Wednesday, July 1, 2009

Same Old Song And Dance

It looks like AB-InBev is taking another running shot at "consolidating" it's distributors. What does this mean? This means that Anheuser-Busch will make certain of its distributors, but not all of its distributors an offer it can't refuse. Why can't the distributor refuse the offer? Because then it won't be able to distribute Budweiser (or Stella Artois) and someone else in the territory will.

What will that offer look like? Well, if AB InBev is anything like MillerCoors, it won't be pretty. We talked a few weeks back about MillerCoors' most recent "consolidation." Distributors ended up with such awesome contract clauses as: MillerCoors gets to control who you sell your business to; MillerCoors gets to control which brands you sell; MillerCoors might be able to set up another distributor in your "exclusive" territory; and, MillerCoors gets to go through your accounting books with a fine-toothed comb. All kinds of fun stuff.

And don't forget that awesome extended payment window that AB-InBev has been pushing out to 120 days.

This news is actually pretty good for craft brewers. Distributors don't like these games that the big breweries play. So to mitigate the loss and increase the distributor's ability to say "no" to AB or MillerCoors when these deals get too onerous, the distributors take on more profitable and more rapidly growing craft brands. In fact, this consolidation is one of the biggest reasons for the increase for craft growth - the distributors are finally on board.

The only catch for distributors is that they have to be more knowledgeable about the brands and the craft breweries need to work with the distributors. When the distributor's account is deciding between Craft A and Craft B, the distributor needs to be able to tell the retailer the difference - not only so the retailer can make an informed decision, but so the distributor can educate its consumers. So, the breweries that work with distributors rather than just hand over kegs at the dock, will be the ones that get the most shelf space.

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