Apr 112017
 

GilletteI acquired Texas Beers in May 1981 and Schlitz immediately announced a general market price increase.  As a new owner, this decision on the part of Schlitz, put me in an awkward position. Retailers would be pushing back at the idea of a new owner raising prices on their product. So, despite having a more than 40% market share, the increase caused me to be unsettled about the immediate future of Texas Beers.

Fortunately, AB, Miller, Coors and multiple other beers increased their price at the same time.  Despite this small respite, I took steps to increase the Schlitz inventory in Texas Beers warehouses, while at the same time holding the current price.  My competition however raised their prices.  Remember, in 1981, retailers only changed prices when the product changed prices, so Schlitz was now one price point under AB, Coors and Miller.

Upon depletion of the current Schlitz inventory at the old price, I was forced to match AB, now, however, my sales had been soaring, and for the month of June I was the number one volume wholesaler in the state of Texas.  Needless to say, all of those increases disappeared after the price increased.

Well after Stroh took over the Schlitz Brewery, and Stroh had terminated most of Schlitz support programs, including electronic media, the negative trends for Schlitz began accelerating.  To change the Schlitz trends, Stroh repositioned the Schlitz brand by lowering the price, thereby making the brand price-point more regional than national.  The consumer, unfortunately, did not buy into this new pricing and the rest is history.

A recent WSJ article entitled, Gillette, Bleeding Market Share, Cuts the Price of Razors, tells the story of P&G, who had purchased Gillette for $57 Billion in 2005.  After 12 years of raising prices on their blades, Gillette decided to lower blade prices by 20%.  Gillette razors had been losing market share for the last six years going from a 70% share in 2010 to 54% last year. Gillette’s market decline was attributed to their price increases along with the competition from Harry’s and the Dollar Shave Club both which cost much less per blade than Gillette.  According to the WSJ, this price reduction would translate to a lowering their PTC to about 12% less than today.  A question might be, where is the other eight percent going?

Both Harry’s and Dollar Shave Club now have a blade share of 12.2%, up from only 7.2% in 2015.  This includes both in-store sales and on-line sales.  One Barclay’s analyst believes it will be very difficult for former Gillette users to switch back from Harry’s or the Dollar Shave Club now.

To some degree the ongoing story of the Gillette blades parallels the last 10 years of AB’s model in the US.  AB’s rapid price increases in all segments have driven their drinkers elsewhere.  So the question is, should AB, unlike Schlitz or Gillette, continue to maintain their pricing strategy or slow down their price increases or even lower their prices?  AB seems to be doing that with their price beers to generate summer volume.  With these brands, they probably will have some success.

Looking back, Schlitz should have just maintained their premium price points and had all brewery, wholesalers and retailers make full margins instead of trying to save the brand by lowering pricing.  At least all would have made more dollars.

Cutting prices or putting things on sale is not a sustainable strategy. On the other side, one cannot cut costs to save one’s way to prosperity…..

 

 

 

 

 

 

 

 Posted by at 6:00 am
Apr 042017
 

Scoot InnSix years ago while in New York City, I decide to visit one of New York’s oldest bars, McSorley’s Old Ale House, established 1854.  While not the oldest bar in New York City, it is one of the five bars featured in the YouTube below.  Even today, McSorley’s serves only two beers: one dark and one light. Neither of these two beers have a name, nor do the customers know at which brewery they are brewed the bar claims the beers are the original brew from Ireland.

Today, the beer industry continues to fight declining on premise sales, either from competition or from the consumer who is not frequenting bars or casual dining as in the past. The question is, why is this behavior occurring, or what can be done to reverse the trend?

Many of the craft-centric casual dining bars, including Yard House, feature a number of HD TVs broadcast of sporting events.  In recent years, even the powerhouse station, ESPN, has lost over five million subscribers, yet it appears those people who dropped ESPN do not support bars to see live sports. Then there are the craft/import bars like The Ginger Man or The Flying Saucers who have a niche and continue to do well and hang in.

There is one segment in the on premise market that continues to be viable year in and year out, regardless of industry conditions.  It is bars such as these that have been around, not only for decades, but in the case of McSorley’s, over a hundred years.  Every town has one or two classic bars like McSorley’s.

The interior of these on premise establishments, rarely if ever changes, the beer offerings almost never change, and yet these bars continue to do well, often because of their unique culture.  Consider many of the towns that host large colleges, including Austin, Columbus, Stillwater, College Station, all these towns have an old classic bar that has been in business for generations.  When there is a home sporting event, many of the student body, along with alums who are returning to relive their college memories, populate these well know and well loved establishments.

Major cities, too, have their iconic bars that never change.   Many of these timeless businesses have had the same beer on tap since opening.  When Club Schmidt’s celebrated their 50th anniversary, Budweiser had been on draft there for 50 years!  Rarely do such classic bars install the newest or most popular beers, rather they stick with the beers that helped propel them to fame. Needless to say, such business models have worked.

Upscale bars and chains will continue to come and go, they will continue to change with the times, providing the consumer with the latest and greatest beers.  Some will make it, and some will not, but those bars where memories have been made, and have a unique culture will continue to thrive.  Hipps Bubble Room, Scoots Inn, Time Out Tavern, Adair’s Bar and Grill, Greenville Ave Bar, are just a few that will continue to thrive.

Where everyone knows your name…

Beer Fodder;  

 Posted by at 6:00 am
Mar 282017
 

Constellation Brands logoWhen the G. Heileman Brewing Co. was riding its crest of success, their business model was simple.  Heileman’s portfolio was predominantly regional brands which the company expanded nationally.  They assigned various brands in in the market to different wholesalers, therefore, if a market had four wholesalers, all four might have a Heileman brand.  The wholesalers would all compete against each other.

Naturally, over time, wholesalers lobbied their respective state legislatures and got this changed to allow a brewery’s brands to be offered to only one wholesaler.  There was a grandfather clause protecting wholesalers currently doing business, but going forward, there would be no more competing against one’s own brewer.  This worked well for Heileman until the brewer collapsed under its own heavy debt, which it incurred through a series of changing owners. The industry has not seen any business model like Heileman’s since the 1980s.

The current market is seeing some uniquely changing business models today.  ABI, in their desire to acquire Modelo, agreed to sell the rights of the Modelo brands to Constellation Brands.  This satisfied the DOJ’s concerns that AB could have more control over the US beer market.  ABI did sell the US market, and did acquire Modelo for the rest of the world.  All is good, right?

Even prior to buying Modelo, AB has, for years, been attempting to find a way to slow Corona’s growth and steal some of their market share.  AB first tried to develop their own Mexican labels, however, this proved to be unsuccessful.  In recent years, AB has started to import other Mexican beers with some success, including Estrella Jalisco and Montejo.  AB also has Presidente from the Dominican Republic, and Oculto, a beer with a hint of tequila.  All of these brands are aimed at Modelo.

Not even AB could have anticipated the success that Constellation brands have had since becoming an owner versus an importer.  It is safe to assume that much of the volume loss experienced by AB has shifted to Constellation.

Now, however, it seems the shoe is on the other foot.  After years of AB’s attempts to stop Corona, Constellation brands will be soon introducing Corona Premier, a brand designed to compete against AB’s powerhouse, Michelob Ultra.  Did AB see this coming?

The shift continues as Modelo brands are now taking over the lead sponsorship in such sporting venues as the Chicago White Sox. These venues, long tied to AB or MolsonCoors, are looking at Modelo brands as their demographics are changing.  Did AB see this coming?

Even as this blog is being posted, Modelo is taking AB’s place as set-captains in a number of major chains.  Retailers can read their own scan data along with SIRI and others to see the consumer continues to move to higher priced premiums, and especially the Modelo brands.  Did AB see this coming?

Modelo continues to expand their own product line, now with Corona, Corona Light, Corona Premier, Modelo Especial, Negra Modelo, Pacficio and others.  Did AB see this coming?

In the beer industry, nothing ever stays the same as the industry leadership is rapidly moving from AB to Constellation brands.

If you want to change things, it requires bravery….

 

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 Posted by at 6:00 am
Mar 212017
 

Rainier posterColumbia Distributing was formed with the merger of three Northwest beer and wine houses, one of which was Mt. Hood Beverage.  Mt. Hood Beverage was formed when Dick Lytle purchased Coast Distributors in 1990, at which time I was the General Manager for Coast.

Coast, which had existed for over 100 years, was one of the largest U.S. beer distributors at that time.  It was also the largest Pabst distributor, by volume, in the country.  Hamm’s, sold more beer in Oregon than Budweiser or Coors during this time period, in fact, we did close to three million cases of Hamm’s in 1989.  Of course, we also had PBR along with a number of G. Heileman brands across the state.  Maletis Distributing in Portland, however, had Henry’s and Rainer, and Henry’s still enjoyed a market share of 12% in Portland.

In 1991, Heileman, which had already filed for bankruptcy protection, attempted to terminate Maletis.  Heileman had brought in a team to do a 90-day market drive with the express purpose of discovering any out of date product.  They found quite a bit of old beer.  Heileman wanted to move to Coast, however, while running Coast, I cannot recall having any discussions with either Heileman or Maletis regarding the purchase of these brands.

Maletis sued, and I was retained to determine future loss of profit and, in my opinion, to determine if the termination was justified.  Just prior to jury selection in New York City, both parties reached an agreement, thus foregoing trial.  The brands did move to Coast.  Combined, both parties spent several millions of dollars in litigation.

The industry has seen an onslaught of attempts by craft breweries to modify the current franchise laws, targeting terminations without cause.  Many states have changed their franchise laws to allow crafts, which have a small share of the wholesaler’s total business, can now buy out for fair market value.  The percent of the wholesalers business taking advantage of the changes in franchise laws ranges by state, but typically encompasses under 10% of the wholesaler’s volume.

It has taken the craft segment almost two decades to accomplish the current franchise law changes, and it continues today.  The recent events in a couple of states emphasizes the importance of franchise laws.  Recently, Pabst terminated three Washington state wholesalers and moved the Pabst brands to Columbia.  The fair market value is yet to be determined!

It is not unreasonable to believe that conversations between Pabst, Columbia and the three Washington wholesalers took place last year.  Since Pabst is a large part of the overall business in Washington, one might assume all three wholesalers had no interest in selling distribution rights.  Pabst’s termination forces this issue through the court system.

This attempt by Pabst to terminate longtime wholesalers, along with AB’s actions in Mississippi, does nothing to help crafts’ attempts to change franchise laws.  In fact, wholesalers can use these cases to strengthen their position that franchise protection is needed now more than ever.  For crafts, these actions could not have come at a worst time.

There will be a lot of money spent in Washington over these terminations, and in the end, Pabst will be at Columbia, but those wholesalers will be compensated.  Your life works to the degree to which you keep your agreements…

EDITORS NOTE;  I am sorry to report that Fred Schumacher past away last Sunday at 78 years old.  Fred, who was the man responsible for importing Hofbrau into the US, also worked for the Jos. Schlitz Brewing Co.  He will be missed.

 Posted by at 6:00 am
Mar 142017
 

Corona PremierMiller Lite was the first line extension introduced in the early 1970s.  Lite’s success was soon followed in the mid-1970s by Coors Light and Bud Light.  These three brands created an entirely new category, and as successful as they were, these three brands not only replaced their mother-brands, they surpassed them.  The term “cannibalized the mother- brand” can be over used, but when you take the combined volume of both the regular and light brews of each brand, the decision to create a light beer was never second guessed.

Today, we see Miller, Budweiser, and Coors, all once the flag ships of their respected breweries, in different places.  Miller has moved toward retro marketing and is positioned as a price beer; Budweiser is still in a free fall, looking for a parachute; and Coors, who years ago went back to a retro marketing strategy, has been growing for over 10 years.

Perhaps the ultimate line extension the industry has seen is Michelob Ultra. This is certainly the hottest domestic brand, with only Modelo Especial coming close to Ultra’s growth trends.  When AB dropped the tear-drop shaped Michelob bottle, the brand became a memory to older drinkers.  Ultra today is Michelob, and its success has become the target of several major importers.

Heineken and Modelo are now offering brands aimed directly at the Ultra consumer, however, their marketing strategies are dramatically different. Heineken is introducing Amstel XLight, using their long-dormant brand, Amstel as the vehicle to capture the Ultra consumer.   Modelo, on the other hand, is using the long established, and highly successful, Corona brand as their strategy to capture the Ultra consumer with Corona Premier.  These are interesting tactics and dramatically different.

How will a buyer for a major chain view these two new brands?  Heineken will be asking for shelf space for a brand, long disappeared from the consumer’s point, yet Corona will introduce their Premier tied to the Corona name.  Obviously, the buyer will be much more supportive of the Premier as it will have stronger name recognition over Amstel.  It seems to be a lock that Corona’s attempt will be successful and Amstel’s will not.

The question really is: why did Heineken use the Amstel label for the XLight instead of the Heineken label?  Perhaps Heineken should have used their Dos Equis label.  It seems that Heineken is testing the temperature of the water, where Modelo is jumping directly into the deep end.

It will not be surprising if the XLight disappears from the shelves by the end of the year, or at best, the brand will have limited distribution. Nor will it be a surprise that Premier will be the hot new beer of the year.  If so and Ultra’s trends continue as is, Heineken may be using their labels and go with something like a Heineken Superior or Dos Equis Grande.  The chance that those products will succeed is much better than Amstel XLight, so why bother with the Amstel name?

Perhaps this is an example of the difference between a European managed importer verses an American managed company?

A fool can throw a stone in a pond that 100 wise men cannot get out…..

 Posted by at 6:00 am
Mar 072017
 

Clint EastwoodThe basic premise as to what drives volume in the beer industry is twofold:  it is either through media or through price discounting, with a combination of both being the ideal situation.  That being said, over the last 10 years, both AB and MC have lost millions of barrels and substantial market share.  The reason, ineffective marketing and aggressive pricing. The numbers do not lie.

Over the last five decades there have been an endless number of media campaigns by AB, Miller, and Coors.  Many have been very effective, however, some have been a total disaster.  There was the Schlitz, Don’t Take Away My Beer ad, made by actor James Colburn that was in your face and very offensive.  Then, Miller produced the infamous Dick ads, enough said.  Then there are the classics like Miller Lite’s Tastes Great, Less Filling, which started a new category that still dominates the industry today.  AB ran with This Buds For You!, along with some other variations that really drove the brand.  These are two examples of classic ads which spoke to the consumer.

The question today is, why have the current messages failed to drive volume for these brands?  Maybe the better question, is why have ads for AB and MC been ineffective, while some ads for other brands been very successful?  Michelob Ultra, Coors, Corona, and Dos Equis have all seen great growth for years, but perhaps the personification of success is Modelo Especial!

What do these brands have in common, and what are they saying to the consumer that the others are not?  Could there be an underlying theme that is resonating, not only with older consumers, but also with the millennials?  A message that hits home to the cupcakes and buttercups that society has earmarked?

Coors has used the actor Sam Elliot, long known as a rough cowboy with a gruff voice, since 2007 as the voice for their retro Rocky Mountain ads.  Coors has experienced single digit growth for years.  Corona, has relied on the beach-in-the-bottle theme for decades, showing couples enjoying life on the beach.  Michelob Ultra has illustrated a lifestyle with successful, chiseled bodies, that hits its intended mark, and the numbers are nothing short of incredible.  Dos Equis and the Most Interesting Man in the World has been so successful that Heineken recently rebooted this ad with a younger man. The result has been that the numbers continue to grow, indicating the younger MIMW, resonates with younger men.

But, perhaps it is Modelo Especial that is the bell weather of just why these brands are so successful.  Using music from the macho movie, The Good, The Bad, and The Ugly, which emphasizes the macho theme, while the ad highlights the brewing of Modelo Especial.  These ads are definitely speaking to males.

Ads from Coors, Michelob Ultra, Corona, Dos Equis, and Modelo Especial speak to the quality of the beer, however, they all have the underlying macho theme that hits home for males of all ages.  Men are saying, I cannot be like them, but I can drink their beer.

What is clear is that fraternity-style ads and ads-sharing-with-friends are not working.  Masculine focused ads are hitting home and the numbers reflect that.

The Good, The Bad, and The Ugly…..

Beer Fodder; 

 

Beer Fodder #2; 

 Posted by at 6:00 am
Feb 282017
 

beer wallIt was 41 years ago this March that Coors opened S. Texas.  This rollout was much anticipated by both retailers and consumers as Coors was only available in 10 states and half of Texas. Despite the limited availability, Coors was by far the largest selling beer in all markets, with market share ranging from a low of around 35% to a high of around 70% in parts of Kansas and Oklahoma.

The largest trade channel in San Antonio was the c-store, however, the largest grocery chain was Handy-Andy, as HEB did not sell beer in 1976.  The morning of the initial rollout all of the stores were anticipating delivery and had already provide shelf space in their respective cold boxes.  The consumers were lined up to waiting to purchase Coors.  Since we delivered the beer cold, it went directly into the empty spaces, which, at Handy-Andy, were right in the middle of Schlitz and Budweiser.

The premium section consisted of three beers: Coors, Schlitz, Miller Lite and Budweiser.  The regional section was composed of: Lone Star, Pearl, Falstaff, Jax, and Busch.  There were a few price beers, including Texas Pride and Buckhorn.  Imports were limited, mostly Heineken, Becks, Carta Blanca, and Tecate.  The line-up was simple, but that was the ways things were in 1976.

The spring resets for most grocery and c-store chains are now underway.  As has been the norm in recent years, the number of new products available continues to overwhelm buyers.  Buyers have their own criteria in which they reset their space, and because there is no industry standard, each chain is different.

At one time, boxes were set based on traffic flow.  The number one beer got the first spot, followed by the number two beer, and so forth.  Price beers occupied the final place.  Over time, however, buyers learned to up-sell the consumer and some chains reversed the sets enabling the higher priced imports, the first spot. This sales tactic did prove to be beneficial.

Today, we see sets with a domestic section, an import section, a craft section, and a FMB section.  These sections can also be split.  This spring, a large chain had over 450 new SKUs submitted.  Even the best chains cannot handle all these new products.

So the question is, can there be a more effective approach to setting space?  The internet provided the initial boast to crafts by providing the consumer with the knowledge that these types of styles existed.  What would happen if a hierarchy existed in cold box setting?  A craft or beer might have to earn or qualify for a place?

Perhaps a highly awarded product with high ratings could get the prime space as earned at the GABF or another international competition.  This way, all the pressure would fall on the brewery to prove they deserved the spot.  A retailer could have a gold section, a silver section, and a bronze section, along with a current local section.  The consumer could than decide how to buy based on industry hierarchy.  This could prove to be an interesting concept.

Total Wine, with their thousands of SKUs, identifies beers with ratings, but not by a section.  What would it look like if Total Wine created their sets by ratings, starting with the highest rating and decreasing down the shelf to the lowest rating.  How many consumers would go to the end?  How fast would those lower rated beers disappear off the shelves?

What is there to lose?  Hierarchy works well in a stable environment…..

 Posted by at 6:00 am
Feb 212017
 

JN Few Good MenThe proliferation of Fake News, has, up until this year, left the beer industry untouched.  Sure, there was once the infamous Corona liquid fake news, which began out west and spread like wild fire.  Fortunately, however, the distributor who started the vicious rumor was quickly determined and Barton/Gambrinus immediately doused the horrible story.  Some damage was done, but the after effects quickly dissipated and the rest was history.

This blog once told the story of Coors Brewing Company’s accusation that AB and Schlitz had fusel oil as a byproduct of their brewing process.  Once again, a few well-placed phone calls and the issue quickly disappeared.  It was, however, not a good look for the industry.

Social media has been the godsend of the craft industry to date.  One might agree that the industry would not be what it is today without this relatively new form of communication.  Social media has allowed local crafts to talk directly to their consumer and potential consumers, telling their story without any obstructions, and better yet, without the major costs associated with the traditional above-the-line advertising.  Everyone uses social media, including the big boys, albeit, by looking at the numbers, not quite as well.

In the 2016 presidential election, it was clear that social media played a significant role for both parties.  That single election will change how campaigns will be run in the future.  The losing party, and those who supported it, are now using social media to attack the winning party, using the term fake news, or simply making up negative stories about the other side and sending said stories out on the internet.

Fake news is also being used to galvanize voters and raise money.  It seems to be working if you believe the reports on TV.  Just look at all the protests being held on campuses, the rallies, speeches, and marches.

As more and more breweries struggle to get established and grow, the question becomes, when and how will fake news be used in the beer industry?  A craft could spread a vicious rumor about another brewer’s product using fake news.  One might even start a fake news story about a successful brewer selling out to AB or MC!  This could certainly create opportunities for the fake news brewer.  Fake news could announce a pending major price increase, or start a personal campaign against an owner.  All types of fake news could be started and would accomplish nothing but hurt the overall industry.

We have just seen a number of key retail outlets discontinue product lines associated with the President or his family.  Companies are taking a political stance regardless of the possible consumer response.  This type of political involvement has not yet been fully played out to see just how this will affect said retailers’ overall sales.  This could, however, be a direction any number of crafts will soon take.

The beer industry has been, and always will be, highly visible to the consumer given that beer is such a personal product.  Let’s hope that political stances and fake news stay away from our industry.

The thing about the truth is, not a lot of people can handle it….

 Posted by at 6:00 am
Feb 142017
 

David vs GolithA number of years ago, Hofbrau, one of the six original German Munich breweries who can produce and sell Oktoberfest beer in that country, developed a unique business model.  Once they established an importing agency in the U.S., focusing on their Munich heritage, Hofbrau decided to franchise its name while using their famous Munich beer hall.

Today in the U.S. there are seven Hofbrau franchised beer halls.  There are several models one can invest in, depending on what the buyer would like to purchase, including a full-blown brewery.  Obviously these halls are German themed, with authentic outfits, glassware, banners etc., including the original Hofbrau from Munich.  Hofbrau is not trying to be something they are not; they are building on what they already are.

Even though these Hofbrau houses are franchised, and not part of Hofbrau, it is only from a legal view that the average observer would know these houses are not part of Hofbrau.  The laws have either been changed or modified by states to allow craft brewers to sell their beers in-house or to-go.  Some crafts, where it is legal to do so, are building brew pubs in other markets, not unlike Hofbrau, only they are not franchised.

Some crafts, Anchor, Boston, New Belgium, Yuengling, and even Rogue, have themed bars in locations like airports.  In such bars, their beers are served along with food.  It is called the blurring of the three tier system, but is this not really the melting together of the current system?

Two weeks ago, Diageo, the owner of Guinness, announced that Diageo would build a version of Guinness’s Dublin Open Gate Brewery in Maryland.  Their goal is to open the brewery in October in celebration of the 200th anniversary of its first importation. In addition to the brewery, Guinness will have a tasting room, retail store, packaging and warehouse.  The total investment is reported to be around $50 million dollars.  While the iconic Guinness will not be brewed there, Guinness Blonde will be, along with other special brews. A number of Maryland beer laws need to be modified or changed to allow Diageo to build this facility, but considering the economic impact of what this brewery means to Maryland, one can count on those laws being changed.

So the bigger question is now: will this new business model of the major breweries continue in the future?  We all are aware of AB’s expansion of craft brew pubs of the beers they currently own.  Now we see this model unveiled with Guinness.  Will the major breweries start building these eclectic breweries in major cities or tourist areas?  Why not?

Even if these models by-pass the middle tier, the local wholesaler should benefit from the money the brewery invests in their market.  Will the locals support those brands?  It is working for those who have made the investment, like Hofbrau!  It is working for all the crafts!  It will work for Guinness.

The melting of the tiers continues and, in fact, seems to be accelerating today.  Look for others to follow Guinness and Hofbrau in the not too distant future.  The new definition of this centuries “tied house.”

I love challenging the status quo….

 

 

 Posted by at 6:00 am
Feb 072017
 

beer glassesThe Rio Grande Valley area of Texas is considered an isolated part of the U.S. because of its location, surround on the southeast by the Gulf of Mexico, the county of Mexico to the south, and the vast expansion of the King Ranch to the north, coupled with the fact that a majority of Valley’s population is confined to just three counties.  Because of this, in 1980, there were multiple beer wholesalers located in the valley:   one Schlitz wholesale, run by me; one AB, one Miller (Falstaff), two Coors; two Lone Star; one Pearl/Imports; and believe it or not, one Hamm’s (Femsa).  Heineken, was delivered into the valley by Glazer’s, based in Corpus Christi.  Altogether, nine different houses not counting Glazer’s.

By 1982, however, the beer industry was affected by the following a multitude of uncontrollable factors:  a massive peso devaluation; a 100-year freeze which destroyed 95% of the citrus trees; and the oil embargo.  These events created an unemployment rate of near 50% and a decline in population as people moved to locations where they could find work.  All of these factors created a major reduction in the beer volume.  The economy, unfortunately, was supported by the seasonal visits of the upper mid-west winter Texans, who at this time, were mostly retired WWII vets.

Fast forward to today.  Since the early 1980s, the Valley has more than tripled in population, but today there are only two beer distributors; three if you include BEK who maintains a small operation in the area.  Of the original nine wholesalers, only the AB house L&F remain, all the others have consolidated into a Glazer’s operation.  In other words, the breweries who survived, along with the financially committed wholesalers, weathered the storm and are today making money.

Recently, while visiting a small brewer in their sixth year of business, I learned that in 2016 this brewer experienced his first decline in sales.  He self-distributes and because of that, his tap handles have become a target for the other beer distributors.  He told me that the wholesalers have a $300 bounty for his handles!  Unfortunately for this brewer, he cannot compete with such a practice and has lost a lot of business.

With over 7,000 breweries of all sizes, another 1,900+ with permits, but not yet brewing, and a couple of thousand more in various stages of planning, the industry has reached a saturation point.  It is yet to be determined how many of those will get the funding to build, but rest assured, many will not get the funding they need.  Still, it is obvious that those in the business today are hitting the proverbial wall, not growing as the category slows.  Those breweries without the sales structure, programing, pricing, money, and most importantly, the will and focus to continue on, will surely risk failure in the future.

Just as what happened in the Valley over 30 years ago, economic conditions and top tier consolidation were the reason that seven of those distributors sold out.  The two that stayed the course are now benefiting from their tenacity.  This same determination applies to those craft breweries today.  If the liquid is quality, and one can withstand changing conditions, then the sky will be the limit.

If you want to see the sunshine, then you have to weather the storm.

 

 Posted by at 6:00 am