Oh baby! Can you believe it? A-B & InBev
As of last Friday morning, this week’s post started with this incredible piece of prognostication… “Since the InBev Anheuser-Busch cage match will be a long running show…” and then flowed into an incredible piece – if I do say so myself – on technology and its impact on building better managers. So much for predicting the future.
The management wisdom post will be coming in a week or two. For now I’m reminded of that font of wisdom, Krusty the Clown from the Simpsons. In an episode prophetically called “The Last Temptation of Krust”, Krusty stops shilling for every product on the planet and said he would never again do such a thing… never. But soon he’s making a pitch for the Canyonero (a great jingle by the way)… in explaining his sudden change of heart, Krusty cries “but they brought truckloads of money! Truckloads!!”. Hard to argue with that. Everything I own, other than my dog, is for sale.
And InBev is bringing truckloads of money. $52,000,000,000!! That is a lot of zeros. If completed it will be the largest cash deal ever done. Anywhere. Anytime. The 4th and the A-B board are only doing what they should, attempting to look out for the best interests of A-B’s shareholders. Will this end up being in the best interests of the A-B wholesaler network? Ah, that is the $64,000 question for the wholesalers… on both sides of the fence. Ultimately only time will tell but I’d have to guess the pluses might surprisingly be greater than the negatives… if InBev is smart enough to allow it to happen.
Of course as one astute A-B wholesaler commented on Friday, the more InBev pays, the more they will have to cut. And cut they will. The blood will be running in the streets. Probably be a good opportunity to pick up a few good beer folks. And for those wholesalers who have had to put up with some arrogant and foolish A-B folks for far too long… probably a good time for a little good old schadenfreude.
Non-brewing assets… so long. We need cash and we need it now! As I noted in last week’s post, distributor dynasties are going to be built… and the ground work for these dynasties will be set in the next few years… perhaps even the next few months. One would have to guess the branches will all be sold… probably relatively quickly. Talk about big-time opportunity. Get on the phone and start sucking up now! ;-)
Partnerships will now be able to own A-B distributorships. Just this fact alone will change a lot of the landscape. Who knows, the holy grail of public ownership might be just around the corner. Talk about a paradigm shift.
Frankly, I have been shocked by the reaction of the A-B wholesalers I have talked to. Granted the sample size is small but they were almost 100% positive… and I don’t think they were just whistling past the graveyard. It certainly didn’t take them long to go through the 5 stages of grief! About 2 cups of coffee! Many bittersweet comments about the present and past A-B management team. Lots of things done right… but lots of things these wholesalers believe were done wrong… and the chickens have come home to roost.
An incredibly dedicated A-B wholesaler… I don’t think you’d find a more loyal, dedicated A-B person on the freaking planet, stated it perfectly… “I look forward to it because I believe InBev will come in and just let us sell beer”. Ah, and that is the crux of it… “just let us sell beer”. He thought that margins might get squeezed some BUT if InBev would end the many costly requirements which don’t sell case one of beer, his bottom-line will increase, not decrease. I would have to agree.
Here is my advice to Brito - please feel free to forward this to him, I don’t believe he is on my mailing list ;-) … unleash the A-B wholesaler network. Let them “just sell beer”. There is so much talent, so much creativity, so much power in the A-B wholesaler network (sorry Miller Coors guys, but you’ve got to “give the devil his due”)… set them free and I believe you will be amazed at the results. Far too much time and energy at the wholesaler level is directed at things which have no relation to selling beer or maintaining quality product. Forget the organizational standards… these wholesalers know their own markets and can design organizations which are specifically built for their world, not someone’s across the country. They can decide where best to put their payroll dollars to get the biggest bang for the buck in their specific market… of course if they really want to excel they will use my services to help build these new organizations, but that is just a shameless pitch for my services ;-). When I do a re-organization I constantly ask, does it help us sell beer? If not, then why in the heck are we doing it?!
A good analogy for this are those Clydesdales (which you will probably soon jettison). For too long the wholesaler horses have been spurred hard but at the same time the reins have been pulled back with the bit digging in, all while carrying a few hundred pounds of unnecessary, excess weight… instead give these horses the reins, dump the extra weight and hang on for the ride. Spur them if you want, but quit pulling on the reins and weighing them down at the same time. Unleash the A-B distribution network – that is the simple message.
Of course for some wholesalers, a small minority to be sure, this change will be frightening… they will actually have to start running their own companies rather than letting A-B corp. do it for them. Don’t get too upset with me, the MillerCoors network has a few of their own too. After one of my more caustic emails, I think about 4 day delivery, a good GM friend emailed and said, “John, I also think some of my retailers are idiots but I don’t go out of my way to tell them so”… so much for my sparkling personality! ;-) I’m paid to analyze situations, build superior systems, and give my honest advice… that’s what I do.
For those A-B wholesalers who are concerned about what InBev
might do, think of the facts. They are
going to pay $52B for A-B and around 80% of A-B’s profits come from the US
The new MillerCoors will be a much more formidable competitor… A-B’s dominance at the chain level is going to face considerable challenges… more marketing dollars… a single competitor who is much more of similar size and strength… many more brands to use as coordinated weapons – although InBev brings more than a few to the table too. This is no time to be weakening the A-B distribution network… and one would have to guess InBev clearly understands this.
In what many consider a VERY good sign, Brito is already talking to wholesalers… not the wholesaler council (which many believe to be far too much of a “yes man” situation), but talking one-on-one to wholesalers. Folks who know the street. Just keep reminding yourself, InBev isn’t spending almost $50B to screw this up… and at least for the foreseeable future, the US market is going to be very, very important to them. And a large part of the true value of A-B lies in their very formidable wholesaler network. That’s a fact, jack.
As I discussed in previous posts, “A One-Time Event, Advice for Suppliers” which you can read here, and “Is Power Shifting Back to Distributors”, here… right after the consumer, the most important entity for any supplier is their wholesaler. Wholesalers are where the rubber meets the road. If distributors don’t execute, nothing happens. I would be astounded if InBev thought otherwise, regardless of their relationships with distributors in other countries.
Of course there could be some type of consumer reaction. That one is hard to predict. Those A-B drinkers are some of the most loyal on the planet. How will Joe six-pack respond? Only time (and InBev’s marketing strategy) will tell. I think there are many ways to spin this as a very positive event for the loyal Bud guy. I’m assuming MillerCoors will do everything in their power to spin it the other way… but of course Coors Light will soon be brewed a LONG way from the Rockies so there is plenty of mud for everyone to throw. Will the consumer give a damn or is it just “inside baseball” type needling? Good strategy and time will tell…
That’s all fine and good but what should an A-B wholesaler do? Remember, with change comes opportunity. Read that last sentence again. Now is not the time for status quo thinking. First and foremost, NOW is the time to move on organizational improvements – reorganize and make a stronger, better company that drives a lot more money to the bottom line. Not in 6 months, not in a year… do it now. Waiting will only waste hundred’s of thousands of dollars on things which generate a lousy ROI. Should you use my services? Of course! What did you think I’d say? ;-) Either way, get moving and build the organization that is right for your market and your goals. Stronger, better, more efficient… with less cost. It is possible. It can be done.
If you want to be around as an A-B/InBev beer distributor in 20 years, now is the time to buy. There is incredible consolidation potential in almost every state in the nation. Throw in the ability to form partnerships to make acquisitions and the possibilities expand greatly. And since the A-B network is not very consolidated, many (most?) states offer potential for strategic entry acquisitions. Contiguous acquisitions of course offer the greatest operational synergies but placing a new footprint in a new market/state makes a lot of sense since few states have a truly dominate wholesaler… the chess match is in the early stages and new players can easily come in and make a run at becoming that dominate, state-wide wholesaler.
On the other side of the coin, if you have been considering getting out, now is not bad time to race towards the door. There is no risk or uncertainty with cash in hand… and there is life after beer wholesaling. Really. I actually expect to see values holding steady, and in many cases actually going up. I truly believe we might see a buying frenzy, not a selling frenzy. Now is also the time to sell since you will probably have many potential purchasers – and for each of these potential purchasers there are FAR REACHING strategic implications on passing on any deal. As many stand-alone Miller and Coors folks are going to sadly discover, when there is only one purchaser you are ultimately at the mercy of that one player. If they want to play nice, all is well… if not…
For some of the smaller A-B wholesalers who might be considering an exit. Here’s a suggestion, do a little of the hard lifting upfront and form a group of wholesalers to sell as one. Your value to some of the larger players could be considerably higher and you will be able to attract many more players from around the country. Give me a call and let’s see if we can get it done… ah yes, another shameless pitch… what can I say? ;-) Even if you don’t want to leave, some type of operational merger can put a lot of additional money in everyone’s pockets… you all just have to agree to do it.
Beer wholesalers of all stripes… with change comes opportunity. Grab the future by the throat and make certain the future you desire is the one that actually comes to fruition. You can do it.