Dec 172019
 

The interview process I experienced during the late 1980s for the general manager’s position at Coast Distributors was definitely unique. Although I spent the majority of the interview time with owner of Coast, I also had dinner with the GM’s three director reports:  the Director of Operations, the CFO, the Director of Sales, Jim Cline.  I was offered the GM position and accepted it in early 1988. 

Shortly before accepting the GM position, Coast had been awarded distribution rights to Coors in all six of their Oregon houses. At the time, they were the largest Pabst distributor in the country. Hamm’s was their number one brand and the best selling beer in Oregon. Coast also had a multitude of other imports including: Modelo, Heineken (in some markets), and others, along with a wine portfolio, which produced 10% of revenue. Jim Cline played a key role, not only in aiding Coast with the Coors expansion, but he also had a vision for the future and had agreed to acquire Rogue, one of the earliest crafts. Coast was Rogue’s first wholesaler.

Jim grew up in Oregon and had gone to the University of Oregon where he aspired to play football. Unfortunately for him, the football career did not materialize, but Jim did earn a degree in biology. One of Jim’s favorite sayings was that he might not know how to sell beer, but he knew how to make it. Using his strong work ethic, Jim performed his way up thru the ranks at Coast to become a key member of the management team. Jim, more than another vital employee, was a major factor in the success of Coast. He quickly became my right-hand man and was a great help in negotiating new union contracts for Coast’s five local shops.

After several years of profitable sales, at the request of the family, I helped sell the company to Dick Lytle.  Dick changed the name of the company from Coast Distributors to Mount Hood Beverage, which in turn later became Columbia, the giant multi-state house.

Jim stayed during the transition from Coast to Mount Hood, but as is typical, he departed after the new management assumed control.  Jim was quickly picked up by Jack Joyce, the owner of Rogue Ales.  This decision led to one of the beer industry’s best leadership groups with Jack and Jim growing Rogue into not only one of the top selling crafts, but also one of the top selling brands.  Following the strategy of jack and Jim, Rogue expanded across the country. Jack retired and passed away some time ago, but his son took over from him and continued, with Jim’s help, to grow Rogue.

Jim was one of the beer industry’s unique leaders in that he took a traditional long-time family owned distributorship and grew it it into one of the nation’s top ten.  Not only does Rogue Ales span multiple states, the company also has a definite grasp on the future of the beer industry.  

After decades at Rogue, Jim has now retired to spend time with his wife Amy and his beloved horses. When I see a can of Coors or a bottle of Rogue, Jim comes to mind. Jim Cline, the Oregon Duck. 

2019 = Jim Cline – Rogue Ales

2018 – Ray Teutsch – AB Distributor

2017 – Charles M. Duke, Jr. – Coors Distributor

2016 – Carter S. Huber – Schlitz/Miller

2015 – Albert Jaenicke – Hops

2014 – R.D. Hubbard – Coors Distributor

2013 – George Henricksen – Royal Imports

2012 – Diane Fall – Warsteiner

THIS IS THE LAST POST OF 2019.  I WISH EACH OF YOU A HAPPY HOLIDAY SEASON AND A MERRY CHRISTMAS.  NEXT POST WILL BE ON JANUARY 7, 2020.  

 Posted by at 7:00 am
Dec 102019
 

Almost 50 years ago when the tobacco company Philip Morris was flushed with cash, they purchased the Miller Brewing Company. Miller immediately had access to PM’s marketing expertise along with the resources necessary to attack the beer industry. Miller created Miller Lite just as the baby boomers were turning 21, and the rest is history. One could argue that Philip Morris’ purchase of Miller Brewing was a defining moment in the beer industry

This acquisition by Philip Morris started a shift in the beer industry that continues today. Schlitz Brewing, in trouble for years due to their brewing process, finally sold out to the Stroh Brewing Company, also a struggling brewery. The massive debt Stroh had incurred with the purchase of Schlitz might cause one to wonder how Stroh ever believed they would survive. And they did not.

The G. Heileman Brewing Co. had been successful with the acquisition of regional brands, support of those brands, and the expansion of other brands. A key to Heileman’s success was the fact that they would award brands in a market to different distributors, thus pitting the distributors against each other. This model was effective until distributors got together and changed state laws to prevent such action from occurring.

Alan Bond, acquired G. Heileman in a takeover.  Bond had so much debt that the company had no chance to succeed, especially given their declining brands. Standing in the wings was Paul Kalmanovitz, who was also buying struggling breweries, but instead of spending against them, he stripped them of their assets, cut marketing, and reduced staff. Brands struggled and died but Kalmanovitz made money.

In the last 20 years, the beer industry has seen AB purchased by InBev, and Miller combine with Coors. Both companies have lost market share and volume while simultaneously experiencing rapidly growing margins. These two companies have been successful in aggressively purchasing key craft brewers.  The craft segment, however, is struggling with the growth of seltzers.

Recently the industry has seen a number of large successful beer companies sell out.  Most recently New Belgium Brewery, an employee owned brewery, sold to Kirin. Perhaps the most eye-awaking of all such transactions, was the recent news of Constellation Brands selling Ballast Point to Kings & Convicts. Constellation Brands is said to have paid $ 1 Billion for Ballast Point which caught the industry by surprise. Four years ago, Ballast Point’s sales were at 430K bels. while in 2019 the sales volume will be less than 300K bels.  In recent years, Constellation Brands had several impairment charges which indicated that Constellation had overpaid for Ballast Point.

The question is: why did Constellation overpay for Ballast Point? Why did Constellation sell Ballast Point for only $75 million after just four years? In so doing, Constellation walked away from their distributor’s commitment to the brewery. Constellation is not a beer company that is struggling because they have Modelo. Constellation has resources very few companies have.

Expect Kings & Convicts to be successful with Ballast Point because the brand will be the priority for the brewery, not a bolt-on brand or one that is there to support egos. If that were the case, then do companies make a brand or does a brand make a company?

Don’t let your ego get in the way of your ignorance.

 Posted by at 7:00 am
Dec 032019
 

In the early 1980s, Stroh Brewing Company purchased the Joseph Schlitz Brewing Company.  Stroh quickly reduced market support in an effort to revise Schlitz’s downward trend.  At the time, marketing was limited to media, p-o-s (point-of-sale), and price supports.  Although Schlitz had been declining prior to being bought by Stroh, once Stroh took over, Schlitz’s decline accelerated, and the brand soon lost their market leadership position to Miller Lite.

In the 1980s, wholesalers were predominantly a one-trick-pony and I was no exception as 90% of my volume was Schlitz.  Yes, I had the regionals:  Pearl, Lone Star, and Shiner along with all the imports, (with the exception of Heineken), but Schlitz was my bread-and-butter.  Desperate to save their companies, many Schlitz distributors repositioned Schlitz pricing under Miller Lite and Budweiser in the hopes that the consumer would see value and come back to Schlitz. The repositioning had no chance without support from Stroh, and that, unfortunately, never came and the rest is history.

Corona had just transitioned to the clear bottle and Shiner was years from being bought out by Gambrinus. Needless to say, these beers did not have the traction they have today. Currently, the wholesalers’ portfolios are diversified enough that if one brand begins to slide the net losses are mitigated with the other numerous brands in the portfolio. If the wholesaler has White Claw or Truly, there is no real bump.

With the beer industries’ effort to upsell the consumer, now in its 12-year, wholesalers are ratcheting up pricing at every possible junction.  Some are raising prices even without the suppliers’ knowledge; the supplier is not raising their prices to the wholesaler without their knowledge.  Selective pricing, without supplier involvement, could be costly for the wholesaler; not as much in the wholesalers’ existing footprint, but in the event that the wholesaler has multiple warehouses and operations.  Targeted vendors will likely look elsewhere to find different wholesalers who are willing to work with them as they expand. In addition, new vendors, or those opening up markets, might want to rethink their strategy when interviewing or appointing distributors. Breweries may even attempt to add additional language in their contracts regarding pricing and strategy.

As more, large, multi-state distributors evolve from the traditional beer house to beverage companies; expect to see these companies create pricing professionals who study pricing trends and seek opportunities for the wholesaler. Many smaller vendors will come to rely on the wholesalers’ expertise in understanding the price points that are most beneficial for both companies.

There is much more at stake than just the premization of beer. The Schlitz wholesalers might have been better off not to reposition Schlitz but to wait and ride it out until the end with the best pricing model available. When you have only one pony to ride, however, you do not want to be thrown off.

There is no victory at bottom basement prices.

 Posted by at 7:00 am