Sep 252018
 

It is likely that if you have been in the beer industry for any amount of time, you are aware of either a wholesaler or vendor who has broken state or federal laws.  This is nothing new.

In a past blog, it was illustrated that, as a Schlitz wholesaler with a 30%+ market share, I lost all of my draft handles on South Padre Island just prior to spring break, the largest selling month of the year.  It turned out that AB had obtained my draft accounts. Soon, however, the TABC investigated and discovered inappropriate activity and the AB wholesaler was fined $2,000.  Given this action by the TABC, a wholesaler could assume that a $2,000 fine was the baseline for buying draft accounts.  That being said, the wholesaler or vendor could then determine a risk/reward approach to buying accounts.  Is the account worth the risk of a $2,000 fine?

The recent $900,000 fine paid by Warsteiner for trade violations continues to be a focus for TTB seminars and discussion.  Going forward, this fine could be considered the baseline for penalties against similar sized importers or brewers, regardless of whether the actual violation fits the crime.  If the TTB maintains this standard in fines, does the industry have a 2019 baseline going forward?  If so, then a vendor of Warsteiner’s size, 75,000+ HLs, could assess the risk/reward benefit for incurring TTB violations.

Perhaps the most sought-after venue in the U.S. for any German brewery is the German pavilion at Epcot Center in Florida.  This pavilion hosts over one million visitors annually and depletes over 7,000 kegs.  A multi-year pay-to-play contract for a German brewer and their local wholesaler at Epcot is highly sought after and could facilitate positive momentum for the vendor and their brands. The vendor could totally focus its annual marketing on Epcot’s German pavilion by using the location in a majority of its p-o-s and incentive programs for wholesalers.  Winners of the incentive could receive an all-expense paid visit to Epcot and the German pavilion.  Conversely, the pavilion’s leadership could visit the German brewery, spending time there with brew masters and senior management.  Most vendors will see the opportunity to be showcased in a venue like the Epcot Center as a reward, and might be willing to risk a fine of $900,000.  Consideration for such a fine would include: the keg volume over a three-year period; the opportunity to showcase one’s products in front of over three million people; and having one’s brand be the primary product served.

Warsteiner’s willingness to pay a fine of that size without further negotiations with the TTB may, or may not, motivate other vendors to do the same thing. Or, that amount alone may cause some vendors to remain on the fence.  Either way, do not expect this type of activity to disappear.  Such inappropriate pursuits have been going on for years, and in all likelihood will continue

I have no problem with cheating…whatever you can get away with….right?

 

 

 

 

 Posted by at 6:00 am

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