We'd like to have a beer with this guy.

Beer bloggers love writing about breweries, brewpubs, bars, package stores, and beerfests. But there’s one facet of the beer industry we generally ignore…the wholesalers. There are a few reasons for this. First of all, distribution is an industry based on infrastructure and logistics. In other words, it’s kind of boring. Second, beer distribution is incredibly complex. Different states (hell, different COUNTIES) have wholly different distribution laws. Some allow breweries to self-distribute. Others require all breweries to sign on with a licensed wholesaler. When you combine an industry that is both legally complex AND prosaic, well…it’s no wonder you don’t hear a whole lot about the beer distribution industry in the blogosphere.

But here’s the thing…if you really care about beer and the brewing industry, you’re doing yourself a disservice by not at least having a basic understanding of wholesalers. Of course, considering the labyrinthine complexity of the industry, that’s easier said then done. And that’s where John Conlin comes in.

Conlin heads up his own beverage consulting company called (you’ll never guess), Conlin Beverage Consulting, Inc. On the side, he maintains a public blog where he drops some knowledge about the distribution industry to anyone willing to spend a few minutes reading his prose. He’s no poet or comedy writer, so if you’re looking for laughs or clever turns of phrase, you’re barking up the wrong tree. Instead, Conlin is an expert in the field who writes in a clear, accessible style so even nitwits like yours truly can follow the machinations of a bewildering industry. If you want to know the trends in the distribution world, do yourself a favor and check out his blog. You won’t regret it.

But the question still remains…why should you care about beer distribution? It’s just a bunch of delivery trucks, right?*

*OK fine…no one is really asking these childish questions. Setting up stupid questions for dramatic responses is just one of my many, many annoying tics. I also put lots of words in caps for EMPHASIS. No one is handing any Pulitzers my way, is what I’m saying.

You should care about distribution because it’s the prime mover behind the world of beer. While distributors are obviously responsible for getting your beer from the manufacturer to the point of purchase/consumption, they’re also the ones who fight for prime package store shelf space, battle over tap handles, and generally try to win valuable retail real estate over their competitors. They also have extremely deep pockets relative to craft breweries, so when you hear about lobbyists trying to stymie pro-craft legislation in your home state, chances are those lobbyists are paid directly by distributors. That’s not to say distributors are evil or anti-craft. It’s just that many of them have an obvious monetary incentive to keep things the way they are…so they often hire lobbyists to do just that. Think of your local Budweiser distributors. The more restrictive the craft beer laws are in your state, the less breweries will be enticed to open there. Less breweries means less local competition for AB which means more retail shelf space for AB’s products.

That kind of situation was precisely what happened in Alabama last year. Free the Hops was attempting to pass a law which would allow breweries to have taprooms. The Budweiser distributors saw this as the first salvo in a potential threat to the three-tier system (since “technically” the law allowed consumers to purchase beer directly from the manufacturer…even though all it really allowed was someone to have a draft beer at a brewery). So they paid lobbyists to fight the law and maintain the status quo. In a desperate bid, Free the Hops started a boycott of ALL beers distributed by the Budweiser wholesalers. Keep in mind that this included many wonderful craft breweries like Avery and Great Divide AND some small local microbreweries like Back Forty. It was an ugly situation with lots of bad blood between both sides…but in the end, the boycott worked. The distributors, wary of the bad PR they were engendering, backed off a bit and the law was passed. Granted, it was in a watered-down form, but in a state like Alabama, baby steps are all you can hope for.

Getting back to the point (man, my tangents are long…another annoying tic), beer wholesalers clearly have a tremendous influence over the industry. They can make or break a small brewery by showcasing their wares or relegating them to the back shelf in the corner. And with their financial resources, they’re the biggest players in helping or hurting pro-craft beer legislation. So THAT’S why it’s important to understand this crucial aspect of the industry. And THAT’S why you should read Conlin’s stuff when you get a chance.

I especially urge you all to read his three most recent articles (Bitch slapped in Dallas, Who’s Your Daddy?, and Who’s Your Buddy?). These three posts discuss what could end up being THE most important story in craft beer over the next few years. In a nutshell, Conlin takes a look at what is happening amongst the distributors aligned with the two Big Boys of the industry (Anheuser-Busch InBev and MillerCoors). As you might imagine, the VAST majority of wholesalers are connected (some more strongly than others) with one of these two companies. Since Bud, Miller and Coors made up 99% of American beer sales just a few short decades ago (and still make up over 90%), it’s no surprise that most distributors today have to be aligned with one of those two companies in order to survive.*

*For small breweries, I would liken the dominance of MillerCoors and ABI distributors to having to choose between AT&T or Comcast for your high-speed internet. You might hate both companies, but they own all the infrastructure and the lobbyists…if you’re a brewery, you just don’t have a choice.

Conlin notes in the earlier articles that ABI, which has seen stagnant sales since AB was bought by InBev, has essentially said to their distributors that they must focus entirely on their line of products at the exclusion of everything else. Now again, most of the AB distributors are independent…but they’re so intrinsically tied up with ABI corporate that they really HAVE to blindly follow whatever credo comes down from HQ. Conlin believes this strategy will be a big moneymaker for ABI (how could it not…they’re forcing their allied distributors to only sell the products they make). But it could be VERY detrimental to the distributors themselves since consumers are clearly starting to show a lack of interest in ABI’s products (most likely because they are fucking terrible). ABI corporate has the distributors stuck between a rock and a hard place. They’re forcing them to focus exclusively on their shitty products while the sales of craft beer (which has a MUCH higher profit-margin than the sub-premium Bud brands) continue to skyrocket. But the distributors can’t turn their back on ABI because, regardless of the growth of craft, those distributors still make the vast majority of their profits from ABIs portfolio of beers. Conlin calls this the “insidious genius” of ABI. They’ll reap the rewards, while their distributors face the backlash.

On the flipside, Conlin’s last post talks about the opportunities ABI’s new strategy opens for MillerCoors. With the success of Blue Moon and the development of the Tenth and Blake “craft wing”, MillerCoors has clearly shown that they want to be in the craft business. It’s only logical. MillerCoors has been getting CRUSHED by ABI in the sub-premium market. Miller Lite is fading fast…and while Coors Light might be holding steady, there’s simply no question that Bud has “won” the light beer war. As such, MillerCoors needs to look at other segments of the market. Conlin suggest something radical. He recommends that MillerCoors tell their distributors to not only start stockpiling craft beers in their portfolio, but that they should also treat them like royalty. His argument is that focusing on craft will allow MillerCoors distributors to prosper and become the unit AND dollar sales leaders in their markets (since again, craft is the only segment of the market showing big growth right now). While this may seem counter-intuitive (since the distributors would be focusing on selling independent craft beers instead of MillerCoors products), Conlin argues that a rising tide will lift all boats. That is, what’s good for MillerCoors distributors will also be good for MillerCoors (which is, of course, true). More money for MillerCoors wholesalers means more money flowing into MillerCoors corporate. Money they can use to buy up equity in craft breweries (like they did with Terrapin) or just snap up a craft outfit lock, stock and barrel (like ABI did with Goose Island).

If I’m interpreting his posts correctly (and considering my track record, that’s probably a stretch), it seems to me as if Conlin is basically encouraging MillerCoors to become THE craft distributor in the beverage wholesale industry. He’s not arguing that they should give up on their core brands, of course (that’s STILL where most of their profits come from). After all, there will always be a market for multiple brands of cheap, light beer. But he IS arguing that ABI’s insistence on making their distributors focus exclusively on their brands leaves an unprecedented opportunity for their rival. If MillerCoors were to take Conlin’s advice, they could all but corner the craft distribution market. In effect, the world of beer wholesale would become binary…with ABI dominating the sub-premium brands (which they already basically do) and MillerCoors dominating craft. It’s an interesting thesis and who knows whether MillerCoors will jump at the opportunity or will simply “circle the wagons” like ABI has done.

All I know is that I’ll be watching Conlin’s blog closely. Because the man certainly has his finger on the pulse of the distribution industry…and I for one want to know how everything is going to shake out.

11 thoughts on “ALL HAIL THE CONLIN

  1. Very interesting, but why would more money to MC wholesalers necessarily mean more money to MC rather than more money to craft brewers (especially if that excess revenue is due to the distribution of non-MC products, particularly non-MC products with higher profit margins)?

  2. Good question, Smiley. I obviously didn’t explain that part very well…

    First, while some distributors are independent, many are either owned outright or partially owned by MillerCoors. That means that even if they didn’t sell a single MC product, they would still be raking in bucks for MC corporate by increasing their sales.

    Second, while I only glossed over it in this post, if you’ve read any of our pieces on Tenth and Blake, you’ll know that MC plans on buying into the craft game with a vengeance over the next few years. So again, even if they don’t sell a lot of High Life or MGD, they’ll still be selling the “craft” brands that they own outright (like Blue Moon) or have equity in (like Terrapin). As sales increase and profits flow to MC, they will (presumably) buy into craft even more. It’ll be a positive feedback loop that, if MC follows Conlin’s advice, could give MC a HUGE edge in the craft segment of the beer industry. If craft really does continue to grow as it has over the past decade, and if MC becomes the de facto craft distributor, ABI could really be in trouble.

  3. This is a great summary/introduction to John Conlin. His insight into distribution is thorough and very on point. His blog and website are a little 1999 (would love to help him get on Twitter!) but his thoughts on the industry are always very timely. I’ve seen his posts printed out and on desks at distributors I work with, so I know he’s very widely read and respected. Glad you chose to highlight distributors and Conlin as important parts of the beer world.

  4. Thanks. I’ve certainly been following the Tenth and Blake, etc. apoplexy (though I think on the Aleheads spectrum, I fall pretty far on the other side of the camp with regard to most of the issues in this area).

    I take it that ABI has the same sort of relationship with its wholesalers (i.e. with many being partially or wholly owned by by ABI)? Even so, I remain skeptical of ABI getting boxed out here. To the extent this looks like a bad business call for them, couldn’t they reverse course at any time (with enough capital/infrastructure/market share/etc to offset any disadvantage due to MC being the early mover here)?

  5. Smiley,
    Most ABI wholesalers are independent companies that have been family-owned for 50+ years. There are a few with brewery ownership, but most are as independent as they can be (although ABI’s power gives them a lot of influence over their distributors’ business).

  6. > “Since Bud, Miller and Coors made up 99% of American beer sales just a few short
    > decades ago (and still make up over 90%)…

    A-B, Miller and Coors have never come close to “99% of American beer sales”. If by “a few short decades ago” you mean, for instance, 1980 at the dawn of the craft era, the total market share of those 3 brewers was around 57% (28%, 21% and 8% respectively). It was until the 1990’s that Coors even became the #3 brewery, as Heileman, Pabst and Stroh all collapsed. Mid-decade 1995 “BMC” accounted for around 82% of the US market.

    Today, the combined market share of the now Big Two- A-B and M-C – hovers under 80%, with the biggest growth during the era coming from imports, which have increased their share of the US market by 10% (from 3% to 13%) in the 30+ years of the craft era, dwarfing craft’s 0% to 5%.

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