Retailers React to Changes in Beer Industry

By Renee M. Covino

NEW York -- Mergers in the beer industry last year resulted in a changed landscape, but seemingly one that has not yet fully emerged. Two leading suppliers, Miller Brewing Co. and Molson Coors became MillerCoors in July, making it the nation’s No. 2 player. In November, the Anheuser-Busch’s merger with InBev was finalized, creating the world’s largest beer-maker.

Changes were immediately felt within the companies -- MillerCoors moved its headquarters to Chicago (from Milwaukee for Miller and Golden, Colo., for Coors), and Anheuser-Busch InBev, while keeping its North American headquarters in A-B’s longtime home of St Louis, eliminated about 1,400 jobs less than three weeks before Christmas.

But so far, the waves created by these industry-changing mergers haven’t swamped the way c-store retailers conduct their beer business.

"It’s been kind of seamless for us," said Kirk Matthews, senior category manager for TravelCenters of America, based in Westlake, Ohio, with 236 total stores. "There have been no problems since the beer mergers. The biggest worry for me was the distribution, and there have been no hiccups in that -- all the payments were set up ahead of time. We were proactive in planning for it as soon as we found out." He added that "if it doesn’t make it to my desk, it’s not a problem, and nothing [related to the beer mergers] has made it to my desk."

Kevin Lott, corporate buyer/merchandiser for Gas Mart USA, a 45-store c-store chain based in Overland Park, Kan., agreed. "We haven’t seen any slack-off or problems," said Lott, who operates stores in seven states. "Our beer business is as good as gold; everything is still running smoothly with regards to our distributors -- we are still dealing with the same distributors and the same key accounts people."

In some areas of the country, such as West Texas, many distributors were already carrying the variety of beer brands that were merged together, such as those from Miller and those from Coors. So for retailers like Cindy Fisher, operations manager for West Texas Gas Inc., an 18-store chain based in Midland, Texas, "everything is the same, there’s been no change whatsoever since the beer mergers," she stated. "We’re still dealing with the same people, the same distributor, the same pricing, the same everything."

Distribution Perspective
Standard Sales Co., based in Odessa, Texas, is one such distributor that was not greatly affected by the mergers. "Our Miller/Coors distribution was already consolidated," David Ramer, general manager for the Colorado Springs division, told CSNews Online. He said there was also "no real change" after the joining of Anheuser-Busch InBev either. "It was similar to MillerCoors -- we already handle all of their brands -- and have been for a few years."

That’s because Anheuser-Busch has imported InBev brands, such as Bass and Beck’s, long before the merger -- since February 2007, according to Evan Athanas, vice president of sales and wholesale operations for Anheuser-Busch. "These brands have been part of our network; they are not new to the system," he said. "We became the importer, and then worked the transition to our wholesalers. Right now, we’re about 70 percent transitioned -- we have 70 percent of InBev volume into A-B distributors; there’s still 30 percent residing in non-A-B wholesalers. We’ve stated publicly that we want to align our portfolio with our wholesalers that have agreements in place."

Understandably, not all distributors have been happy with the mergers. Lawsuits have been filed by some that were terminated by MillerCoors, allegedly in an effort to cut costs through streamlining distributorships, according to The Wall Street Journal. In a joint lawsuit, two Ohio distributors claimed that their terminations were without just cause and notice. Both declined comment to CSNews Online.

"A distributor’s worst fear is forced consolidation, so I do keep close watch on the lawsuits," Ramer admitted. "Many settle out of court -- that’s my take on it."

While Ramer believes his distributorship is "safe" because "we have a good footprint -- a higher percentage volume in the brands we carry versus other distributors," he also recognizes more change could come from the merged companies down the road.

"It would probably take six months to a full year before we saw any major change."

On the retail side, Lott, too, admitted some of Gas Mart’s key beer account representatives have indicated, "changes are coming down the pike," he said. "What those changes are, they don’t know. All I tell them is: ‘don’t let our beer business slide.’"

Benefit Reset
Meanwhile, executives at both merged beer companies contend their newly combined forces are focused on benefiting the c-store marketplace.

"We now have an account-focused organization that looks for solutions, and sales leaders who understand the unique dynamics of the convenience-store class-of-trade," said Kevin Doyle, chief customer officer at MillerCoors. "We’ve created channel-focused teams at the national, regional and local levels."

Doyle also maintained MillerCoors’ strategy is to grow the size and value of c-stores’ beer category (reportedly flat by many in the channel) through a more focused and streamlined distributor network, selling a more powerful and complementary portfolio.

"The emergence of a tangible MillerCoors advantage will result to help to reset the beer landscape in the c-store channel," Doyle said.

Anheuser-Busch’s "60 percent share with c-stores is growing, and we don’t want to do anything to disrupt that," Athanas maintained. "We’ve had a record year, we have momentum, and we want to maintain that."

He added the c-store segment is not only the highest-share segment for the company, but also where it matches up best.

"The channel lines up well from a demographic standpoint. It’s where our core customers are," he stated. "We’ve always performed well in the channel, and we are absolutely committed to it moving forward."

Athanas acknowledged the A-B InBev merger was "complicated on the back end," but "as it relates to our c-store customers, and how they’re serviced, it’s very simple, they’re not going to see much change," he said, confirming what some retailers already told CSNews Online.

"We’re working diligently to make it a seamless transition -- our breweries remain open, our logos and name won’t change. If anything, we have reinvested in the U.S. from a sales perspective."

Athanas said retailers could take comfort in the fact that company veterans were keeping their positions.

"Our guys in the field, some with 25-30 years experience, are staying in place -- we’ve demonstrated we understand the marketplace. We have the passion and the energy," Athanas stated. "The face of A-B is not changing to wholesalers and retailers."

And in the area of promotional support -- Athanas highlighted it would only get better.

"We’re very promo-active with the c-store channel; we know c-store consumers are looking for something different than those in other channels," he said. "So we constantly have programs for them -- we partner with them on cross-merchandising promos with food tie-ins, gift cards, phone cards, fuel cards. We offer an array of cross-promotions to best meet the unique needs of consumers at each individual store."

Upcoming examples include pizza, c-store gift cards, salty snacks, soda and water. Point-of-sale is also offered to coordinate with events important to c-store customers including NASCAR, major league baseball, St. Patrick’s Day and summer beach themes.

Other promotions are developed to reflect the unique layout of the stores.

"For example, we provide retailers with clear window banners that help improve visibility both inside and outside of the store and don’t block the natural light of the windows," said Athanas. "Additionally, we’ve developed a five-case bin display to uniquely meet the needs of a c-store design. This allows stores to have a ready supply of new and popular products."
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