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« "That’s not fair" and other "irrational" behavior | Main | Part 1 - The Evolution of Beer Wholesaling »

Strategy

Strategy – a long-term plan of action designed to achieve a particular goal.  Many of you wholesalers are seeing effective strategy in action with A-B’s recent moves with Rolling Rock, Grolsch, and the InBev line.  Whether you agree with their goals or not, you have to give them credit for some great strategy.  And one from which an effective response is not readily available.

An attempt to weaken Coors/Miller/multi-brand distributors and strengthen the A-B network?  Oh yeah.  For most wholesalers, the loss of these brands will not reduce expenses by much – usually only inventory carrying costs.  Not a single driver or merchandiser or sales rep or warehouse worker or office staff will be cut.  So all of that gross profit, which used to be driven to the bottom-line, will now be subtracted from the bottom-line.  As a percentage hit on one’s income before taxes, it can be huge.  Even if a wholesaler is paid a decent multiple for these brands, their value FAR EXCEEDS any price.  In those states without strong franchise protection, there aren’t many choices other than getting the most you can – once again, the result of great strategy.  (please don’t forget, I’m not cheering it, I’m simply commenting on a very effective move).

In those states with strong franchise protection… guess what?  It will be weaker tomorrow than it is today.  And it may disappear entirely.  Franchise protection has always been viewed as a double-edged sword (but in my opinion the benefits far, far, far outweigh whatever negatives there may be).  But many A-B wholesalers will be looking at their short-term interests and deciding that they no longer support franchise protection (a mistake in my opinion).  How is a politician going to be able to make sense of the fight?  These wholesalers want this, those want that.  We all know how the craft brewers (and big brewers) feel about it.  And it is a difficult political point to make – the reasons for franchise protection are more complicated than can be addressed on a simple bumper sticker – the ideal political summation.  And a typical pro-business politician generally isn’t for government protection of certain industries.  One would have to guess there will soon be tremendous pressure on all franchise laws.  And those laws that only offer protection if the brand is over 20% (or whatever) of your volume simply miss the economic reality.  They in effect offer no protection other than against the big three brewers.  Once again, as I understand A-B’s views on franchise protection, a great strategy. In addition, this drives perhaps a significant decrease in value for the Coors/Miller/multi-brand distributor (and perhaps even the A-B wholesaler – A-B corporate has always tried to keep distributor values low).   Whether you like it or not, a tip of the hat to the 4th and his team for a great strategic move.  And guess what?  I’d have to hazard that they aren’t done yet.  The 4th and his team most certainly plan to leave their mark on the company.

But that is just an example – but a useful one since each of you is feeling the real touch of strategy in action.  Each of you, the wholesalers, needs to become much more focused on strategy.  A handful of the large players clearly are attempting to execute their strategy but far too many wholesalers have little to no strategy.  Wishful thinking is not a strategy.  Not having a plan won’t stop you from ending up someplace, but will it be where you want to be?

Many wholesalers past failures, whether in NAs, craft beers, wine, spirits, snacks, were at their root failures of strategy.  Some opportunity just came by and without adequate analysis, you jump in and quite often fail.  Then you look back at the failures and think “we tried that and it didn’t work”, so we won’t go there again.  This is a mistake.  You must analyze why you failed – almost always this points to some strategic contradiction – a certain receipt for failure.

Pause in your daily operations and take a strategic look at your business.  Who are you?  Who do you want to be?   How do we get from here to there?  Quit dreaming.  This needs to be a hard, cold, factual analysis.  Where the rubber meets the road, no one cares what you want.  It has no meaning on any reality.

Here’s some inside information, the only time I receive negative feedback on my articles (whether here or in a magazine) is when I attempt to explain to wholesalers why some should consider selling.  This always generates at least one angry wholesaler – it’s kind of like getting mad at your doctor who tells you that you have cancer.  But it happens regularly.

But I still am sickened by wholesalers who are “planning” on their children taking over the business when in reality they should have sold for a premium a while back.  Rather, they are unknowingly giving away literally millions of dollars in family wealth as they tilt at windmills.  I’m certain their grandchildren will thank them (sarcasm intended).  I wish that many had taken my advice some time ago.  The A-B moves discussed above may have a significant negative impact on values.  They most certainly make getting a deal done much more difficult – and in many cases destroy the economic reasons for the deal in the first place.

But for those who remain – now is the time to have a crystal clear strategy.  Not your supplier’s strategy. Not your retailer’s strategy. Not just responding to the latest issue which lands on your doorway.  But a crystal clear, living strategy (strategy is not conducted in a vacuum – it is in constant flow).  Please, prior to jumping into NAs, waters, wine or spirits, or making an acquisition, ensure you know exactly what you are doing and why you are doing it.  Have a strategy.  Ultimately you may or may not achieve your goals, but without strategy, it is highly unlikely you will end up where you desire.

Ensure your strategy is both coherent and cohesive – in my re-orgs I always emphasize “consistency of thought and action”.

Coherent means the plan is rational, it is well thought.   Cohesive demands that all of the pieces are in complete agreement, none conflicting with another.  You can’t have the lowest operating costs and provide the highest frequency of service – not all at the same time.  It is impossible.  You can’t be big and small at the same time.  Ensure the strategy is rational (not built on wishful thinking or with internal contradictions) and all the pieces are unified and working towards a common goal.  Many failures and actions which lead to sub-optimum results are at their root based on these types of problems in the initial strategy.  I firmly believe ALL BUSINESS SUCCESS AND FAILURE is ultimately rooted in sound strategy.  Of course luck is better than skill but luck is quite difficult to plan for.

For those in sales, use the same thinking for each of your retail accounts.  Take them one at a time and build a strategic plan.  Where is the account right now?  If you were King, what would it look like?  Build a plan to get from where it is, to where you want it to be.  Prioritize those required actions by level of importance AND probability of success.  Then get moving.  Initially go after those actions where you have the highest probability of success.  Always grab the easy successes first, and then slowly and surely work the more difficult ones. Build a plan for an account every week (no matter how busy you are, you can find time for this in a week).  In a year’s time you will have 50 accounts completed – the bulk of the volume you sell.  Keep at it until all your accounts have a strategic plan.  Not only will this greatly assist you in managing your account base, over time you will find it becomes a part of your mental process.  You will begin to think strategically in every account.  In fact you begin to think strategically in all of your decisions, a certain success and career boost. 

For all employees reading this – the same holds true for you.  Whether looking at your career path, upgrading your skills, or managing your department, pause and take a big picture view.  Pause and think.  Think strategically and plan.  What do you want to do?  Where do you want to go?  This is often more difficult for an employee since you have to respond to other’s planning (or more often, lack of) but the value of strategic thinking cannot be overstated.  Take the concept home with you.  Your career success, personal wealth, your children’s education and success, whatever - the odds of success can always be improved with a little strategic thinking.

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