In the early 1980s, Stroh Brewing Company purchased the Joseph Schlitz Brewing Company. Stroh quickly reduced market support in an effort to revise Schlitz’s downward trend. At the time, marketing was limited to media, p-o-s (point-of-sale), and price supports. Although Schlitz had been declining prior to being bought by Stroh, once Stroh took over, Schlitz’s decline accelerated, and the brand soon lost their market leadership position to Miller Lite.
In the 1980s, wholesalers were predominantly a one-trick-pony and I was no exception as 90% of my volume was Schlitz. Yes, I had the regionals: Pearl, Lone Star, and Shiner along with all the imports, (with the exception of Heineken), but Schlitz was my bread-and-butter. Desperate to save their companies, many Schlitz distributors repositioned Schlitz pricing under Miller Lite and Budweiser in the hopes that the consumer would see value and come back to Schlitz. The repositioning had no chance without support from Stroh, and that, unfortunately, never came and the rest is history.
Corona had just transitioned to the clear bottle and Shiner was years from being bought out by Gambrinus. Needless to say, these beers did not have the traction they have today. Currently, the wholesalers’ portfolios are diversified enough that if one brand begins to slide the net losses are mitigated with the other numerous brands in the portfolio. If the wholesaler has White Claw or Truly, there is no real bump.
With the beer industries’ effort to upsell the consumer, now in its 12-year, wholesalers are ratcheting up pricing at every possible junction. Some are raising prices even without the suppliers’ knowledge; the supplier is not raising their prices to the wholesaler without their knowledge. Selective pricing, without supplier involvement, could be costly for the wholesaler; not as much in the wholesalers’ existing footprint, but in the event that the wholesaler has multiple warehouses and operations. Targeted vendors will likely look elsewhere to find different wholesalers who are willing to work with them as they expand. In addition, new vendors, or those opening up markets, might want to rethink their strategy when interviewing or appointing distributors. Breweries may even attempt to add additional language in their contracts regarding pricing and strategy.
As more, large, multi-state distributors evolve from the traditional beer house to beverage companies; expect to see these companies create pricing professionals who study pricing trends and seek opportunities for the wholesaler. Many smaller vendors will come to rely on the wholesalers’ expertise in understanding the price points that are most beneficial for both companies.
There is much more at stake than just the premization of beer. The Schlitz wholesalers might have been better off not to reposition Schlitz but to wait and ride it out until the end with the best pricing model available. When you have only one pony to ride, however, you do not want to be thrown off.
There is no victory at bottom basement prices.
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