The Rio Grande Valley area of Texas is considered an isolated part of the U.S. because of its location, surround on the southeast by the Gulf of Mexico, the county of Mexico to the south, and the vast expansion of the King Ranch to the north, coupled with the fact that a majority of Valley’s population is confined to just three counties. Because of this, in 1980, there were multiple beer wholesalers located in the valley: one Schlitz wholesale, run by me; one AB, one Miller (Falstaff), two Coors; two Lone Star; one Pearl/Imports; and believe it or not, one Hamm’s (Femsa). Heineken, was delivered into the valley by Glazer’s, based in Corpus Christi. Altogether, nine different houses not counting Glazer’s.
By 1982, however, the beer industry was affected by the following a multitude of uncontrollable factors: a massive peso devaluation; a 100-year freeze which destroyed 95% of the citrus trees; and the oil embargo. These events created an unemployment rate of near 50% and a decline in population as people moved to locations where they could find work. All of these factors created a major reduction in the beer volume. The economy, unfortunately, was supported by the seasonal visits of the upper mid-west winter Texans, who at this time, were mostly retired WWII vets.
Fast forward to today. Since the early 1980s, the Valley has more than tripled in population, but today there are only two beer distributors; three if you include BEK who maintains a small operation in the area. Of the original nine wholesalers, only the AB house L&F remain, all the others have consolidated into a Glazer’s operation. In other words, the breweries who survived, along with the financially committed wholesalers, weathered the storm and are today making money.
Recently, while visiting a small brewer in their sixth year of business, I learned that in 2016 this brewer experienced his first decline in sales. He self-distributes and because of that, his tap handles have become a target for the other beer distributors. He told me that the wholesalers have a $300 bounty for his handles! Unfortunately for this brewer, he cannot compete with such a practice and has lost a lot of business.
With over 7,000 breweries of all sizes, another 1,900+ with permits, but not yet brewing, and a couple of thousand more in various stages of planning, the industry has reached a saturation point. It is yet to be determined how many of those will get the funding to build, but rest assured, many will not get the funding they need. Still, it is obvious that those in the business today are hitting the proverbial wall, not growing as the category slows. Those breweries without the sales structure, programing, pricing, money, and most importantly, the will and focus to continue on, will surely risk failure in the future.
Just as what happened in the Valley over 30 years ago, economic conditions and top tier consolidation were the reason that seven of those distributors sold out. The two that stayed the course are now benefiting from their tenacity. This same determination applies to those craft breweries today. If the liquid is quality, and one can withstand changing conditions, then the sky will be the limit.
If you want to see the sunshine, then you have to weather the storm.
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