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Leadership And Unity

Beer Business Daily:

Tensions and lack of unity is one of the issues facing the US beer industry right now, argued First Beverage’s JB Shireman at BBD’s tenth annual Beer Industry Summit yesterday.

“I think regardless of what your personal view is or what your company’s view is on the craft definition that the BA chose to adopt… shelve that for a second, back up and look at the larger picture. Realize that we’ve had very large portions of our industry that are either heavily influenced or outright controlled by globally minded financial type people who are much more focused on quarterly earnings…. I think that has left us with a real lack of leadership and unity in our industry and it makes us an easy target….. You can write op-eds, but I say step back and put up that pen  until it turns into a sword.”

Indie craft brewers have more political clout than they ever have, and those “chose to launch some fairly pointed attacks at some large players in the industry,” JB continued. The problem? “They may need those large players in the future.”

This intra-industry squabbling may attract some much larger problems, he continued. “We are an easy target for tax increases…. The more we turn on ourselves the more the sharks on the other end smell blood in the water.” His solution is to “call your industry brethren and figure out a way to unite.”

IT’S A LEADERSHIP PROBLEM. But can the industry move past its differences? Luis Duran (formerly of FEMSA Cervesa, now with Strategy Primus) suggested the industry’s problems stem more from a lack of leadership. “There is a lack of leadership at some important levels in the industry and that’s worrisome.” He believes craft brewers were able to take share partly because of the big brewers’ lack of innovation. “The reason the craft phenomenon is happening is because those guys are building brands.”

Meanwhile, he says, there “doesn’t seem to be a clear strategy” among the big brewers. Not only are they behind in brand building, but: “I challenge anyone in this room to tell me the last memorable advertising from beer…. It’s becoming a little bit bland,” Luis continued. “I think there should be a lot more happening. More innovation in beer.”

THE ARGUMENT FOR MORE SKUs. Of course, you can’t talk about innovation without acknowledging that there are a lot of people who believe the beer industry is delivering too many SKUs.  Not so, said Jeff Nowicki of The BWC Company. “I think there is a misconception out there that there are too many SKUs in the marketplace…. It’s all about managing efficiencies.” Just look at the wine industry, which is “very good at over-SKUing.” It’s served them well, and the beer industry has nowhere near as many SKUs. “It’s not about managing a portfolio of SKUs, it’s about managing the geography in the retail trade and getting our share. Our share has a lot of pinots, chardonnays and cabernets. That is something everyone in this room should be challenging now.”

But can we absorb more craft brewing capacity that’s coming online? “I think we’re still short on capacity,” said Jeff. “We have a huge channel and emerging channels that haven’t even touched this [beer] channel yet.” That applies not just to craft beer, but imports, cider and the unsung hero: super-premiums.”

“The consumer demands this innovation and variety. If we don’t give it in beer than wine and spirits will,” added JB.

ARE WE HEADED FOR A CRAFT SHAKEOUT? It’s quite possible, JB told the audience. These small brewers aren’t going anywhere willingly, and at the same time the environment is getting more complex. “People in the middle tier are going to have to adjust their business models.”

And that brings us to the brewer/distributor relationship. “The lack of support that craft brewers feel from the wholesalers around small brewer carve outs around franchise legislation — a lot of them feel it’s patently unfair. I hear that from people of all sizes,” said JB, who feels brewers should be able to change distributors within certain parameters and after paying fair market value as they mature.

Jeff, meanwhile, argued it’s a two way street. “Craft brewers rely way too much on the wholesaler partnership to do all the work for them. It’s not a partnership.” With that said, he believes anyone who is hired by a supplier should have worked as a distributor first because it’s “how you learn the business.”

Luis’ suggestion? “The best defense against that is to build brands… a lot of the dialogue has left the business on how to build brands. That’s what we’re missing.”

IF YOU WERE AN A-B WHOLESALER…. What would you do? Luis gave this parting wisdom: “You need to get bigger. That is the only wave of the future. If you don’t get bigger than someone is going to get bigger for you, and you’re not going to be able to compete.” There are different avenues of getting bigger, which includes entering the soft drinks game, forming a joint-venture and/or taking on new territories.

Meanwhile, Luis predicts the ABI/Modelo deal will move forward largely due to the “air tight” contract between Constellation and ABI. He believes this would prevent any judge from blocking the deal.

Key points? The industry needs to work together for the common good, and help one another adjust to the changing times. As usual, let us know your thoughts at hs@beernet.com.   More later.