During the late 1980s, I was in Distributor Development for Coors Brewing Co. The department had been charged with overseeing a number of special projects. In addition to owning and managing Coors operations through Ford Street Management, we also helped our wholesalers on special issues when requested by the wholesaler. On the rare occasion that I was in Golden, I was asked to do other projects, one of which was to assist with the expansion of Coors to new states.
As one can imagine, the applications for any given market could have numbered into the hundreds. These applications came in all forms and styles, even though the brewery sent a template for the wholesaler to follow. Some applications came back inches thick and leather-bound. Some applications were simple and easy to follow. Regardless, I was amazed that all of the applications were sent in with the understanding of the sizable investment the organization would have to make. Early in the expansion phase, these were stand-alone Coors operations, meaning the winning group would have to buy land, build a warehouse, purchase equipment and trucks, hire and train staff, etc. Even in the 1970s, the investment was in the hundreds of thousands of dollars with no guarantee of success. In fact, of all the South Texas appointees from the mid-seventies, I can only think of one original owner who is still in business. In many markets, Coors only achieved single digit share, sometimes only a 2%-3% share.
As the brewery expanded east, more established wholesalers were awarded the brand. That still meant a sizable investment in more trucks, refrigeration, people, inventory, etc. Again, with no guarantee of any success, wholesalers did this to enhance their operations and build for the future.
So the question now is would those potential groups and distributors still apply for a Coors appointment if Coors was charging for distribution rights? As Yuengling heads west, what would happen if they began charging for their rights to distribute? Given Yuengling’s great success in Ohio, one might have a new stand-alone Yuengling operation, not unlike the old Coors model.
In the recent legislative session in Texas, while there were many new laws passed to support the growing craft industry, one law not passed was for these new crafts to charge distribution rights for their products. Recently, when visiting with a successful craft brewery, the brewery indicated that they soon might be charging for their distribution rights. They were looking at a per case rate, but also offering the wholesaler a much smaller marketing per case commitment along with better margins.
Would wholesalers focus more on products they paid for then those for which they did not have to pay? If they had skin in the game would they be more inclined to keep those products then sell them or trade them? Or will wholesalers attack their state legislatures and get a law passed that prohibits breweries from charging for the brand? If the later happened, would crafts create a co-op enabling them to get together and start their own operations? Breweries are now being required by large chains to more frequently come to the table not only to get ad and display activity, but even for distribution rights. Should the wholesaler help with that or would that be covered in the original costs?
Either way, when charging for distribution rights in states that have strong franchise laws, this could produce an irresistible force meeting an immovable object!
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