Apr 292014

VeltinsMy first action as President of Warsteiner Importers Agency was to request an internal audit of the brewery.  This request was well received by the brewery, and as a result, their accounting firm proceeded to conduct an audit.  Given that I inherited a company which was millions in debt, and my charge was to make the agency profitable for the first time in 27 years, I wanted a clean slate as a base line.

The next year I had the company profitable, and by 2008, we were paying down the short term debt held by the shareholders.  In the third quarter of that year, the agency produced the biggest sales number in its history along with the most profitable quarter ever.  It was at this period that Warsteiner had begun to centralize control over each of the countries in which they were selling.

In August, I was notified by the brewery of price increases that would ultimately result in a loss of 39% of our sales.  After writing the owner regarding my dissatisfaction of this decision, I was called to Germany where I met with the new export director.  This man was not from the beer industry and had zero industry experience, but was an instigator of the centralized model.  At this meeting he informed me that the new policy was called “four eyes,” which meant that my CFO would now report directly to Germany.  I would be over everything else.

By this time, this export director had already replaced the senior leader in every country except the US.  The four eyes model had become somewhat standard in Europe, and because Warsteiner had discovered a number of ethical issues with some of their previous senior management within their business in Africa and South America, ownership felt it was necessary to switch to this internal control.  In that afternoon’s Board meeting I told ownership that I did not support this model.  My issue was not with the internal controls, with the individual Warsteiner was hiring to run these operations.

While all the other countries were required to operate with their CFO reporting to the brewery, I still had all the financial responsibility because I was still accountable for the financial performance, budgeting, and presentation of the US results to the Board.

In January of 2014, the German Cartel announced it was fining five of the largest Germany breweries including Warsteiner, Krombacher, and Veltins $106.5 million euro for collusion.  Just recently the cartel announced additional fines of $212.2 million euros to six more German breweries along with seven individuals, also for collusion.

Recently MC report that they had discovered some of their executives had falsified invoices and had stolen millions from the brewery.  I am sure the industry will be hearing more about this in the coming months.  MC has stated they have taken the steps necessary to upgrade their internal systems to prevent this from happing in the future.  Perhaps they instituted the European “four eyes” controls which are now in place?

The export director at Warsteiner was removed from his position not long after I left, but with the news of the serious fines and collusion of the major German breweries, the question becomes just how high up did this collusion go?  Did ownership approve these actions?

Given the size of the fines by the cartel, one would assume ownership approved of this, but no names have been published regarding who was fined.  MC and these German breweries do not need more internal controls, what they need is strong leaders.  Management is doing things right; leadership is doing the right thing.

 Posted by at 6:00 am

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