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Wholesaler focus.

WHOLESALER FOCUS

Beer distributors from around the country discuss the challenges of doing business in an industry under new pressures.

Kevin Forth President Straub Distributing Co., Ltd. Orange, CA Kevin Forth heads up a large Anheuser-Busch house in Orange, CA, and will serve as the secretary of the National Beer Wholesalers Association for 1991. * Questioned about the early impact of the federal excise tax, Forth said, "Realistically, we're just starting to see the impact of the tax now. Some retailers bought additional product in December, and they are using that price as the basis for selling cost. To give themselves competitive advantage, many aren't exercising the price potential." * "In January," Forth continues, "we've seen prices go all over the ballpark. I expect to see them stabilize in February. We've seen a 10-percent decline in January, but I don't think that's too bad. This industry has never experienced such a massive price increase before, and it will take some time to settle down." * Forth reports that in terms of categories, light beer was the strongest performer. "Light went from 29 percent to 33 percent," he reports. Forth noted that popular-price sales rose slightly and premium remained stable. "Imports declined slightly in this market," he notes, "probably because of the continued softness of Corona." * "I'm in this business to serve the consumer," Forth continues, "and the consumer obviously wants light." * Forth said he would put emphasis on selling the Budweiser family of brands in the coming year--Budweiser, Bud Light and Bud Dry. Of the new Dry, Forth says, "We haven't had a full year's experience yet, but I'm very happy with how it's done. It's got a two-percent share of market, which is about what I had hoped for." * In regards to continued neo-prohibitionistic pressures, Forth said, "We've been seeing this for the last 2-3 years. There are still legislative pressures on us for an ad ban and against the deductibility of advertising expenses." * "In California," Forth continues, "we're seeing continued pressure for an excise tax increase because of a budget problem. There has been a lot of talk about earmarking revenues towards social goals." * Forth reports he's been pleased with his supplier's response to the threat. "I think Anheuser-Busch has been at the forefront of this issue," he says. "They have put a lot of emphasis on their consumer awareness campaign, with television spots and a whole list of programs for wholesalers. We have used several of their programs with good success, including T.I.P.S and the safe ride program during holiday periods. We have also promoted O'Doul's non-alcoholic brew where appropriate--during alcohol awareness week on our local college campus, for example." * "The pressures against this industry are getting stronger," Forth observed, "and it takes a lot of time to respond effectively. It's getting to be a full-time job to defend this industry from legislation." *

John L. Rhoades Rhoades Beverage Co. Plainfield, IN John Rhoades operates a distributorship in Plainfield, IN, just west of Indianapolis. Of the impact of the excise tax, he reports, "Our business is a little off this month, but it's been soft for two or three months prior to this, so I don't put it all on the tax." * "I think it's much broader," Rhoades reports. "Here in Indiana, certain industries are having economic problems just like everywhere else, and there have been some layoffs. I also think the war is having an effect--people are concerned and aren't going out much." * "From my point of view it seems to be a three-way thing," Rhoades says, "and it's too early to tell how much effect the tax is going to have. However, if there is any effect, I don't think it will be long-term." * In Indiana, Rhoades notes, the impact might be less than elsewhere. "The pricing at retail in Indiana is so cheap anyway," he notes. "I've seen a premium-brand suitcase recently priced at $9.99. I believe premium is priced considerably higher elsewhere in the country." * When it comes to categories, Rhoades says his market shows few changes. "Premium is a major part of the market here," he says, "and that category has been stable. Super-premium has been somewhat flat and economy beers haven't shown any movement either. I don't know what effect changes in the pricing structure would have on economy brands, but it's possible their share will increase." * As to how neoprohibitionistic pressures will effect Rhoades Beverage, Rhoades reflects, "It's difficult to say, but I'm certainly concerned about it. * "If an ad ban were to pass, for example, that would certainly have a massive effect on the market. It would change the brand-mix, and there would be a lot of dislocation." * "I may be an optimist," Rhoades says, "but I can't really see an ad ban happening. If they removed brewery ads from sponsorship of sports events there would be a huge impact on coverage of many sports. The United States is extremely sports-oriented," he notes, "and I think there would be an outcry if Congress tried to do that." * "In terms of other pressures," Rhoades says, "I think we've been seeing the effects for a couple of years. People are wary of mixing drinking and driving, and rightfully so. I think the raised consciousness about that issue has slowed things down a little--instead of having four beers, they'll just have two and go home. That moderation in consumption will continue, for health reasons as well." * As for a state-wide forecast of the most turbulent beer market in the country, Rhoades is wary. "I wish I knew," he says, "I've made a lot of predictions over the years, and a lot of them are coming true, but a lot sooner than I had thought. The attrition in wholesaler ranks is continuing, even intensifying. More are closing down or merging--we're down to 60 wholesalers. That contrasts with 235 when I got started in this business in 1949. The way it looks, we'll be down to 30 or 40 in a few years." * Will Rhoades Beverage be one of the survivors? "We're sure working on it," Rhoades says. "We're still the largest Anheuser-Busch wholesaler in Indiana." *

Dean Shintaffer Treasurer Sound Beverage Dist. Co. Bellingham, WA The Sound Beverage Distribution Co. is located in Bellingham, Wa. Sound Beverage distributes wine and soft drinks in addition to beer. The company's beer operation handles the Anheuser-Busch line, but also sells a number of micro and contract-brewed beers, including products from the Redhook Brewing Co., Sierra Nevada Brewing Co., Anchor Brewing Co. and the Boston Beer Co. * Dean Shintaffer reports that it may be too early to measure an excise tax impact. "It's hard to tell clearly," he says, "but our early reaction is that the tax didn't cause a major catastrophe. In January we were ahead of last year, but we'll have to wait and see what happens." * Shintaffer notes that premium beers were strong performers in 1990. "Premium did the best," he says, "and in fact there was a significant jump in sales this January. I'd say that category was our mainstay." * "Washington is a very strong microbrewery state," Shintaffer continues, "particularly the area around Seattle. They continue to do well for us, particularly on draft. Sure, it's a pretty small percentage, but we're glad to have them." * "In our area," he says, "we're heavily influenced by the proximity of Canada. In fact, I'd say that 25-30 percent of our customer base is Canadian, and they are interested in these kind of products. I think it's also due to the efforts of the Redhook Brewing Co.--they have really created an interest in these products in Seattle." * Shintaffer reports that Sound Beverage has not felt any severe effects from neo-prohibitionism. "There's certainly been more publicity lately focused on alcohol-related accidents over the past couple of years," he says, "and we have seen some reluctance on the part of some retailers to display products and point-of-purchase tied into the Indianapolis 500 and other automotive events." * "It's subtle," Shintaffer continues, "but it's there, and we have to be sensitive to the amount of publicity that this vocal minority is getting. If we're not sensitive to their point-of-view, we may be taken by surprise by legislation someday. As it is, I don't see this emphasis on alcohol-awareness stopping." * Shintaffer notes a local idea that has been floated by a group of doctors to restrict alcohol advertising. "It's a more restrictive measure than any other that I'm aware of," he reports. "This group wants to restrict print media advertising and ban alcohol brand names from kid's T-shirts. It's gotten a lot of publicity, but I think it's unconstitutional, so I hope it won't make it through the state legislature. * "If they do pull it off," Shintoffer notes, "it would certainly change the way we do promotions. The proposal might have been just a trial balloon," he says, "but our state association has mobilized a letter-writing campaign to make our views known." *

Gene Van Over President Galveston Beverage Co., Inc. Galveston, TX Gene Van Over runs a medium-sized multi-brand house in Galveston. When questioned about the early effects of the excise tax, he said, "It is too early to say, because we saw quite a bit of inventory build-up prior to it. We've also had rather poor weather down here, so sales in general have been down. I do think there will be an effect, however. Psychologically," he says, "people will be looking more for lower-priced brands as opposed to premium products." * However, Van Over says that trends seem favorable for Galveston Beverage. "I believe we'll have a plus year this year. We're pretty well positioned to take advantage of that, since we handle a number of lower-priced products." Van Over stated that his portfolio, which includes Olympia, Black label and Schaefer has been performing strongly, and he sees that continuing. "We also have Schlitz," he notes, "and that does very well in this area." * Of neo-prohibitionism and its effect on consumption, Van Over observes, "I think we've been seeing the effects for the past four or five years, and I think it will continue to have an effect. People are more worried about drinking and driving and I see that restraining consumption. People just don't feel as secure sitting down in a bar for several hours." * "I think that future growth will occur in the off-premise segment," Van Over continues, "and with our brands that trend isn't a problem. We already do the majority of our business off-premise--roughly 90 percent. Wholesalers for the big two, however, might see some decline as a result." * Van Over says he believes that the brewers have responded well to public concerns about alcohol abuse. "I think the restraint programs that Anheuser-Busch and Miller have produced are fairly effective," he says. "However, I'm not sure the industry should overplay this issue. There's a danger the message will become more negative than positive if it's repeated too many times." *

Tilden Martin Vice President of Sales Better Brands Atlanta, GA According to Tilden Martin, vice president of sales for Atlanta, GA's Better Brand's Inc., the January 1st federal excise tax increase has not negatively affected his company's sales. "At this point in time, I haven't seen our sales affected," Martin explains, "because prior to the increase, our retailers really loaded up on their stocks. Things are beginning to move well now, but due to the poor weather we've been having and the state of our economy, stocks are still full on the retail level. Overall though, I don't think we'll be that badly hurt." * During 1990, Better Brands, which handles the Miller, Falstaff and Anchor Brewing Co. product lines, saw nearly identical growth in the above-premium and popular-priced brands. "Malt [liquors] also showed some decent growth," he continues. * Martin also notes that Miller Genuine Draft and Lite continued their sales success stories in 1990. * The non-alcoholic brew category, a brand new segment this year, also continued to pique the consumer's interest. "Miller Sharp's has shown tremendous growth," Martin reports, "and Pabst NA has nearly quadrupled its sales growth over the year." * Looking to the remainder of '91, Martin believes consumers will buy less of his products or move down in terms of price for a while. "Right now, we're seeing a sort of |consumer sticker shock,' so people will purchase more of the popular-priced brands," Martin offers. "However, I feel that American consumers are creatures of habit, so I think at some point consumers will return to drinking what they have in the past." * As far as Better Brands is concerned, Martin hopes to see a slight one to two-percent increase in 1991. "The imports will continue to be hurt this year," Martin explains. "However, the popular-price brands--like Milwaukee's Best, will be much stronger than last year." The reason for the increase, Martin believes, is due to the economic pinch felt by the consumer, who will in turn buy fewer and cheaper products, as well as the entry of several "good products into that category." * Unlike many wholesalers in other parts of the country, Better Brands has been dealing with the neo-prohibitionist specter for years, and instead of fighting has learned to accept it as a part of doing business. "Since we are located in the |Bible Belt,' we've become very sensitive to people's concern about alcohol and alcohol abuse in our region, and we've accepted that." Martin explains. "With that in mind, we try to manage our company as best we can while always remaining sensitive to our community's needs and beliefs." * "Other parts of the country are heavier beer drinking areas," Martin continues, "and I think alcohol consumption in general is more widely accepted in those regions. In this part of the world, however, we've got to be mindful of what people want and believe, and we will continue to do just that." *

David R. Bailey President New Hampshire Distributors Concord, NH New Hampshire Distributors is a good-sized Anheuser-Busch wholesaler in Concord, NH. The distributor, headed by president David Bailey, also distributes Canada's Labatts products, as well as Canandaigua Wine Co. and Seagram Beverage Co. wine coolers. * According to Bailey, the newly-enacted excise tax has taken its toll on New Hampshire Distributors' depletions. "January was devastating," Bailey explains. "Our sales were down considerably--well over 20 percent." * In an effort to combat such legislation, the wholesaler has implemented longer and further-reaching price promotions than it has in the past. Bailey believes this tack is working, but the real story won't be told until at least three months have passed. * Looking back over the past year, Bailey saw the light beer category top the sales list. "Light beers probably did the best because we had a couple new brands to offer. So far, Busch Light has done very well." * "O'Doul's is also being received very well," Bailey reports. "People perceive it as an excellent brew. It is received by two different categories of people. One, by those who |know when to say when,' and two, by those people who want the taste of a good beer without the alcohol." * The neoprohibitionist arm has not missed New Hampshire, Bailey notes. "We're extremely concerned at their approaches. They're into everything--from advertising to taxation. The recent tax was as much aimed at banning alcohol as it was at raising money. If you look at it that way, I'd have to say they're winning." To combat such pressure, New Hampshire Distributors backs both the Anheuser-Busch efforts to educate the public about responsible drinking, and the NBWA's lobbying efforts in Washington. * Following in the footsteps of recent California legislation, New Hampshire is currently considering a bill that will warrant the posting of an alcohol warning sign aimed at pregnant women in on- and off-premise establishments. |We've agreed to this bill. It's a compromise from the original proposal that called for the warning to be everywhere in a bar or liquor store--including things like table cards. It would have been a huge expense for the liquor commission." * Looking ahead at the rest of 1991, Bailey believes his company's sales outlook rests with the results of the Persian Gulf crisis. "It all hinges on the Middle East," Bailey notes. "If that situation swings around pretty quickly, the economy should follow. If that's the case, we'd be looking at a modest increase for the year." Bailey also explains that so far this year, the low-end brands have been outselling the premium and imported beers. *
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Title Annotation:1990 Statistical Study; attitudes of beer wholesalers about the new excise tax being imposed on beer
Publication:Modern Brewery Age
Date:Mar 11, 1991
Words:2739
Previous Article:The view from the hill.
Next Article:Brewing a new three-tier system.
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