Jul 252017

Regardless of what report one reads today concerning beer shipments or sales of beer to retailers, the numbers all reflect negative trends.  Until last week’s reports, which showed some improvement in STRs, the negative numbers continue to accelerate.  Such a downward pattern has not been since the days of the Schlitz decline, with major brands like Miller Lite, Coors Light, Bud Light and Budweiser presenting large decreases in sales.  In fact, Bud and Bud Light are close to double digit negative numbers.

Not surprisingly, these negative trends have caused pundits to throw darts at the reasons causing said losses.  The most commonly reasons sighted include: ineffective beer advertising, when compared to ads for the spirit vendors; aggressive pricing and the number of SKUs; all of which have negatively impacted and have had consequential results in today’s beer industry.

Much of the blame in last week’s report was directed at insufficient beer ads, aptly noting that the ads proved ineffective in moving the needle in a positive direction.  One article pointed out the number of ad agencies Miller Lite had retained over the past years.  Looking at the number agencies listed, it would appear that Miller’s marketing department changed agencies as frequently as most people change their shirts.  None of which have improved Lite’s trends.

All the responsibility, however, does not fall on the shoulders of the brewers. The middle tier could play a much bigger role in these negative trends than initially thought.  Consider the AB wholesaler who has a draft-handle market share of 70%+.  The wholesaler prices all their craft beers at the same PTR with no programing.  Any new handle must come from competition.

An incentive program does not count if a new handle comes from an in-house brand.  On the surface, this seems logical, but in reality, does it?  Such a wholesaler, who engages this type of business model, only hurts the brands they represent.  If a brewer’s strategy is to employ certain tactics, and their wholesaler refuses to execute such tactics because they do not desire to have issues with other in-house vendors, who really wins? A brand cannot get any traction to build consumer demand or sampling.  In fact, it could be viewed as the wholesaler providing brands that do not match the consumers’ desires or, in other words, telling the consumer what to drink, when in fact they should be listening to the consumer. It is a double edged sword.

Going forward, what will the wholesalers do if their major domestic brands continue to hemorrhage as they have for years?  At what point do wholesalers determine enough is enough and begin to support their in-house brands as their suppliers have positioned them?

While there are many wholesalers that do aggressively pursue any and all programs their vendors have, there are an equal number of wholesalers who do not.  Those that do follow such programs should not criticize their major suppliers, as they too, are part of the overall industries’ problems.  The middle tier is equally as deep in this mess.

When you blame others, you give up the power to change.



 Posted by at 6:00 am

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