Conlin... the trouble-maker
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Well the NBWA Legislative Conference has come and gone… thanks to all who allowed me to participate in some cost mutualization… I drank and they paid ;-) You’ll understand that concept in a few paragraphs.
Independent beer distributors of the United States unite! For those who studied Latin… "tous pour un, un pour tous" the famous motto of The Three Musketeers “all for one and one for all”. I believe The Beer Musketeers should adopt this motto as our own.
It is about unity and sticking together, strengthening the bonds of the brotherhood and sisterhood of beer distributors. The absolute necessity of hanging together and acting as a single, unified force at both the federal and state levels.
If you think about it, the reality we face is pretty straight-forward. When we discuss the erosion (or destruction) of the independent three tier system, we are discussing your demise, no one else’s. The first tier, the producers/suppliers are going to continue to exist… if there is any product to distribute they must. The third tier, the retailers are going to continue to exist… someone has to sell it to the end consumer.
But the good ol’ second tier, independent distributors, what about them? When we talk about the erosion of the 3-tier system we are basically talking about the erosion or death of your businesses… you’re the only ones who might be leaving the party. Never forget that reality.
Think about your fellow independent beer distributors… I don’t care if you love them or hate them. I don’t care if you compete with the dirty, rotten SOB or have a great relationship. Your fellow distributors are your brothers and sisters. They are your true partners. If you don’t stand together you will most certainly fail. If you turn on each other, you will most certainly fail.
Never ever forget… it is your businesses on the line. Not the retailers… not the suppliers…It’s YOUR asses on the line. 100% of the “erosion of the 3-tier system” comes out of your hide. 100%!
If the independent three tier system goes away, that means most of you go away… and those who remain will face a world profoundly different than the one you face today… a world where your power, your profitability and your value are all far less than they are today.
All who know me know I am a strong supporter of NBWA - even when I profoundly disagree with some of their tactics… which is probably more than Craig and his crew would like ;-) I am also a loud supporter of strong, unified state associations.
The federal level is important but in this battle the state level is where the real warfare will take place… and a unified voice is incredibly important. A unified voice is a must for accomplishing legislative action, whether at the federal, state or local level. Without a unified voice, the odds are very great you will not be able to generate the support and votes you need to accomplish your tasks.
Now some pundits out there say Conlin is just making this stuff up, trying to generate business by being a trouble-maker (and I freely admit to being a trouble-maker)… causing strife and friction between suppliers and distributors where none existed before. I guess it was the Garden of Eden until I came along. Now I don’t know what world these folks are living on… or whether they have already been cowed by the power (and possible retribution) of the major suppliers. Something you all should think about.
I freely admit my blog is a marketing mechanism which is aimed at…. here’s a surprise, marketing. But me making this stuff up? My Bitch Slapped in Dallas, here was a direct quote from one who was there.
Although my Slaughterhouse analogy, here might have crossed the line of good taste… I think it reflected (and continues to reflect) the reality on the ground. My Who’s Your Daddy piece, here reflects a very real conflict of paradigms between ABI and every single one of you.
And although ABI is right now the primary spear catcher you all must realize that success forces competitive response. Every distributor has lived this… a competitor makes some stupid move, like bringing in 30 packs or some crazy pricing move. You and your management team correctly say, “that’s crazy and we’re not doing it”… but if it turns out to be short-term successful, you will respond. You all have lived it. Thus it ultimately doesn’t matter whether it’s ABI or MC or Pabst or whoever… if the actions are successful, they will force competitive response… whether that company or person really wants to do it or not.
If you recall, a couple months ago Morgan Stanley came out with an investment piece on ABI, Another Billion? Time to Look at US Distribution Profits. This heartwarming piece ;-) explained their thinking on ways ABI could “extract” at least $1,000,000,000 of incremental profit from “their” distribution channel. If you haven’t read much about this in the trade press you might want to ask yourselves why… but that’s a story for another day.
Well Morgan Stanley came out with another ABI analysis on March 8th. These analysts are cold blooded mercenaries (I can relate to that)… and they are putting their reputations (and incomes) on the line with their projections. I can assure you they have not been influenced by any Conlin trouble-making.
And what do they think? To put it in my terms, they think distributors are going to get their asses kicked… they are betting against your ability to stop the pillaging of your income… at least $1 billion. And yes, that word begins with a b. And that’s only from the ABI network. If you believe MC will just watch this happen without responded you are living in a fantasy world.
So what do these disinterested financial vultures think? The following are all direct quotes from the piece (the underlining and bold are mine)
- Stock price is targeted to go up 20%
- Potential distribution profit pool optimization: We believe ABI in the US could grow EBITDA by $2bn through 2015
- For more than six months now, ABI's sales organization has had new management in place –which has substantially affected the way the company executes in its No. 1 market. Wholesaler feedback points to the introduction of very detailed operating instructions and targets. While some distributors have not welcomed this, many are starting to realize the value of this improved focus on execution.
- Importantly, we believe compliance at the wholesaler level is high, because: a) the "carrot" of potentially being part of the "Anchor" wholesaler group (those wholesalers that will be allowed to act as consolidators); b) many wholesalers agree with this new strategy; c) wholesalers are unwilling to risk going into a termination procedure which at worst could go through and at best would involve a costly legal battle.
- In our note on ABI, Another billion? Time to look at US distribution profits (10 November), we envisaged ways in which ABI could extract more profits, at least $1bn incrementally, through greater system-wide cost mutualization and wholesaler margin management. Our conversations with distributors suggest that the "low hanging fruit" is being captured at the moment, involving important cost transfers to wholesalers (reduction in brewer funding of trade marketing, logistics-related costs) and what we would refer to as "Level 1" mutualization (e.g. making the Managed Freight Program compulsory for all wholesalers). "Level 2" mutualization, e.g. admin cost externalization to ABI's own share service centers, is seemingly more in the cards post-selection of anchor wholesalers.
- Meanwhile, wholesalers themselves are cutting costs and consolidation will drive efficiencies, in which we believe ABI will partake to the extent that it gets to decide – via its pre-emption rights on any distributorship sale – who can actively participate in consolidation and who cannot.
Cost mutualization… that sounds like some freaking word made up by some consultant. In my world of cost mutualization, I drink and you pay. In ABI’s world they mutualize costs by having you cover some of their costs… as freaking many as they can.
Wholesaler margin management. Distributor profit pool optimization. Do you think any of these actions are in your favor? The power of the anchor wholesaler concept (they insidiously won’t disclose who this golden anchor is… thus everyone has the “chance” to win this golden ring).
These aren’t my words. These aren’t my descriptions. This is what is coming your way and your ONLY freaking hope of fighting this is to hang together. The entire concept of the anchor wholesaler is to pit ABI distribs against other ABI distribs. There is tremendous power in connectivity… in unity… in truly living one for all and all for one. To phrase it another way, setting it up so it’s every man for himself is a certain way to weaken you all. And as I mentioned above… if ABI’s wholesaler profit management and cost mutualization are successful, MC will be right behind them.
As a side note on the insidious anchor wholesaler concept, there is a way to fight this. STICK TOGETHER! If every ABI distributor in a state does the same thing (picking up a new supplier or whatever), then nothing changes in your position relative to each other… all basically remains the same as before the action. If you all act as one, the anchor wholesaler plan cannot work in turning one against the other… and yes I know, almost all of you want to purchase the other guy, but allowing ABI to get you all in a knife fight while they sit back and laugh is not the way to accomplish this.
And for a piece of self-promotion – I know, when aren’t I? ;-) Next time you decide to spend some money on an outside service provider, whether buying or selling or making operational improvements perhaps you should think… who should I use? Someone who is a strong, vocal AND PUBLIC supporter of this industry? Someone who pays a very real cost for this defense… trust me, I do. Or someone who remains quietly on the sidelines… willing to accept your money but not willing to come to your defense when you are being attacked. Who would you rather have next to you in a fight? I know wholesalers, and I’d gladly have you all covering MY back.
I say the following as an outsider… whether you ever use my services or not, never ever forget…
You all have something very special here… very special. I implore you to not simply give it up without a fight…for once lost, this special thing will never come back again.
Print the above paragraph and put it on your refrigerator at home, right next to your kid’s pictures (and perhaps your grandparents)… if that won’t focus your mind then nothing will.