Is Change a Threat or Opportunity?
With change comes opportunity… and there is some serious change being bantered about in the beer and beverage industries. Is my crystal ball any clearer than the rest? In all honesty, probably not. As I’ve noted many times before, the difference between a “good” decision and a “bad” decision is almost always how the future plays out. If future A happens, you might look like the smartest guy (or gal) on the planet… on the other hand if future B happens, you’re the goat.
So what to do? Analyze the situation to the best of your ability, attempt to break free of all the mental chains that bind and blind you… and make your best call. Analyze information as you gather feedback and adjust you path accordingly. This is true in business… this is true in life.
And what paths people are considering! The dynamism and creativity of the beer distribution industry continues to amaze me. Although a minority might act like ostriches and pine for the good ol’ days, most are grabbing this change by the throat… determined to shape it to their advantage.
I’m involved with a number of groups who are investigating the path of mergers… ranging from the vertical integration of Miller and Coors distribs… to “simple” mergers of adjacent beer distributors… to a merger plan for the creation of a huge multi-state distributing colossus.
Others see opportunity in acquisitions… taking steps to create dynasties which will last for generations. And of course others think now might be a good time to cash in their chips and to head to other pastures… and yes, I do provide brokerage services for those wishing to sell (or buy for that matter). If you are tired of the same old folks and the same old routines, give me a call and let’s talk… there is no one out there who has actually lived and breathed the real world of beer wholesaling more than me… I help take them apart and put them back together again… I have ALWAYS lived with the real results of what I do… how’s that for a shameless plug? ;-)
As for mergers, obviously the vertical integration of separate distributors is always a profitable endeavor… on the high side you might put 70% - 80% of that new gross profit to the bottom line. On the financial/operational side these are the ultimate no-brainer. But of course with all mergers, the people side is where the friction generally occurs.
Mergers of adjacent distributors can also make a lot of sense. If you can close warehouses, these can also have a fairly significant financial impact. But even where you can’t, often these mergers make sense from a defensive viewpoint… as a stand-alone 1.5 million case distributor you only have so much power… merge with a couple of your adjacent distribs and now you are a 4.5 million case operation. Much more viable, defensible, and attractive for the long term. And there are still synergies to be had… perhaps not $0.30 per case but if done correctly, everyone will be stronger and make more money.
I readily admit I am a dreamer, and taking the merger concept to the next level is extremely exciting… the colossus full state and multi-state distributor. All it takes is vision and the willingness to do the heavy lifting upfront. Once you begin to consider a merger and get over the only downside… that the nature of the asset changes, it is no longer solely your business… why not form larger and larger entities? As long as the valuations are fair, no one experiences any dilution and you own a chunk of a larger and larger entity. Regardless of where the future leads do you think you will be stronger, more viable, and more attractive to suppliers of all sorts as a stand-alone 4 million case operation or as part of a 40 million case operation? Is it an easy path to get here? Hardly. But is it worth a little time and consideration? Very possibly.
Next post – more on acquisitions