What we have here is a failure to communicate!

The best definition of growing old, I believe, is when “the past means more than the future!”  You can see that in the writings of the famous Dan Jenkins when he talks about golf.  Jenkins, recently elected to the World Golf Hall of Fame, can’t seem to write an article without reference to the great Ben Hogan.  This is somewhat understandable as Jenkins played golf with Hogan in the 50’s and has attended 50 Master’s tournaments and over 200 majors, so he, if you will, tends to live more in the past.

I can remember when price increases from breweries were 10 cents a case and when they happened, as it sometimes didn’t come often, made all of us very concerned as to the impact on our sales.  From a dime the increases went to a quarter, then fifty cents, on to a dollar, and now to several dollars.  And now the impact on sales?

Back in the summer of 2008 while at Warsteiner, the brewery decided to raise the transfer price up to what then was four price points in the market.  At the same time I was directed to eliminate 12 sales people and cut millions from the marketing budget.  The result?  After 6 months, Warsteiner had lost 39% of it’s US volume.  The CFO, after admitting a mistake had been made said that “we needed to communicate better!” I don’t believe communications was the issue, I believe our fears and concerns fell on deaf ears.  Since European companies either own or heavily influence the majority of the US business now I decided to show their CPI on beer for some key European countries (see below).  You can see clearly why we are experiencing these increases and why.  Understand in some of these countries, as you have read, unemployment is over 20%!  Maybe higher.  Interesting, when you look at the German CPI and wonder why the increases are not as dramatic as the other countries, one major reason is that the largest brewery in Germany sells only “price beers”.  There is no advertising, support, p-o-s, promotions, etc.  Cheap price for a case of cans.  The other guys can’t raise without seeing these guys in their rear view mirror.  In other words, competition.

In the post “You Are What You Are” I mentioned that ABI, in their efforts to control GP in all segments, could focus on pricing as a tool to drain the GP of the middle tier. In fact the DoJ is now looking into the ABI/Modelo deal and pricing could be a key component in their decision.   I see it more and more as referenced by the current price increases.   If you are even wondering for a moment about the future, look again at the chart below.  It clearly indicates what you can expect regarding the future of your pricing.  So just what does it mean?  Well while you think about it, I’ll go and fix me a scotch.