During the 60s and 70s, wholesalers represented only one brewery and the future of that wholesaler depended on the success of that one brewery. Partnering was critical, and if the marketing did not connect with the consumer, both the brewery and the wholesaler felt the negative consequences. The wholesaler had little choice but to support the breweries’ plans.
As previously discussed, today’s wholesalers spread their exposure across many suppliers and brands. If one supplier hits a bump, the wholesaler might feel a slight repercussion, but the negative experience will not adversely affect the wholesaler. Today’s model also allows wholesalers to take a more aggressive stance against a vendor when the vendor’s marketing or programs are questioned by the wholesaler. Partnerships are strained and tenuous at best. One really must question whether the relationship between the wholesalers and the brewery could truly even be considered a partnership.
During the summer months, majority of vendors develop their annual budget and marketing plans for the upcoming year. Once approved internally, the vendor presents the upcoming years’ plans to the wholesaler. These plans, which are created by the vendor, are based on the goals and strategies of the vendor. The vendor has built their future around certain platforms and has invested their dollars against that strategy. In the business meetings, the wholesaler has input and many times these plans are modified, but typically the core plan remains. Only when the strategy totally fails are the business plans changed.
Recently, a major AB distributor notified their beer vendors of a wholesaler–initialed price increase. The increase included price points and margins that the wholesaler was not only taking for themselves but, also what they were allowing their vendors to take! This even included the date the beer price was to increase.
There was no discussion with any of the vendors as what effect this increase would have on their 2019 market planning, goals, or strategies. The increases, which were deemed final, were focused on all keg sizes. One wonders if ALL their vendors were affected or just a targeted few? When a vendor has questioned the wholesaler in the past, the wholesaler’s continued response is “this is the policy.”
Leegin Creative Leather Products, Inc. v. PSKS, Inc. 551 U.S. 877 (2007), is a U.S. antitrust case in which the United States Supreme Court reversed the 96-year-old doctrine that vertical price restraints were illegal per se under Section 1 of the Sherman Act. The aforementioned case replaced the older doctrine with the rule of reason. Resale price maintenance (RPM) is the practice whereby a manufacturer and its distributors agree that the distributors will sell the manufacturer’s product at certain prices: at or above a price floor, or, at or below a price ceiling. If a reseller (distributor) refuses to maintain prices, either openly or covertly, the manufacturer may stop doing business with the said wholesaler. This marked a dramatic shift in how attorneys and enforcement agencies addressed the legality of contractual minimum pricing and essentially allowed the reestablishment of resale price maintenance for most commercial situations in the U.S.
Simply put, if the wholesalers’ pricing has a negative effect on the vendors’ products, the vendor may have the ability to take legal action against the wholesaler. If that happens, then who wins?
Alliances and partnerships produce stability when they reflect realities and interests.
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