.

It is clear that the Vernos are saying to wholesalers: While you are growing, are you sacrificing the long-term for the short-term? It was also clear that the Vernos see obvious wholesaler short comings including: internal structure, lack of talent, bench depth, and training. There are good odds that when questioned, almost all vendors would agree with that position.

On the reverse, wholesalers see the same issues with many new or recent vendors. Both parts of the industry hire to fill a void, not for leadership, experience, and growth. Both sides will make a point of not being able to find the right talent which is only an excuse. Talent is out there, but to obtain the best, both parties have to step up. The talent gap between wine and spirit companies and beer companies can be eye-awaking, especially when dealing with mid-management areas.

Expect to see more on the 40 key metrics outlined by the Vernos in the coming weeks. Or, one can always contact the Vernos directly for more information on this topic, for a fee, or course. 

Thank you, Captain Obvious.

In the 1970s, it was common for most medium to large size cities to have a local beer wholesaler association, in addition to their state association. There were even some strong regional beer associations, including the Rocky Mountain Conference of Beer Wholesalers Assoc. Most wholesalers had only one supplier. Most markets would typically have an AB, Miller, Pabst, Schlitz and Coors distributors along with regional houses, like Lone Star and/or Pearl house, which was the case in Texas. In the northwest, the regionals might have included Olympia, Rainer, and Henry’s. Other parts of the country had their own regional houses, as well. There could have easily been six or seven wholesalers in any given market. All of these associations turned to the National Beer Wholesalers Association for a national presence. As the years went by, however, and the consolidation of the beer industry became a way of life, most of the local and regional beer associations disbanded, leaving only the state associations and, of course, the NBWA.

In the 70s, the national NBWA convention’s political focus was on fighting deposit legislation, while the convention show concentrated on vehicles and delivery equipment. At the time, convention conversations often centered on Coors’ eastward expansion. Interested wholesalers would locate Coors wholesalers who could provide them with information to assist with their Coors distributor applications.

By the 1980s, the convention moved to highlighting imported beers, mostly European breweries, who were interested in expanding into the U.S. Wholesaler consolidation had not yet impacted the overall attendance at the convention, the suppliers conducted wholesaler meetings during the NBWA. Because wholesalers typically had only one vendor, many major breweries hosted their national golf tournament and other events during the convention.

By the 1990s, Pabst and Schlitz were almost gone and the rise of crafts and the Corona “miracle” became a national topic of discussion. Multi-brand beer houses became the norm which resulted in more hospitality rooms and dinners, thus enabling the vendors the opportunity to entertain their wholesalers. Some vendors, like Diane Fall of Warsteiner, invited key volume wholesalers for a private limo pub crawl across Vegas. At each casino Diane handed the wholesaler a $100 chip and a Warsteiner. The evening typically lasted until sunrise. Many other vendors also had their own unique evenings.

The NBWA frequently featured a beer segment that was particularly popular during the given time frame and provided that segment with a special section on the floor during the convention. The NBWA created the craft beer sections which enabled craft breweries to feature their respective beers while, at the same time, enabling conversation with current and potential wholesalers. This style of presentation was popular for years.

This year’s recent convention was a real eye opener for those who have attended the NBWA for decades. The massive three room exhibition hall featured seltzers, ciders, CBD, Hemp, and alcoholic infused waters. It seemed as though one had to really look for the beer segment. In one seminar, the presenter graphed the number of suppliers a beer wholesaler represented. This graph illustrated that the average wholesaler had 61 vendors, but a mere 30 were beer vendors.

The question is: does this indicate the direction the industry is taking or does this indicate the reason that beer sales have been losing share of stomach to other beverages?

Perhaps it is time to call the NBWA, the National Beverage Wholesalers Assoc. and drop the word “beer.” Some people seem to think so.