Who’s Your Buddy?
I’ve spent the last couple posts discussing the evolving relationship between ABI corporate and ABI distributors. A clash of paradigms indeed. But what of MillerCoors corporate? Some observers think MillerCoors wants to follow the ABI corporate path… an attempt to be “their” distributor’s daddy. Whether this is true or not, I’ll give my free advice nonetheless…
First let’s take a stroll down memory lane. Years back, before the Miller Coors merger there was unhappiness among some of the independently consolidated Miller Coors distributors (most distributors had already become Miller Coors by this time). Distributors felt they were getting unfairly financially squeezed by both. … some were more upset with Miller… some more with Coors.
There was little joy in Whoville for these Miller Coors distributors, except for some joy generated from a very surprising supplier… good ol’ Pabst. Now Pabst at this time was resource poor. Its brands were what they were and the trends were what they were. Its power over distributors was what it was… they weren’t going to be anyone’s daddy. But you know what? During this period Pabst was incredibly distributor-friendly. Rather than squeezing pennies from their distributors, they brought pretty good margins. Rather than attempting to use power over their distributors, they instead were the distributor’s friend. They actually lived the “what can we do to help?” attitude every time they walked into the warehouse. And they even meant it! Note that again, they actually listened and saw their role as helping the distributor “sell more beer” in whatever manner they could. They knew they couldn’t beat up their distributors… and even if they could have, to what end?
Now I’m not so naïve to believe they did this out of the kindness of their hearts… who knows, if they had the power perhaps they would have made “a bunch of foreign corporate raiders” seem like girl scouts in comparison. But they didn’t have the power and instead they played the hand they were dealt… and they played it pretty darn well. When Miller or Coors personnel walked into the warehouse the grinding of the teeth started… when Pabst folks showed up they were actually welcomed. Usually by the entire organization! Look at Pabst trends from this period. This “Who’s Your Buddy” strategy had a distinct positive impact on Pabst and their distributors… and the good feelings (and all the positives associated with them) lasted quite some time.
So what does this warm and fuzzy tale have to do with MillerCoors corporate? I offer the following guidance and perspective as they decide which path to walk… hopefully they will not attempt to emulate the “who’s your daddy” power play of ABI and instead continue to create their own paradigm, the “who’s your buddy” strategy.
- Rather than attempting to limit and control “other” craft beer product, instead embrace them all. Help your distributors become the craft brewer’s best friend. Help your distributors become THE desired distributor for every craft beer on the planet. ABI corporate, in their insidious genius, is actively working to limit their distributor’s ability to attract other suppliers. Go in exactly the opposite direction and work to strengthen your distributors. Of course you want to build your brands but I would argue you AND your distributors are stronger and better positioned to do this if you embrace the hottest category in the entire industry. Use your technology and power to assist your distributors in this arena, not work to limit them. Help your distributors gain state-wide coverage… heck perhaps nation-wide! Put out the welcome sign for Yuengling and everybody else… “hello friend, you are welcome and desired here”.
Let ABI corporate plant their seeds of fear, you should continue planting seeds of partnership and goodwill. You’ve started down this path with the MillerCoors Distributor Doctrine and other moves. Don’t change directions and go for the Ring of Power just because you hear its siren song.
As with most things in life, it is possible to create a virtuous circle where one good thing generates another good thing which generates another good thing, etc., etc. Let’s assume MillerCoor corporate follows the buddy strategy… where will the bulk of the craft beer end up? With MillerCoors distributors. What strategic advantages can MillerCoors corporate gain from this?
- Their distributors become the marketplace leaders, probably in units but definitely in gross profit dollars. This allows tremendous leverage at retail… look at AB over the past 30 years and how they used their market strength to their advantage.
- After the shake-out and consolidation in crafts (it happens in all new, dynamic markets), where will the “winners” most likely be? In the MillerCoors distributor network. This sure makes an acquisition or two more likely for MillerCoors corporate. On the other side, if ABI wants to make an acquisition of one of these winners, THEY can gain from the acquisition but at the distributor-level their distributors are screwed. The brands will in all likelihood already reside in the MillerCoors network. And in a whole lot of the country, forcing a distributor to divest a brand is far from an easy task (impossible in many states)… to say nothing of the multiples it will take to get this done… 5X to 10X gross profit. Either way, the MillerCoors distributor network AND corporate are sitting in the best possible position. The lay of the land will make an ABI acquisition in this space more difficult and will limit the synergies the acquisition generates. Just the opposite for MillerCoors. This is a tremendous barrier for ABI to overcome.
The gross profit these highly desired brands bring to the distributor could generate more bottom-line profits for MillerCoors corporate without impacting the distributor’s power at retail – I might be warm and fuzzy but I do live in the real world ;-) You can be quite honest about this… you help the distributor in attracting and managing these brands and in return you get a little more $$. Win/Win. And not “managing” these brands by keeping them down… managing the brands to give them all the greatest possibility of success. Let the consumer decide.
Helping expand the entire craft beer segment will only help your efforts in this category. This doesn’t hurt Blue Moon or the 10th and Blake stuff, it helps them all. Again, win/win. Look at any new, growing category… helping grow the category ALWAYS helps the present participants, always.
“Focus” on maximizing the selling opportunity… ah that “F” word. I can hear some of the corporate people repeating it like a mantra… “but the distributors will lose focus on our brands”. To this I ask why? Is it not the field people’s job to get more than their fair share of mind from a distributor and grow share. That’s job #1 of every supplier. Aren’t your people up to the task? If so, why? I’ve met more than a few MillerCoors field people and from what I see, I think your people are more than up for the task.
The MillerCoors distribution network has years of perfecting the art of distributing multiple brands from multiple suppliers. They are well prepared to execute on anything which comes their way. You will win more being their buddies than attempting to show them who their daddy’s are.
For distributor and supplier alike, leverage this power at retail. Become the retailer’s #1 beer consultant. Do what is best for the retailer, knowing that sooner or later this will work out to the advantage of all. Rid yourself of self-serving tactics, do retailers really need 15 linear feet of Bud Light?
Consider expanding and leveraging the “who’s your buddy strategy” for FMBs, energy drinks, whatever. The power play of “who’s your daddy” will in all likelihood create tremendous opportunity for MillerCoors corporate and distributor alike.
MillerCoors competes in a duopoly and due to your competitors “insidious genius” you currently have a huge tactical advantage staring you in the face… hopefully, you will stay the course and not choose to follow the power play of your competitor and avoid reaping the very real negative fall-out. Don’t create more opportunities for the huge wine and spirits houses to become permanent, big-time players in this distribution market. Follow the “who’s your buddy strategy” for both your distributor network and every craft brewer out there. Do you fight your natural instinct to grab for power?… Or instead leverage your size and embrace (in every sense of the word) a win/win partnership with the entire craft beer world.
As I’ve noted before, I know what choice I would make. Now of course everything I’ve just said works for ABI corporate too… but I won’t hold my breath waiting for them to change their stripes. Sooner or later I predict they will change course… but only after multiple kicks to the groin (I expect them to be slow learners, especially for something they don’t want to learn). But until they do learn this lesson, MillerCoors corporate and distributors should put on their pointy boots and, as they say in the country, make hay while the sun shines.
I guess the only question is whether MillerCoors can take advantage of this gift from ABI and deliver a true win/win strategy. Or will they take the other path and play a self-serving and ultimately futile game of “who’s your daddy”? Time will tell.