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Filling a niche.

Filling a Niche

Tom McCormick entered the beer wholesaling trade for what shouldn't be an unusual reason - he loves good beer. This passion had its beginnings in the late 1970s and early 1980s, when California's microbrewing renaissance flooded the marketplace with revivalist beers of every style.

Although McCormick was tempted by the idea of opening a microbrewery, exorbitant capitalization costs deterred him. Resolved on working in the beer industry, however, he found his opportunity in the profusion of brands available from the new breweries. "I figured that if I couldn't brew good beer," he says, "I could always sell it." Today, he is owner and president of McCormick Beverage Co., a specialty beer distributorship in Sacramento, CA.

Before starting out, McCormick's research indicated the existence of a niche market in his Sacramento hometown. "Retailers reported there was strong demand for microbrewery beers," he says, "and at that time they were difficult to get, because no distributor in town was selling them."

McCormick entered the beer business tentatively at first, hanging onto his previous job, and making deliveries whenever he could spare the time. As it turned out, his market research was on target. Demand soon forced devotion of his full energies to the distributorship.

Five years after the first case was delivered from the back of a van, McCormick Beverage Co. is a company showing strong growth, employing four full-time and two part-time personnel and a modest-sized delivery fleet - one medium-duty truck with an 18-ft cargo box, two parcel vans and a pickup.

"We're doing the best we've ever done," McCormick says, "We've been through several stages of growth since we started, and I think we've turned the corner. We are currently undergoing the largest single expansion of our history, and by June 1, we will have switched entirely to pre-sale. It seems to be getting easier as we get more known in the trade," he notes. "We're getting more brands and better brands."

Specialty Distributor

Tom McCormick is among a growing number of specialty distributors - wholesalers who focus on what might be called "ultra-premium" products, one of the most lucrative categories of the industry.

According to McCormick, a motivation for getting into the business was his perception that micro and imported brands were not always adequately represented. "Many distributors base their business on one or two large-volume brands," McCormick notes, "and there is a potential for other brands to get lost.

"I felt that some of the microbrewed beers weren't getting the exposure they deserved," McCormick says, "largely because it's often impossible for a small company to get their brands picked up by a distributor. A company like Mendocino Brewing Co. isn't like Anheuser-Busch. They can't just breeze in anywhere."

The portfolio at McCormick Beverage currently includes products from microbreweries up and down the West Coast. In addition to brands from larger craft breweries, like Sierra Nevada Brewing Co., Mendocino Brewing Co., and Yakima Brewing & Malting Co., McCormick has diligently sought out brands from the smaller players, like Stanislaus Brewing Co., Anderson Valley Brewing Co. and the North Coast Brewing Co.

Although McCormick had initially envisioned a distributorship dedicated to microbrewery brands, imports became an important addition to the portfolio. "I added imports for two reasons," McCormick states. "First, there are a great many good foreign beers out there. Second, I needed to round out my portfolio."

Currently, the company's brand portfolio is evenly divided between domestic microbrewery beers and imported brands. "I'm a believer in high quality beer," McCormick notes, "I don't think it matters where it's brewed."

McCormick has become a staunch defender of the imports, the freshness of which is sometimes questioned by microbrewers. "There are imports that don't withstand travel well," he says, "but no beer lover could deny that many of these imports are classics of their style. Even when they aren't brewery fresh, these are incredibly complex beers, more so than most, if not all, of the micro beers."

Specialty import products handled by McCormick Beverage include Corsendonk Brown Ale from Phoenix Imports, Fuller's E.S.B. from Grolsch Importers and Chimay Ale from Manneken-Brussel Imports.

Different Structure

According to McCormick, specialty beers of any provenance require specialty sales methods. "Our business is structured differently from 99 percent of other beer distributors," McCormick says. "When I say we're structured differently, I mean we're not a large house based on volume sales. Until very recently this meant we were limited to route-selling. In the last year, however, some of these brands have really grown - brands like Sierra Nevada Pale Ale, Mendocino's Red Tail Ale and Newscastle Brown Ale. I think it's a very encouraging sign for the specialty beer category that we are getting the volume to switch to pre-sell.

"Nontheless," McCormick observes, "these products have to be virtually hand-sold, and we depend on our salespeople a great deal. Our salespeople don't see beer as some generic product to sell - each one of them is highly educated about beer and brewing."

This detail-oriented sales approach has dictated care in building the portfolio. "We're not just looking for an attractive package," McCormick says, "we hand-pick every beer we sell.

"Some wholesalers don't seem very interested in what's in the bottle," McCormick remarks. "The emphasis seems to be on a good package, a favorable price point, point-of-sale materials and advertising support. Of course," he says, "those factors are important to us too, but the beer comes first.

"We emphasize to customers that every product on our list is a unique, quality beer," McCormick says. "There are some exotic styles on that list, and some of them aren't for everybody, but you can't say they're not authentic beers.

"The thing is," McCormick continues, "we can't sell these beers in small neighborhood bars and family groceries - we're limited to specialty bars and gourmet markets. Recently, though, I've been pleased to see we're getting more brands placed in chain stores and large supermarkets."

To expand knowledge of his specialty beer products among consumers, McCormick initially sponsored large-scale beer tastings. "We did tastings to promote the company, and generate awareness about our products," he says, "and it was helpful when we were starting out, because we got a lot of TV and radio coverage. Frankly, though, I don't think we'll be sponsoring another one. Although we enjoyed doing it, the benefits were largely intangible, and California state laws have become more restrictive since then."

Growing Market

McCormick reports that specialty beers are finding a widening audience in the Sacramento area. "The Sacramento market may not have sophistication of the San Francisco Bay area," he admits, "but it's a growing market, increasing in population and sophistication. People are moving up from the Bay area, and we've seen demand increasing.

"Four years ago," McCormick observes, "Sacramento was a lot different, and I was worried that this business might have been ahead of its time. The population now stands at one million, though, and I think the market's wide open.

"People are flocking to the area," McCormick says. "Sacramento's not too far north, land and housing is relatively inexpensive, and companies can come right in here and build. It's a good place to be."

According to McCormick, he is satisfied with his current market reach, which now extends north to the Truckee-Tahoe area. "We don't plan on expanding our geographic area," he says, "if we were closer to San Francisco we might have a larger market, but we are where we are. We are still obtaining more and more accounts - restaurants, on-premise accounts, etc."

"We haven't seen a huge jump in sales," McCormick notes, "but we're seeing gradual increases. More accounts are expanding their product lines as people become more interested in beer."

Struggling Microbreweries

As harsh regulatory winds scoured the country last year, McCormick was caught up in the fight against the California state alcohol tax initiative, Proposition 134. "My biggest concern was for the small breweries," McCormick says. "If a tax package like Proposition 134 were passed into law, you would see a lot of attrition.

"So many of the microbrewers are just struggling to turn the corner," McCormick points out, "you see the same thing with any small business. It may take five years to turn that corner, and a lot of microbrewers aren't there yet. Proposition 134 would have imposed a lot of costs on the brewers," he says, "and for those businesses that are hanging in the balance, it could have tipped them the other way.

"It would have affected my business as well," McCormick notes, "because I'm sure we'd have seen a decline in micro sales. I wasn't too worried about it," he says, "because while I wouldn't want to diversify into other businesses, we could if need be. We could sell water, or for that matter, we could sell nails. We're set up as a distributorship, so we're equipped to distribute just about anything. I wouldn't be in the beer business," he says, "but I'd be in business."

A trend towards moderation has been a feature of the California market for some time, McCormick reports. "To date," he says, "this renewed concern about alcohol has helped us, if anything. You hear about people drinking |less but better' and that seems to be happening. People are drinking less in the way of distilled spirits, and more wine and beer. I think my father is a classic example. He used to drink martinis, now he likes beer - good beer. Instead of three or four light mainstream beers, he'll have one or two imports or microbrewery beers.

"Naturally," McCormick says, "more moderate drinking habits have had the strongest impact on-premise. I'm not pessimistic, though. It might be more difficult to get accounts, but we'll manage. The way I look at it," he says. "if Prohibition didn't kill the brewing industry, nothing will."

PHOTO : Tom McCormick is finding a widening niche for microbrewery and import specialties in Sacramento, CA.
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Title Annotation:Small-scale Brewing in America; McCormick Beverage Co. fills a niche in the industry by focusing on specialty beers
Author:Reid, Peter V.K.
Publication:Modern Brewery Age
Date:May 13, 1991
Words:1649
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