Just when I thought I had seen it all, after my many years in the beer industry, along came 2020! As we all know, a myriad of things changed last year, and not for the better. There was, however, a year I recall that was worse than 2020.
When I first began working on a beer truck during college, one of my goals was to purchase a Schlitz distributorship. That goal became a reality in 1981 when I bought Texas Beers, located in the Rio Grande Valley of South Texas, then the seventh largest Schlitz distributorship in the country. Unfortunately, 1981 was not the best year to buy a distributorship. That winter, the area was hit by a 100-year record-breaking cold front that froze 95% of the citrus and agriculture products in the Valley. Because takes seven years to grow a fruit-bearing tree, most of the migrant workers left Texas and moved to other states for work. The Rio Grande Valley is located on the Mexican border and a large part of the economy at that time was based on the number of Mexican consumers coming into Texas to purchase products. The peso exchange rate, which was initially 12-to-1 when I purchased the Schlitz distributorship, dropped to an astounding 2200-to-1! Combine that with the jump in oil prices and the market in South Texas experienced an unemployment rate of 50%. Retail sales were non-existent, house prices crashed resulting in a collapse of the housing market, and by the end of 1982, the size of the beer market had decreased by 50%. To add salt to the wound, the Jos. Schlitz Brewing Co., facing sliding sales due to the changes in their brewing process, sold to the Stroh Brewing Co. of Detroit. In 1981, there were 10 beer distributors servicing all or part of the Rio Grande Valley. Once the smoke cleared, only two were left standing. Yes, that was a year I would like to forget. Compared to 1981, 2020, for me, was a piece of cake!
I remember two years in which the events that took place changed the beer industry forever. The first year was 1969 when Philip Morris purchased the Miller Brewing Co. Until that time, the industry had not marketed to professional sports, but Philip Morris changed that by purchasing consumer marketing spots during sporting events. This innovative marketing, along with the introduction of Miller Lite, forever changed the industry. Fifty years later, light beers are still the largest selling segment in the industry.
The second year that forever changed the beer industry occurred in 2008 when InBev purchased control of AB. InBev’s culture was diametrically opposite of what had been the culture of AB and even that of the U.S. The result was that InBev’s culture has forever changed all three tiers of the beer industry.
2020 is the third year of dramatic changes which will join 1969 and 2008 in permanently changing the industry. While many breweries closed, many breweries not only survived but grew, some by a great deal. Industry pundits think that the culling of the heard was necessary as many of these small breweries were simply hanging on by a thread. Thousands of retailers are now gone and many of the survivors have changed their business models forever. The on-premise accounts may never be the same again.
The middle tier seems not only to have weathered this year but appears to have emerged in a much improved position. Has there been a wholesaler who was forced out of business due to the virus? Wholesalers streamlined their portfolios, either by their design or by their vendor closing. Off-premises sales soared while their on-premises sales, coupled with the high costs of maintaining that on-premises segment, disappeared. The costs of destroying or picking up beer from the closing of accounts, in most cases, was shared with the brewery. Many breweries and wholesalers lost more than 50% of their keg sales. Then there are those Zoom sales meetings. Enough said. Many wholesalers have experienced a record financial year.
As the vaccines are distributed, the hope is that the world will slowly return to normal, but will the beer industry return to what it once was? Probably not. Time will illustrate that in 2020 the virus changed the industry, just like the industry was changed in 1969 and 2008.
In 50 years, I do not think you are going to look back on 2020 and say: “The good old days!”