Back in the mid 1970’s when Coors entered South Texas, San Antonio was awarded four distributorships. They as a group, had to compete against one Budweiser house, one Schlitz house, one Pearl house, one Lone Star house and one Falstaff house (true, still around then). Because Coors had divided up the market into the four houses, individually they were all smaller than their competitors making it difficult for them to compete. Obviously, it didn’t take many years to force the consolidation of the four into one house. Remember they were exclusive, too.
At that time, most competing houses were exclusive, too. A Schlitz house might have an import or two, but no other domestics. In Texas, Pearl houses usually had Miller, or they had Falstaff, especially in small towns. Some distributors had Lone Star/Pearl/Jax, but that was in markets where sales weren’t great. Consolidation wasn’t an issue then and the “big” boys usually made things difficult if you were taking on additional brands. In fact, a number of established distributors sold their line when Coors came in as a condition of appointment. Sometimes it worked out, and sometimes it didn’t. In fact, Barry Andrews of Andrews Distributing benefited when the Miller wholesaler in Corpus Christi sold the brand when he received the Coors brand. Coors never took off, but Barry was able to buy the Miller operation about the time the brand exploded. Timing is everything.
Windy City, a craft/import house in Chicago, recently sold out to Reyes after some dramatic growth. This is the latest example of a specialty house selling out for a premium. It wasn’t many years ago, that some of these failed just like the early craft brewers did. Some were very successful, including CR Goodman, Fresh, and Little Guy Distributing and, of course, Click. Just as there are many new craft breweries opening, you will see many new distributors opening soon, too. It’s where the opportunity abounds.
Last week, at the Miller/Coors convention, a comment was made regarding how the craft breweries are taking advantage of the MC distribution system, by using the distribution system to get the these brands delivered. These comments, along with ABI’s program of Anchor wholesalers, could be the beginning of a push back on new brands and a return to exclusive houses now that both ABI and MC are offering products in hot categories that they did have in the past.
Along with this thinking, is the movement of some crafts to charge wholesalers for the rights for distribution. This would create a whole new approach. First, if this happened it would involve more government restrictions. Selling these rights might be subject to franchising laws similar to those of McDonald’s, Taco Bell, Subway, etc. In theory, one would think that if the wholesaler paid for the rights said wholesaler would put more effort into selling the product. When I was running Warsteiner, in almost every case, when a wholesaler acquired the brand, it took years for the new wholesaler to show sales increases.
Heavy investment by the wholesaler in incentives, promotions, truck paints, people, etc. could be considered in some ways as buying a brand, however, the question really is, are we seeing a shift in the distribution model with the beginnings of a return to exclusivity of houses to selling distribution rights? If we are then, be careful, remember, the buyer always knows better than the seller.