OutBev

What A-B’s push to transition InBev brands means for “all other” distributors.

Anheuser-Busch’s announcement late last year that it would start importing InBev European brands was hardly a bolt out of the blue.

It had been predicted for years and last summer a deal seemed imminent.

Surprise or not, the deal has upset distributor portfolios across the country as A-B seeks to get the brands -- including Stella Artois -- to its restricted wholesalers.

This shift is forcing distributors to adapt and plan for the future in new ways.

The April issue of Brew Magazine, “All the King’s Beer,” takes an in-depth look at this issue and what it means for distributors.

Here’s an excerpt.

“Just two years ago, “all other” distributors operated under the expectation that they would handle non-Anheuser-Busch brands for the foreseeable future.

That’s ancient history.

The world has changed utterly since Anheuser-Busch snapped up distribution rights to a bevy of craft and import brands. Its December deal to handle InBev’s European brands, including Stella Artois, rocked wholesaler portfolios across the country.

More instability could be on tap. A rumored distribution deal between Grupo Modelo – the brewer of Corona Extra – and A-B never materialized. But A-B, which owns 50 percent of Modelo, could still get the brand in 10 years.

Industry consultant Joe Thompson captured this uncertainty in a recent paper, saying, “For distributors a significant amount of control has been lost and it is not likely to return any time soon.”

This new reality is going to force distributors to change the way they do business. Some may diversify into nonalcohol beverages or wine – or, potentially, spirits. But others will likely put more focus on brands from players they expect to work with for the long haul.

The InBev case underscores why. While some InBev brands had been struggling of late – notably Bass – Stella Artois has been growing for years. When longstanding rumors of A-B making a run at InBev surfaced during the summer, plenty of wholesalers lost sleep over the prospect of losing this hot brand.

Today, that’s the reality for many. And in some cases, all they’re getting for their years of investment is a low-multiple payoff. Legal action has been taken in some states.

August Busch IV, the newly crowned president and CEO of A-B, told distributors during a March meeting that it planned to have as much as 75 percent of InBev volume with A-B distributors within one year, according to a story in Beer Marketer’s Insights. …

Ron Fowler, chairman and CEO of Liquid Investments Inc., which owns distributors in California and Colorado, says distributors must protect themselves.

“Distributors need to make sure that they have new brand distribution options available to offset volume/margin losses due to changes in distribution arrangements,” he says. “This can be accomplished by working with existing suppliers on brand extensions or new products, or by developing relationships to assure a pipeline for niche products from new suppliers.”

Another thing distributors should look for in suppliers, Fowler says, is predictability.

“During this period of brand flux or instability, supplier/brand predictability does provide strategic value for that supplier/brand portfolio, at least from a distributor perspective,” he says.

Of course, it’s tough to predict how supplier consolidation will shake out. And all but the biggest players could change hands. But it is safe to assume that Miller Brewing Company is going to be around for the long haul.

Miller is working to develop a portfolio that reflects today’s beer business and warrants support from distributors. Besides marketing Miller Lite, the second-biggest brand in the biggest category of the beer business, Miller is making significant investment in the fast-growing craft and import segments. "

Read the whole story here (PDF).

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