{"id":421,"date":"2013-04-30T06:55:52","date_gmt":"2013-04-30T11:55:52","guid":{"rendered":"http:\/\/www.beerbusinessunplugged.com\/?p=421"},"modified":"2013-04-30T09:21:05","modified_gmt":"2013-04-30T14:21:05","slug":"half-of-knowledge-is-knowing-who-to-ask","status":"publish","type":"post","link":"https:\/\/www.beerbusinessunplugged.com\/?p=421","title":{"rendered":"Half of knowledge is knowing who to ask….."},"content":{"rendered":"

\"Einstein\"When Diageo was formed after acquiring the Seagram brands, they established a wholesaler network in the US by approaching all the top wine and spirit houses.\u00a0 Almost every large house was invited to present their RFP.\u00a0 At the time, I was the Director of Malts for Glazer’s, a Brown Forman house. Republic had most of the Diageo brands.\u00a0 I was asked to submit a small part on the beer model\u2026\u00a0 a mere three slides.\u00a0 I sat in on several of the RFP meetings discussing various strategies and long-term planning.\u00a0 Glazer’s felt that with Diageo’s strength, and long-term marketing support, they would be a better partner then Brown Forman for Glazer’s future.<\/p>\n

This was during the time when Glazer’s was going full-bore into building a beer portfolio, both with crafts\/imports and by purchasing MC houses.\u00a0 During these meetings, the COO stated that the main reason the company was pursuing the beer model so aggressively was due to the franchise protection provide by most of the states.\u00a0 As he stated “Glazer\u2019s can’t get terminated!”<\/p>\n

I read recently that two industry consultants, brokers for the wine and spirit houses, John O’Connor and Sean McLaren, stated, “franchise protection laws make\u00a0up over half the value of a beer distributor.”\u00a0 This is based on the fact W&S houses\u00a0sell for\u00a0 three to five times\u00a0EBITDA verses beer, which goes for six to ten times.\u00a0 This statement by the consultants was made even as Reyes paid a much higher premium for Windy City. For them, it was all about the cost of entry into the craft segment.\u00a0 Glazer’s did the same when the opportunity presented itself.\u00a0 Both \u00a0Glazer\u2019s and\u00a0Reyes considered it part of the “cost of getting in.”<\/p>\n

B schools that have studied various industries, including beer, and have concluded that a beer distributor business model is the least likely to fail.\u00a0 Franchise protection aside, consider the following:\u00a0 beer distributors have almost no receivables, (it’s all cash); they enjoy exclusive territories by contract (no dueling and no Subway on every corner); the law provides three tier protection; national, regional and local advertising and media support are provided by major suppliers; chain programing is available for both on and off premise accounts; distributors have growing margins; no franchise fees; training; and, of course, political presences nationally and locally.<\/p>\n

So then the question becomes, just how much value does franchise protection bring to a beer distributor?\u00a0 All things being equal, would you, if offered, take a AB or MC house under a time bound contract without franchise protection that is based upon certain sales and execution goals?\u00a0 Even if it was for only five years, I think most people would do so. Wine and Spirit people do.\u00a0 Longer contracts for less established and supported brands might make sense to do so also.<\/p>\n

Franchise protection laws play a huge part of current value of beer houses. \u00a0How the laws will plays out in the future is uncertain, but as to whether\u00a0or not it’s 50% of beer houses value is based on knowing whom to ask.<\/p>\n

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When Diageo was formed after acquiring the Seagram brands, they established a wholesaler network in the US by approaching all the top wine and spirit houses.\u00a0 Almost every large house was invited to present their RFP.\u00a0 At the time, I was the Director of Malts for Glazer’s, a Brown Forman house. Republic had most of […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_s2mail":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_newsletter_tier_id":0,"jetpack_publicize_message":"","jetpack_is_tweetstorm":false,"jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false}}},"categories":[1],"tags":[],"jetpack_publicize_connections":[],"aioseo_notices":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p2xRTi-6N","jetpack_sharing_enabled":true,"jetpack-related-posts":[],"_links":{"self":[{"href":"https:\/\/www.beerbusinessunplugged.com\/index.php?rest_route=\/wp\/v2\/posts\/421"}],"collection":[{"href":"https:\/\/www.beerbusinessunplugged.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.beerbusinessunplugged.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.beerbusinessunplugged.com\/index.php?rest_route=\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.beerbusinessunplugged.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=421"}],"version-history":[{"count":21,"href":"https:\/\/www.beerbusinessunplugged.com\/index.php?rest_route=\/wp\/v2\/posts\/421\/revisions"}],"predecessor-version":[{"id":831,"href":"https:\/\/www.beerbusinessunplugged.com\/index.php?rest_route=\/wp\/v2\/posts\/421\/revisions\/831"}],"wp:attachment":[{"href":"https:\/\/www.beerbusinessunplugged.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=421"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.beerbusinessunplugged.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=421"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.beerbusinessunplugged.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=421"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}