May 092017
 

AmazonLast month, at a retailer appreciation kick-off event for a new brewery, a longtime importer reminded me of a prediction I had made 15 years ago regarding the future of wholesalers.  Given the direction of the industry at that time, it was clear that the biggest change would occur at the middle tier.

With the onslaught of new brands and breweries, it seemed that the middle tier would be over whelmed, and to some degree, this is exactly what has happened.  Distributors are no longer asking for brewery personal support in their markets, they are ignoring breweries that will not position support people or teams in their market.  For example, six months prior to rolling out in Austin, Bells, transferred three experienced sales people to work the market up until the roll-out point.  From the wholesaler’s perspective, the first month’s sales were a success.

For those breweries that are established, similar to Bells, wholesalers are functioning as a warehouse and a delivery system for these breweries.  Wholesalers are demanding that breweries function in this role, and the breweries are delivering on this request. My prediction 15 years ago went even further, as predicted sales would be generated with brewery sales teams and orders would be transmitted to the wholesaler, who would logistically delivery the beer.  Under this scenario, the wholesaler would work off lower margins, assuming the wholesaler has no sales department, or a limited sales department.

Long term vision for wholesalers should narrow to protect the three tier system, not the franchise laws.  The three tiers ensure the continued existence of wholesalers, even if they evolve into just a warehouse, delivery, and merchandising function. One can already make the case that wholesaling is well on the way to that model.

Perhaps the biggest threat to the middle tier is not the craft brewers, or even ABI or MC and others with retail taprooms, but Amazon.  Amazon is, where legal, testing ways to crack into incorporating beer and/or alcohol into their business model.  If Amazon manages to do so, no doubt their involvement will dramatically change the beer industry.

Amazon Prime members do not pay for delivery charges, and one would assume there are millions of Prime members. From a breweries’ perspective, Amazon could be an attractive partner.  Think of all the possibilities!  On the other hand, from the wholesalers’ view, Amazon could be a major nightmare.  The emergence of Amazon delivering beer could signify the end of the middle tier.

If, however, the middle tier would work with Amazon, and become the warehousing and delivery function of Amazon, wholesalers could continue to play a significant role in the industry.  Consumers could order from the Amazon site, Amazon would process the order through their local wholesaler, and the wholesaler would, in turn, deliver the beer order.

Amazon becomes the retailer, and the wholesaler is able to direct-deliver the beer.  This might even evolve into an Amazon order including products from two, or even three different wholesalers, but with only one wholesaler responsible for delivery of the product(s).  Consider all the possibilities.

All the industry tiers should understand that Amazon is not going away. Something will happen that will change the industry and its access to market. It is just a matter of when said change will happen.   Maintaining the middle tier should be the main goal, however, what the middle tier will look like, is up to the wholesalers.

Compromise works well in this world, but only when you have shared goals….

 

 Posted by at 6:00 am

  2 Responses to “Compromise works well in this world when you have shared goals…”

  1. Geoff, I’m curious – do you see Pabst/TSG Consumer Partners/Eugene Kaspher trying to get the early jump and perhaps exclusivity (if that’s possible?) with Amazon in this type of scenario, given that they are seeming to emerge and explore competitive distribution models and partnerships to succeed against ABI/MC?

    • I do see someone jump in and once it starts, there will be many brewers jumping in. Many legal issues to resolve along with logistics not to mention, how to keep the wholesalers happy and agreeable. This will happen sooner than later.

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