I laughed at the tweet by the Flying Dog Brewery rep. in Washington D.C. last week. I can easily guess what was going on with the Miller/Coors distributor based on my experience with the competition and craft beer brewery reps. It's all done legally but it's definitely not done ethically. Then, I read an article two days ago that caused me to reflect upon the two together and I felt compelled to write tonight. First, lets take a look at the article by Harry Schuhmacher, Grokking Heineken's New Marketing Direction, A Talk with HUSA's Dolf van den, http://www.beernet.com/publications_daily.php?id=2597
Harry Schuhmacher refers to Mike Madigan's article on beer franchise laws (three tier system) in his recent post and it's a very good article about the importance of the three tier system and I'm glad that Harry referenced it because we all need to understand how it effects our beer industry. However, please read an excerpt below of Mr. Madigan's article and note the bold text which is my emphasis.
MADIGAN: DUOPOLY MAKES FRANCHISE LAWS MORE IMPORTANT THAN EVER
Three-tier advocate Mike Madigan writes on Alcohol Law Review that the creation of the "Big Beer Duopoly" also known as A-B and MillerCoors makes the need for franchise laws more acute than ever. Why? The article states that "the economic and political power of these international organizations cannot be underestimated, and their impact on alcohol regulation, small brewers, and public health and safety in the U.S. is significant. Under these circumstances, beer franchise laws, which govern the relationship between brewers and distributors, take on a growing importance."
"Never before has the imbalance between supplier and distributor been so great," wrote Mike. "Without beer franchise laws, distributors will be unable to maintain meaningful independence from suppliers and will be unable to fulfill their quasi-regulatory roles as buffer between suppliers and retailers," and preventing vertical integration. Mike goes on to assert that franchise laws are particularly important for craft brewers who "lack the substantial resources required to make a market for a new product." Without franchise laws the dominant suppliers would "all but shut down" the craft segment. What about carve-outs for craft brewers? Mike doesn't get into that. What's your take?
So, Harry asks the magical question, "What's your take?" and so I take the bait. Reel me in Harry, you've got a keeper. I happen to know that many large wholesalers have contracted local craft brewers to be in their warehouse...not only that, they are looking for more. The boom is not lost on beer wholesalers around the country...we react to numbers more so than internal pressure that has not been successful in beating any three tier laws to date. And to make the exclamation point on this subject on the very same day that Harry shared his article the announcement below was made.
Massachusetts Beverage Alliance looks to strengthen craft portfolio by Chris Furnari
It’s a becoming a common trend. “Big beer” wholesalers sharing craft brands across multiple territories in an attempt to help small brewers grow their brands through a wider distribution network.
Last week, Evan Benn of the St. Louis Post-Dispatch reported that three of Missouri’s biggest Anheuser-Busch InBev distributors had reached an agreement to pool their collective craft portfolios together.
Today, the Massachusetts Beverage Alliance officially announced a similar partnership, albeit one that has been quietly operating in the Commonwealth for the past six months.
The alliance is a collection of five separate MillerCoors houses across Massachusetts and currently boasts a craft portfolio of five brands, including Midwest regional powerhouse Boulevard Brewing.
The players? Burke Distributing, Atlas Distributing, Merrimack Valley Distributing, Colonial Wholesale Beverage and Commercial Distributing.
And from the looks of it, the group is on the hunt for some more artisanal craft brands to fill out their book.
So, we have evidence of big wholesalers creating opportunity for craft brewers and this has been happening in the other half of the so called duoploy also. We sell beer!! We love selling beer!! We are here to sell beer!! We are adopting our old processes in order to sell more styles of beer. Let's understand that we are a part of the entire beer industry!!
Flying Dog Brewery Rep
Now, lets take a closer look at the rant that came from the Flying Dog rep. that he recanted a few days later (good idea). I have interacted with craft brewery reps. for many years and I was first introduced to what happened to the Flying Dog rep. over 10 years ago by a craft brewery rep. and this rep. was doing it because the main craft beer competitor of that craft brewery was doing it to them. It's real simple when you have cash, just purchase what's left in the keg of a competitor and the account allows it because the new brewer has sold the account on a profitable alternative.
If the brewery rep. is not on top of his tap placements and how well they are selling plus in communication with the wholesaler and the bar on the sales of the beer then the rep. is in danger of losing a tap handle to whatever nefarious plan the competitor has at that time. The brewery rep. needs to work very closely with the wholesaler on keeping tap handles because if it's a house that has many craft breweries in it's warehouse then it's the squeaky wheel that gets the grease. The brewer that does not have a rep. does not make noise that the wholesaler hears. As a result those tap handles become targets especially if they are not selling as fast as the others, plus the RIGHT beer needs to be placed in the RIGHT bar; meaning, no forced placements by brewery reps. because that's what the priority of the brewer is to have in the market. Those are easily lost.
Getting back to how the Flying Dog rep. lost his handle. What normally happens with a cash offer to purchase a competitor keg is a "program" from the other brewer. These programs can be a simple buy one and get one free on the first two kegs to a full drive to retail program that includes advertising dollars, in bar promotions, and/or community involvement with a charity to bring publicity...all legally done. Obviously, this rep was wet behind the ears and needed more training which is a huge subject by itself.
Anyways, this stuff happens across the country and more so in the craft beer end than in the big brewer/large wholesaler end. So, thats why I referenced the article by Mike Madigan; he has a tone that portrays the big brewers and large wholesalers in their network as a threat to the entire industry and will break the laws. (Never before has the imbalance between supplier and distributor been so great," wrote Mike. "Without beer franchise laws, distributors will be unable to maintain meaningful independence from suppliers and will be unable to fulfill their quasi-regulatory roles as buffer between suppliers and retailers," and preventing vertical integration.) And when I read that type of portrayal at the same time that a craft brewery rep. is exposing what really happens I have to laugh and write a blog like this. The playing field is full of land mines from everyone!!
Harry Schuhmacher refers to Mike Madigan's article on beer franchise laws (three tier system) in his recent post and it's a very good article about the importance of the three tier system and I'm glad that Harry referenced it because we all need to understand how it effects our beer industry. However, please read an excerpt below of Mr. Madigan's article and note the bold text which is my emphasis.
MADIGAN: DUOPOLY MAKES FRANCHISE LAWS MORE IMPORTANT THAN EVER
Three-tier advocate Mike Madigan writes on Alcohol Law Review that the creation of the "Big Beer Duopoly" also known as A-B and MillerCoors makes the need for franchise laws more acute than ever. Why? The article states that "the economic and political power of these international organizations cannot be underestimated, and their impact on alcohol regulation, small brewers, and public health and safety in the U.S. is significant. Under these circumstances, beer franchise laws, which govern the relationship between brewers and distributors, take on a growing importance."
"Never before has the imbalance between supplier and distributor been so great," wrote Mike. "Without beer franchise laws, distributors will be unable to maintain meaningful independence from suppliers and will be unable to fulfill their quasi-regulatory roles as buffer between suppliers and retailers," and preventing vertical integration. Mike goes on to assert that franchise laws are particularly important for craft brewers who "lack the substantial resources required to make a market for a new product." Without franchise laws the dominant suppliers would "all but shut down" the craft segment. What about carve-outs for craft brewers? Mike doesn't get into that. What's your take?
So, Harry asks the magical question, "What's your take?" and so I take the bait. Reel me in Harry, you've got a keeper. I happen to know that many large wholesalers have contracted local craft brewers to be in their warehouse...not only that, they are looking for more. The boom is not lost on beer wholesalers around the country...we react to numbers more so than internal pressure that has not been successful in beating any three tier laws to date. And to make the exclamation point on this subject on the very same day that Harry shared his article the announcement below was made.
Massachusetts Beverage Alliance looks to strengthen craft portfolio by Chris Furnari
It’s a becoming a common trend. “Big beer” wholesalers sharing craft brands across multiple territories in an attempt to help small brewers grow their brands through a wider distribution network.
Last week, Evan Benn of the St. Louis Post-Dispatch reported that three of Missouri’s biggest Anheuser-Busch InBev distributors had reached an agreement to pool their collective craft portfolios together.
Today, the Massachusetts Beverage Alliance officially announced a similar partnership, albeit one that has been quietly operating in the Commonwealth for the past six months.
The alliance is a collection of five separate MillerCoors houses across Massachusetts and currently boasts a craft portfolio of five brands, including Midwest regional powerhouse Boulevard Brewing.
The players? Burke Distributing, Atlas Distributing, Merrimack Valley Distributing, Colonial Wholesale Beverage and Commercial Distributing.
And from the looks of it, the group is on the hunt for some more artisanal craft brands to fill out their book.
So, we have evidence of big wholesalers creating opportunity for craft brewers and this has been happening in the other half of the so called duoploy also. We sell beer!! We love selling beer!! We are here to sell beer!! We are adopting our old processes in order to sell more styles of beer. Let's understand that we are a part of the entire beer industry!!
Flying Dog Brewery Rep
Now, lets take a closer look at the rant that came from the Flying Dog rep. that he recanted a few days later (good idea). I have interacted with craft brewery reps. for many years and I was first introduced to what happened to the Flying Dog rep. over 10 years ago by a craft brewery rep. and this rep. was doing it because the main craft beer competitor of that craft brewery was doing it to them. It's real simple when you have cash, just purchase what's left in the keg of a competitor and the account allows it because the new brewer has sold the account on a profitable alternative.
If the brewery rep. is not on top of his tap placements and how well they are selling plus in communication with the wholesaler and the bar on the sales of the beer then the rep. is in danger of losing a tap handle to whatever nefarious plan the competitor has at that time. The brewery rep. needs to work very closely with the wholesaler on keeping tap handles because if it's a house that has many craft breweries in it's warehouse then it's the squeaky wheel that gets the grease. The brewer that does not have a rep. does not make noise that the wholesaler hears. As a result those tap handles become targets especially if they are not selling as fast as the others, plus the RIGHT beer needs to be placed in the RIGHT bar; meaning, no forced placements by brewery reps. because that's what the priority of the brewer is to have in the market. Those are easily lost.
Getting back to how the Flying Dog rep. lost his handle. What normally happens with a cash offer to purchase a competitor keg is a "program" from the other brewer. These programs can be a simple buy one and get one free on the first two kegs to a full drive to retail program that includes advertising dollars, in bar promotions, and/or community involvement with a charity to bring publicity...all legally done. Obviously, this rep was wet behind the ears and needed more training which is a huge subject by itself.
Anyways, this stuff happens across the country and more so in the craft beer end than in the big brewer/large wholesaler end. So, thats why I referenced the article by Mike Madigan; he has a tone that portrays the big brewers and large wholesalers in their network as a threat to the entire industry and will break the laws. (Never before has the imbalance between supplier and distributor been so great," wrote Mike. "Without beer franchise laws, distributors will be unable to maintain meaningful independence from suppliers and will be unable to fulfill their quasi-regulatory roles as buffer between suppliers and retailers," and preventing vertical integration.) And when I read that type of portrayal at the same time that a craft brewery rep. is exposing what really happens I have to laugh and write a blog like this. The playing field is full of land mines from everyone!!
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