Beer Wholesalers Urged to Fight Back

(MoneyWatch)  At the annual National Beer Wholesalers Convention held in San Francisco this week, Crown Imports president Bill Hacker and Heineken USA president Don Blaustein urged distributors to fight back against Anheuser-Busch InBev and MillerCoors. Many wholesalers are feeling caught in the middle as mega-breweries consolidate their distribution network to cut costs and larger wholesalers are buying smaller businesses. In addition, although specifics aren't clear to me, A-B and MillerCoors appear to be working with retailers directly on the placement of their beers, eliminating wholesalers from the discussion.

According to Beer Business Daily (quoted in Liquid Diet), Hacker described wholesalers' frustration when retailers give prime placement to 30-packs of mass-market beer:

"Wholesalers tell me, 'Well, that was a deal created between the brewer and the retailer.' Hey, I say, this is your marketplace!" he boomed. "These are your accounts."

Tensions are high between distributors and the top two U.S. breweries. After MillerCoors recently ended partnerships with at least 10 Ohio wholesalers, two filed lawsuits for illegal termination of their franchise agreements. According to Beer Business Daily, Anheuser-Busch has said it will uphold its distribution contracts once the InBev deal is finalized, but many wholesalers are leery of InBev's reputation for implementing drastic cost-cutting measures.

Complicating matters further, A-B has been doling out exclusivity bonuses and incentives to distributors -- as much as two cents per case of beer sold. Yet over the past few years, sales of A-B's core brands -- Bud, Bud Light, and Michelob -- have slowed, and the exclusivity agreements prevent the wholesalers from carrying higher-margin craft and import beers.

Outgoing chairman and MillerCoors distributor Aldo Madrigano, quoted in AdAge, said, "We are facing new frontiers and new questions. Recent actions by our suppliers... have created real problems for many." Rogue Brewing's founder Jack Joyce put it more bluntly: "It's a mess out there. The Anheuser-Busch, Coors-Miller alliances? Let's just say this has been a well-attended session."