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Association set on securing industry's future.

Association Set on Securing Industry's Future

The NBWA will maintain the three-tier distribution system, Matthew Dee, new chairman, vows. And as a wholesaler from Indiana, he especially appreciates the opportunity. MBA: As National Beer Wholesaler Association's chairman in 1990, what are your primary goals? DEE: My primary goals are to make sure that we maintain the three tiers of the industry in the years to come. As you may know, our industry is under a great deal of attack in Washington, and also at the state level. To maintain the three tiers is very important to us. MBA: What are NBWA's current and long-term objectives? DEE: That question is very timely as the NBWA has just set up a long-range planning committee, which will meet at the end of August to set up our goals for the next five years. We are very concerned about doing that because we feel that in the past we have basically been reacting to things that happened. We feel that we need to have some long-term goals. MBA: Can you be a little more specific as to what particular areas this group may look at, be they 21 Amendment issues, brewer/wholesaler relations, etc.? DEE: In the long-term, we need to look at all of those type of issues which will be affecting our industry. Mainly, we will try to prioritize. Of course, in Washington, things are ever changing and we need to stay on top of them. MBA: Regarding the upcoming convention, how does the show's theme, "Vanguard of Tomorrow" describe the NBWA? DEE: I think the word vanguard basically means being out front and being a leader. We believe today that NBWA is the leader in the industry, representing the beer industry. We feel that it is important that we portray that to wholesalers throughout the country that we are now the leaders. MBA: What issues will be addressed at the convention? DEE: Once again, it's going to be a situation where many issues will be touched upon--from wholesaler/brewer relationships to where we're going to be in the future, to how we're going to get there, to consolidations, to mergers--a multitude of things will be touched upon. MBA: What issues will beer wholesalers be discussing among themselves at the show? DEE: Survival. Survival, I think, will be the number-one topic, as that is the number-one topic discussed among wholesalers across the country today. They want to know, `Will I be here five years from now?' For the most part, you're going to be very fortunate if you happen to be an Anheuser-Busch or Miller wholesaler. However, there are many wholesalers out there who aren't. I think their concerns are going to be, `Will I be around?' MBA: Which exhibits will receive particular attention? DEE: Other than the brewer hospitality rooms--which are always very popular because after the business meetings, people are always looking to renew old friendships and have a cold one--I believe attendees will be looking for new products. Those include new imports; new innovations in equipment, computers, and software programs. Now that we, the wholesalers, are becoming more sophisticated, we need to stay on top if we're going to survive. MBA: Can you tell us a little about the optional sessions that will be offered? DEE: Let me start by saying that I was the (NBWA's) educational chairman a few years ago and we found that wholesalers are always looking to learn something about their business, either through inter-relationships with other wholesalers or hearing from people other than their brewers.

Some of the topics that will be covered in optional sessions this year include "Implementing Tell-Sell," which is something that is quite new in the industry and has been used in the soft-drink industry for many years. Now, it has been implemented by many wholesalers, at least on a part-time basis. Even the brewers are looking at it today.

Another one is "Profits through Cost Reduction," which is pertinent, as we are all very cost-conscious. "The Transitional Family-Owned Beer Distributorship" is another. For many years, beer distributorships just passed from grandpa-to-father-to-son-in-law, and maybe not always efficiently, although it was assumed that it would be an efficient transition.

"The Recruiting and Selection of Effective Sales Personnel" is another topic to be covered. One that we are all involved in on a regular basis is "How to Work with Your State Legislators." MBA: At the 1988 show, association leaders spoke of the need for unity, particularly among NBWA execs and WBAE members. What strides have been made in this area in the last year? DEE: Would you believe a 180-degree turn? I have to say that I am very pleased with the relationship that has transpired. I don't know what happened in the past or why, but I can tell you from a personal standpoint that the relationship that I have seen with state execs and the new leaders of NBWA has been super. It's a working partnership, it's not a closed-door policy.

I've had numerous contacts with state execs, from Chris Valauri to Paul Romain, and many others, in which we've just chatted about things of mutual concern. It's amazing when you pick each other's brains how much can be accomplished. MBA: What role do WBAE executives now play within the NBWA? DEE: We have four committees that the execs sit on, plus we recently formed a committee to examine the possibility of a national bottle bill. This group met recently in Washington and consisted of about 12 state execs, as well as NBWA staff. The all-day brain session, staffers said, could not have been better. We had state execs from states with bottle bills and state execs from states that have defeated bottle bills. So, we really had a cross-section and I think a lot of information came out of that which will be helpful to us in defeating a national bottle bill. MBA: Is it likely WBAE execs will be given voting status on the NBWA executive committee? DEE: That's hard for me to predict. But if you had asked me five years ago about the relationship between NBWA and WBAE, I would have given you a very different answer. I think we have to change if, in fact, we are going to survive. What's going to happen two years from now, I have no idea. I will say this: the leadership I see today in NBWA is open-minded and we are listening to any suggestions. As a matter of fact, we just made some dramatic changes at our last management committee meeting that the membership doesn't even know about. MBA: Is there any one individual or perhaps group of individuals who you find responsible for these changes in relations between NBWA and WBAE? DEE: My firm belief is that there was a feeling between the wholesaler members and the state execs, for whatever reason, of confrontation and distrust. At our meeting in Anaheim that was completely changed, although there was still some feelings of apprehension. We showed that we would open the door and we would listen. The second meeting that we had in Anaheim was probably 50-percent better than the first meeting. And it wasn't one of, `You did that and we did this,' it was, `what can we do together?' I believe the change in leadership at both NBWA and WBAE has a lot to do with it. I also think there were possibly some personality conflicts in the past that are no longer there. MBA: Beer industry members have expressed outrage with the linking of alcohol to illegal drugs. Industry leaders say it's time to do something, to take the offensive and counterattack the allegations. What should be done? Specifically, what will NBWA do? DEE: NBWA officers have met with the chief executive officers of the five major brewers to discuss this specific problem. We are all in complete agreement that legal alcohol should not be considered the same as illegal drugs. How to do that, I'm not sure anyone has the magic wand to come up with that answer.

However, we are looking at many things. Anheuser-Busch has just come out with a new department which will be richly funded, and August (Busch) and his government affairs people have made it clear to their wholesalers that they would make this information available to competitive wholesalers so they could use it in their home markets. There will also be an advertising campaign, of course, to try and separate alcohol from drugs.

I don't mean to be facetious but I think the press is probably the biggest problem we have because even in our local newspapers, you see `drugs and alcohol.' To try and get that mindset changed, is going to be an educational problem.

We are looking at doing some things--which I am not at liberty to discuss because we are going to make some announcements at the convention in October--but I think they're going to be very positive. We're still working on details of certain things and, as I said, are not available for public comment. MBA: Several alcohol awareness programs, whether brewery-sponsored or wholesaler-sponsored, are in use these days, for example TIPS and TAM. From the standpoint of a beer wholesaler, what are the benefits of wholesaler involvement in awareness programs? DEE: I think the main thing, once again, is public education and the fact that we are viable members in our home communities. We are concerned with people who do abuse our product because the majority do not abuse it. We believe that through education of a server and by convincing retailers that they should not allow their customers to over-indulge, we'll be much better off in the long run. MBA: Are these types of efforts any more than p.r. programs? DEE: Yes, they are more than p.r. programs. Although I think the p.r. aspect is definitely important because for some reason--and having been in the beer business in Indiana--no matter what I do it appears that I'm a beer baron. So p.r. is important, and so is getting across the fact that we are business people who are concerned about what happens to citizens in our communities. MBA: What ramifications will U.S. Surgeon General Koop's recommendations, if instituted by Congress, have on the industry--particularly the advertising-related guidelines? DEE: That's scary, really scary. Everytime I see Surgeon General Koop on television, I cringe. The man has got such great appeal with the press, but I have to say that some of his opinions are really off the wall.

I was very disappointed that the panel (on drunk driving) that he put together was very biased. As you know, the NBWA and broadcasters sued just to get the door open and yet that didn't seem to make any difference to him. He basically said, `Don't confuse me with facts because my mind's made up,' which is a sad thing to say.

Some of the things this man has done, although he's gone, have become a matter of public record. Some of the neoprohibitionists are going to be using that information for years and years to come in public debate and it's unfortunate because most of them are just factless. MBA: What impact will warning labels, which are an inevitability at this point, have on the sale of malt beverages? DEE: Realistically, I don't think they're going to have any impact; that's my own opinion. I think some of the original warning labels that were proposed, such as 'If you drink this product, you're going to die,' were a little bit ridiculous. But having a daughter with three children, I know that when she was pregnant, she just didn't drink because she didn't think it was a good idea. I think most young women today realize that if in fact you are with child, there are certain things you shouldn't do. That's, once again, a matter of education.

We talk about the warning labels on alcoholic beverages and yet, you see the sitution where women are abusing cocaine or crack and are giving birth to children who are already drug addicts. Now, there's something that's scary.

It's the same thing with the warning labels that state, 'If in fact you use this product, you shouldn't use heavy machinery.' Well, that's just common sense, again. So, I don't think it's going to have an impact. Most people know that if you're going to drive heavy equipment or fly an airplane or drive a boat, you're not going to consume alcohol. Now, that one percent or half of one percent that's going to do it, we're going to read about on the front page. And they're not going to read the label anyway. MBA: How likely is an increased federal excise tax either in 1989 or 1990? DEE: My personal opinion is that we're going to get one. I guess the question is how much? I think that's the major concern right now of wholesalers and brewers--all of us in the industry--as to how much the increase will be. I've heard many opinions on it, many discussions on it but I don't know and I don't think Congress knows how much of an increase will be passed.

But there will be an increase, and it's just a matter of how much. I doubt very much there will be one this year. My personal belief from the people who I have talked to who are very knowledgeable is that we can expect one next year. MBA: Assuming that there will be an increase at some point, will beer wholesalers fight harder on a proposal that is linked to alcohol equalization? DEE: Yes, there's no doubt about it. For many years, we have talked about beer as being the product of moderation and to try and equalize it to me doesn't make any sense. I think it would just refute everything we've been saying for the last 10 years. This, of course, could lead to a real donnybrook between different factions of the alcoholic beverage industry. MBA: You mentioned earlier that the NBWA is concerned with a national bottle the bill. Has legislation actually been introduced? MBA: It's being bantered around. While I'm not sure that there is a bill out there numbered, there has been much discussion about a national bottle bill stressing the successes in the nine states that have it. Well, proponents don't stress the 41 states that don't have it. However, with the NBWA's strong representation in Washington, and its respect, I think we are preparing for any inevitability.

We can't just have our heads in the sand. Let's face it, when you get the do-gooders who say, `Gee, this would be wonderful to have a national bottle bill.' It could be a complete disaster. If anybody has ever gone to some of these states and said, `Look how clean the highways are,' well, I can take you through Indiana and the highways are clean here, too.

I do believe, though, that we have enough strength in the industry and in many tiers, i.e., brewers, retailers and wholesalers being against it, so we've got a pretty strong force. MBA: What is the status of the Malt Beverage Interbrand Competition Act or a "generic" version of the bill? DEE: That is in the hands of Rep. Jack Brooks of Texas, who is basically the major sponsor in the House. He is going to orchestrate that situation and we have been working very closely with his staff and heeding their advice. A bill has not yet been filed, but I know that Jack Lewis, NBWA's vice president of governmental affairs, has met with senior staff of Rep. Brook's office. Just what our plan is going to be, I am not prepared at this time to say. I would guess that a generic version would be introduced during this Congress. MBA: So we can almost assuredly say that the bill will be a generic version, and not the Malt Beverage Interbrand bill itself. DEE: That's correct, as of this point. MBA: The House Judiciary Committee recently approved HR 1236, the Vertical Price Fixing Prevention Act which is the 1989 version of last year's controversial Retail Competition Inforcement Act. HR 1236 contains an NBWA-supported exemption which protects exclusive territories. What are its chances in both the House and the Senate? DEE: That's a good question. I did meet recently with Jack Lewis to ask him that same question. Being the good politician that he is, when I left the meeting I wasn't very sure what he told me. I've found out over the years that what a politician tells you today doesn't necessarily mean what will happen tomorrow. So to answer your question, I think we're just going to have to wait and see. MBA: What type of changes do you predict for the three-tier alcohol beverage industry in years to come? DEE: There is absolutely no doubt in my mind that retailers are going to become larger. When I say larger, I mean more powerful; the mom-and-pop grocery store is going to become a thing of the past. You're going to have large-chain drug stores, mega-chain supermarkets, which are going to wield a lot of economic power.

In a testimony here in our own state legislature this year, a major chain basically said, `We don't need wholesalers. We have our own distribution system, our own warehousing system. Why do we need the middle man?' They said it publically, which came as quite a surprise, although I think we all believed in the back of our heads that they believed that anyway.

It's going to be a situation where, if the major brewers or importers truly desire to maintain a good distribution system, which we have proven since the repeal of Prohibition, they will continue to fight it. My concern is that if you get a renegade brewer--I guess I can mention Mr. Kalmonovitz because he is no longer with us but is in that big brewery in the sky--he made the point that he would make beer for anybody and sell it direct.

Unfortunately in Indiana, you have to go through the three tiers unless the brewery is in Indiana and than the brewery can sell direct to the retailer. However, there are only a few retailers that are big enough to buy so you get the major chains which bypass the wholesaler family and go direct. Right now this really only pertains to brands that are not in great demand. But what if it was a Budweiser or a Miller? Now, you've got a problem. MBA: Indiana is the only state, of course, in which exclusive territories are not permitted. Please describe the conditions that now exist here as a result. DEE: Let's put it this way. My wife has said that when I die I can bypass purgatory and go right to heaven. No, it's hell. It really is a complete disaster. Once again, I believe the press has been our biggest foe. We felt this year that we were probably closer than we'd ever been to getting a territory bill passed. But the pressures that were bought to bear by our opponents at the last moment just overwhelmingly brought too much political pressure on the governor. For one who is looking for future elections, I think he flipped the coin and said, `There are a hell of a lot more consumers than there are beer wholesalers.' However, as I told him, there are going to be a hell of a lot less wholesalers.

For example, there were six wholesalers in South Bend 12 years ago when transshipping started. There are now two. There were 182 wholesalers in the state in 1979. There are less than 80 today. I would forecast a 25-percent depletion in wholesalers between now and 1992. I guess that someday, if things don't change, there will be maybe 20 wholesalers left in the state. MBA: To what do you attribute your success and your survival? DEE: I don't know if I'm successful. We're selling beer and we're staying on top of it but basically we did a lot of things to stay in business. We got lean and mean. A top brewery executive once told me, `You can't exist on those margins.' Well, I proved him wrong.

We did it through the total help of everyone who works here; we consider ourselves a big family. We are represented by the teamsters union and they have taken concessions the last three contracts, which is a sad thing as I've got people who have worked for me for 20 years and it's not fair to them. But it does beat the alternative.

So we have grown basically through that kind of cooperation and through the fact that we did an awful lot of costcutting and the fact that we were able to purchase other wholesalers at reduced costs. MBA: To put things in perspective, what does a case of, say, Budweiser, cost at wholesale and retail in Indiana? DEE: That's going to scare you. Budweiser was on special over the 4th of July weekend here at $7.79 a case, the wholesale price was $7.60. The retailers were operating on 19 cents and we were operating on about 15 cents a case. That's crazy, especially when Coca-Cola is $8.25 a case and there's no tax on it. Now, you tell that to the governor. So, on one hand, you talk about a drunk driving task force and on the other hand, you're maintaining a cheap price on beer. Where's the reasoning behind it? MBA: Will consolidation among wholesalers continue? DEE: I don't think there's any doubt about it. There's no doubt in my mind. MBA: How far will it go? DEE: I think somebody said once that you're going to see in each major market a Budweiser wholesaler, a Miller wholesaler, and a wholesaler who has everything else. In many instances that is probably true already.

The state of Indiana is also unusual because there are 26 wholesalers here who have both Budweiser and Miller. We have wholesalers here who basically have all the brands and this is what has caused the transshipping problem. Historically, and when Indiana did have territories, the state would only allow one wholesaler per county. If a county had more than 35,000 people, it was allowed another license. So in small counties, if a brewer wanted to sell his beer in that county, he had to go to the licensed wholesaler.

However, when transshipping started, suddenly this wholesaler who had all the brands could go into the major markets, i.e., Indianapolis or South Bend or Fort Wayne and cherry pick the big accounts and sell them everything. That's where the problem came in. So, it's an unlevel playing field. Unless you have all the brands, it's difficult to become competitive. MBA: What practice among beer wholesalers would you most like to see changed? DEE: Transshipping. Also, the naivety of wholesalers. I've given talks throughout the country -- Heartland, Washington, Oregon, Georgia, South Carolina, Ohio -- and it's amazing when you talk to fellow wholesalers how naive they are as to how they got to be where they are and who controls their destiny. Basically, it's the bureaucrats in their state capitols.

Yet, when you tell them how important it is to become involved, i.e., as a member of a national organization or a state organization or to contribute to their PAC organizations, they say, `We don't have any problems in our state.' Well, we didn't have any problems in Indiana either.

There's a hell of a lot of strength in unity. If we all hang together, we can beat this problem. But if we don't hang together, we're surely going to hang alone.

So, my biggest concern is the complacency. I'd like to see that changed. I'd like to see wholesalers say, `We're going to become the meanest dog on the block,' and `We're ready to take on the neoprohibitionists and the large-chain supermarkets, if we have to.' MBA: In what ways can brewers and importers improve in their dealings with beer wholesalers? DEE: By realizing that we're a very vital point in their distribution system. That's what's important.

Anheuser-Busch, which is by far the largest brewer in the world, has said that without its wholesaler family, they would not be where they are. Wholesalers can be used for grass-roots situations as there is a wholesaler in every congressional district.

For any brewer to come in and try to set up a new distribution system, it would be mind-boggling. So, brewers and importers have to realize that we are partners, we're not adversaries. We may not agree on everything, but I don't agree with everything my wife says either. MBA: Do you have any final comments? DEE: I would like to say very honestly that I hope people read the trade journals, and yours specifically, and take some of the things that I've said to heart, because they will find out that those wholesalers who are involved at the state and national levels are not there for ego trips. I think that was one of the perceptions years back, when things were very good. I believe that people went to the NBWA convention because it was a party. It was a good way to see old friends, renew acquaintances. Today, it's business. The NBWA officers, directors and management committee spend numerous hours in meetings. And that's because we are concerned. A problem is that we are not getting the support from both members and non-members, either through complacency or naivity. We all have to get involved if we're going to survive as an industry. And that means personally and financially.
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Title Annotation:National Beer Wholesalers' Association
Publication:Modern Brewery Age
Article Type:interview
Date:Sep 11, 1989
Previous Article:Industry is doing something.
Next Article:Brewers & wholesalers step up alcohol education efforts.

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