May 152018
 

If one were to earmark the date of Warsteiner’s slow decline it would be August 2008.  In the third quarter of 2008, Warsteiner Importers Agency of the U.S. set a record in STWs, STRs, and profit.  At the same time, in Germany, Albert Cramer, the eighth generation Cramer family member to lead the brewery, fired his longtime CEO.   Albert had learned of multiple questionable and illegal transactions that were taking place in South America and Africa.

At the same time, Albert faced several personal tragedies, including the loss of his longtime spouse who had been thrown by a horse spooked during a summer storm, followed shortly thereafter by the announcement of his incurable cancer.  These tragedies resulted in Albert’s decision to turn over the leadership of Warsteiner to his daughter, Catherine Cramer.  Catherina at this time was in her early 30s.

Catherina, with the support of the lead accounting staff, instituted what is referred to as the four-eyes business model. Warsteiner company-owned importers implemented a policy requiring each department head to report directly to the corresponding department head in Germany.   Simply put, accounting in the various countries reported to accounting in Germany, and likewise with the sales and marketing departments.  This resulted in countries across the world having no direct leadership.

The consequences of Warsteiner’s actions are best illustrated by the downturn in the U.S. sales.  Within six months of implementation of the four-eyed leadership model, the U.S. operation lost almost 40% of its total volume with countries around the world experiencing similar results.

After 10 years, Warsteiner has not altered this model.  The volume loss continues today, however, the industry has recently learned of another unfortunate result of this model.  In the last several weeks, the TTB announced that it had fined Warsteiner Importers Agency $900,000 for violating FAA acts.  These violations include an exclusive outlet, tied house, commercial bribery, and consignment sales.  The violations occurred between January 2015 and continued into 2018.

Last fall, Warsteiner lost or replaced a number of U.S. employees whose positions have now been filled.  It appears that the managers in the U.S. retained their jobs, the brewery, however, the export director is no longer employed.  More than likely his leaving is a direct result of this fine.

There is little doubt that Warsteiner Importers cannot pay the required fine. The brewery will have to step in and pony up.  Rest assured once the fine is paid, there will be a new long-term liability on Warsteiner’s balance sheet in the amount of $900,000.  This will certainly handcuff the next individual who will lead the U.S. operation.

So the other question is: how do the U.S. Warsteiner distributors and retailers view this penalty and fine?  Is this the beginning of the end of what little is remaining of the Warsteiner U.S. business, and if so, could Warsteiner close down the agency and assign importing rights elsewhere?

It is quite clear that this four-eyed model does not work and needs to change immediately. Only Catherina can make that decision.  Her legacy is tied to the success of the brewery and there is still time for her to make the necessary changes.

Be prepared for more fines and penalties coming from the TTB.  Mistakes are always forgivable if one has the courage to admit them…

 

 

 Posted by at 6:00 am

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