The history of Heineken’s expansion and growth after WWII has been previously documented in past blogs. The importer, Van Munching, predominantly appointed liquor houses to distribute the beer. This was, at the time, a logical way to distribute beer, as the trade channels that sold the most volume were liquor stores, upscale bars and restaurants.
The rise of Corona, however, in the 1980s motivated Heineken to acquire the importing rights, which then began the movement from liquor houses to beer houses. Heineken had no choice as the brand was falling behind Corona, especially in terms of distribution.
The early 90s saw multiple liquor companies interested in future growth; expand into the beer segment of the industry by creating beer departments. Glazers took the lead in purchasing beer distributorships, a strategy which at the time proved to be successful. Many of the liquor houses, however, Glazers included, have in recent years, sold off their beer portfolios to local MC or AB houses. The reason for these reversals in the purchase of beer distributorships is delineated below.
Initially, many of the liquor companies believed that by expanding into beer sales they could be a one-stop vendor for the retail market. There was also the belief that the liquor companies could leverage their combined portfolios and gain an advantage over their competitors and, to some extent, the retailers.
Beer vendors saw the above mentioned model as the first option in a market in which AB, at the time, exclusively held an almost three-fourths exclusivity of their wholesalers. With the passage of time, however, many breweries came to the same conclusion as Heineken had years earlier: that liquor houses are not going to service the retail industry as well as beer wholesalers. Being in one of these liquor houses limited the growth of a brand.
Now, 25 years later, Constellation Brands, is hoping to capitalize on their liquor and wine portfolios with their powerhouse beer brands through the leverage of their chain teams and sharing data. Needless to say, if Constellation Brands is able to create an effective model (Total Beverage Solutions) to take advantage of their portfolios in the chains, Constellation Brands would have a tremendous advantage over their competition.
History has shown that on paper, these models appear to provide an overall advantage; however, the actuality is that such a version has yet to be successful. The culture of the three industries: spirits, wine, and beer, is totally different. Selling beer differs from selling liquor, which differs from selling wine. Of course, warehousing and delivery work, but that is on the wholesale side, not on the supplier side.
In the end, management in both the liquor and wine side has, and will continue to focus on their respective portfolios. The liquor and wine industries have little interest in selling beer. Constellation Brands, to be successful in the Total Beverage Solutions strategic plan, will need to understand these challenges. If there is any company with the means to be able to take advantage of this model, however, it will be Constellation Brands. Their portfolio gives them a great advantage going forward.
Collaborations have no meaning if one plus one does not equal much more than two…
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