Oct 012013

Schlitz wholesalerFrom the time prohibition was repealed, until the mid-1970, beer was delivered to retailers the same way: either off the truck which is called DSD.  Almost all distributors had only one vendor with limited packages.  Most accounts only carried one package, and grocery stores carried just two or three packages.  This made selling easy.  The first changes came with the rush of new imports and the beginnings of consolidation.  With the eastern expansion of Coors, wholesalers felt they had to change the selling systems to pre-sell method in order to successfully handle the demands of the new brands.  Pre-sell became the system of choice, and remains so to this day, even with the hundreds of new breweries and products.

Recently, consultant Joe Thompson commented on what he thought could be the selling system of the future.  According to Joe, the system will be more retail-driven with the orders generated by the retailer through web based operations and supported by the wholesalers’ tel-sell system.  Using this system, the remaining sales people will concentrate on value- added programs and items.  The thought behind this is to move away from the idea that sales people are nothing more than order takers, to a more cost effective sales and delivery system.  In fact, one distributor the Joe studied has now implemented the new system and is seeing positive results.

So then the question becomes, how will the retailer and the vendors look at this system?  Retailers for years have had the luxury of having the beer wholesalers supply labor, inventory management and programs to the point where any cut backs of service might create real problems for the wholesaler.  Consider a chain with stores across multiple states, with some wholesalers servicing the chain as they have for years, while others have moved to Joe’s system.  If there is dissatisfaction, push back from the chain will go to the vendor(s), not the wholesaler.  Do wholesalers feel that the smaller retailer will really make an effort to order on line?  What if the competing wholesaler does not transition to this type of selling system and continues service as usual?

Joe’s system assumes the vendors will have feet on the street, as will be required by the wholesaler.  This might work in major markets; however, you cannot put people everywhere, just as a wholesaler cannot have a different sales person for every account.  In large markets, the wholesaler could easily become just a delivery and warehouse for the vendor, but understand the wholesaler will then be required to work with less margins.

What makes Joe’s program workable is the franchise laws.  When there are only two wholesalers in a market with all the brands, the retailer has no choice because there is no way the retailer can get beer except from the wholesaler.  Add in minimum orders for each delivery, and it creates a difficult environment.  But this is what happens when there is no competition.

A recent forecast for the domestic beer sales indicated that the industry could soon slip under 200 million bbl. in sales, and in the future, continue to lose ground to wine and spirits.  Joe’s program is all about cost control, not about brand development and volume growth.  With multiple sales teams with different vendor pads and strong merchandising programs, the wine and spirit wholesalers and vendors see this as a great opportunity.  The beer industry continues to offer volume to the W&S guys, as the W&S teams expand calls to the retail trade.  Joe’s value-added sales team may be adding value, but to whom?  Based on future forecasts for beer, it is value added only for the wine and spirit industry!  Remember, if you have no critics, you will likely have no success!


 Posted by at 6:50 am

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