How about never….is never good for you?

By the 1980s, G. Heileman Brewing Co. had grown into the third largest brewing company in the US.  The business model enabled Heileman to own and market a number of small but successful regional brands.  The breweries’ anchor brand was Old Style, the number one selling beer in the Chicago market and surrounding states.

Due to the large number of regional brands Heileman owned, it was not unusual to have multiple distributors in one market.  As a distributor, I was responsible for Special Export, Malt Duck, and Mickey’s, and I competed against other Heileman distributors.  In fact, once we learned Heileman was expanding a new brand into the market, all the distributors made presentations to the brewery.  The franchise laws in Texas at that time enabled a breweries’ to have multiple distributors.

Heineken had bought Van Munching, their importer, in 1991, and began a slow but determined model to move distribution of Heineken to beer houses.  Since WWII, distribution of Heineken had been handled predominately through Wine and Spirit distributors.  The rapid success of Corona, which flew past Heineken to become the number one import, seemed to wake up the brewery.

At this time, dueling distributors in Texas was legal.  With Glazers as Heineken’s Texas distributor, Heineken was looking to ramp up on-premise distribution.  Glazer’s business model did not fit with Heineken’s business model, so Heineken dueled the brand with Glazers permission.  The result being that on-premise would be serviced by the Miller distributors and Glazers would service the off-premise.

This action by Heineken alarmed the beer wholesalers who began to focus on changing the franchise laws to exclude dueling and to allow line extensions and brands to be handled by the existing wholesaler.  The wholesalers did, in fact, modify the state franchise laws to include these provisions.  However, the Heineken and Glazers dueling model was grandfathered to allow these two companies to continue doing business under their existing model.

The Corona success continued. Corona sales, in fact, were accelerating and when the Julius Schepps W&S Company sold their beer portfolio to the Miller network in 1997, it was one of the largest W&S companies to have the Modelo brands.  In in Dallas alone, 247 new Corona 2/12 pack placements in c-stores were made by the new wholesaler in the first month.  This did not go unnoticed by Heineken.

In 1999, Heineken had enough, and in spite of the state franchise laws, terminated Glazers after attempting to get Glazers to sell the brand.  As expected, lawsuits were filed and hundreds of thousands of dollars were spent in legal action.  An agreement was reached years later between the two companies which allowed Heineken to stay in the Miller beer network.

Fast forward to 2014, and nothing has changed as crafts now have replaced “Heineken” as they, too,  are struggling with franchise statues with wholesalers’ attempts to move brands to what they perceive as a better alternative to their current situation.

Thirty years have passed since the dueling of the G. Heileman brands, and 25 years have passed since Heineken’s charge through the US.  The question the industry should really ask itself about changing and challenging franchise laws is: How about never……is never good for you?