If you win the rat race you’re still a rat….

Consolidation in the middle tier began to kick-up in the early 1980s when Schlitz started the journey, which would ultimately led to the death of this top selling brand. Of course, in non-Stroh markets, Schlitz wholesalers worked to pick up the right to distribute Stroh as the beer expanded across the U.S. into Schlitz –held houses.  This expansion, at least for a short while, gave these Schlitz wholesalers the hope of additional volume.

During same time, the G. Heileman Brewing company was also adding brands and expanding across new markets.  Most states had no provisions for either line extensions or dueling, which worked in favor of Heileman’s business model.  A model which provided for a number of wholesalers in each major market with the idea that by competing against each other, the brewery was the ultimate winner.

One year, Heileman planned to launch their super premium, Special Export, into Texas.  They sent a request for proposal (RFP) to all wholesalers.  These RFPs were much simpler than today’s RFPs.  As it turned out, my Schlitz distributorship was awarded Special Export for our market.  During the winter, our market was home to thousands of mid-western winter Texans, which provided an automatically built-in market for Special Export.  We had some initial success, but the excitement soon died, and so did sales.

Coors also was expanding across the mid-west and heading east, and wholesalers saw Coors as a life-saver, especially if they carried Schlitz. What wholesalers were most interested in was market spending and pricing.  What they were not concerned about was the quality of the product.  Heileman, Stroh, and Coors all made good beers with no QA issues.  Even Schlitz, in an effort to save the brand, reverted back to its original recipe formula, although by that time it was too late to save the doomed beer.

This past week, while addressing the wholesalers in West Virginia at their annual conference, the topic arose concerning the on-going issue of the quality today’s craft breweries.  The troubling part was that these craft brewers, who were making beer of suspicious quality, were some of the most outspoken critics of access to market and franchise laws.

Why would any wholesaler want to represent a craft brewery who was producing a poor quality product?  Such craft brewers either are choosing to ignore this problem or are completely unaware of the problem.  In any case, because of this issue of quality control, many brewers are spending time and money attempting to change state beer statutes in an effort to suit their own needs.

These brewers believe that eliminating franchise statues will provide them with access to markets and more control over the execution of their brands in the middle tier.  This alone has put the beer industry in a bind. No wholesaler wants to represent a brewery that has QA issues.

It goes without question that these craft breweries could eliminate much of their difficulties in getting to market if only they would spend their resources on building a lab and using trained and educated techs to oversee the quality of their liquids.  The QA manager should report only to ownership or the CEO, not to the brew master as this proves to be a conflict of interest.  The brew tech must have authority over all liquid and should be the determining factor as to whether or not the beer goes to market.

Schlitz and Heileman did not make it, one died due to QA issues brought on by management, while the other died because of management.  So, too, will these craft brewers perish, but not before damaging the industry.

If you win the rat race you’re still a rat!

Editor’s note:  A special thanks goes out to the West Virginia Wholesalers for inviting me to speak to them.  I enjoyed visiting with each of these professionals and hope to do so again in the future!