Is the concept of “we mutually pledge to each other our lives, our fortunes and our sacred honor" only for saps?
First a clarification… in a recent post, which you can find here, I referenced a Steve and some have mistakenly believed I was speaking about my buddy and associate Steve Cook. I was not. I was referencing the Brewers Association inspired NYT op-ed by Steve Hindy. And I didn’t even get a dang t-shirt! ;-) I’ll let you all figure that out.
All I can say is that for 25+ years I have worked with beer wholesalers and I can tell you that you can take their word to the bank. I’ll do a handshake deal with almost any beer distributor in the country, regardless of how many zeroes are in the deal. The same cannot be said of others.
To all the beer wholesalers out there… the craft brewers are not your opponent and it is destructive to think of them in that manner (and the same to you craft beer folks regarding distributors) but the BA is most definitely an opponent if not an outright enemy. Accept reality as it is and deal with it.
But onward and upward… one thing a good manager (or consultant) must do is to always try to manage the “what if’s”. What if this happens? What if that happens? How does that affect the company? In this process one has to mentally project the business (or system) 5 or 10 years out. What incentives does it drive? How does it work once the dust has settled?
That’s why the present battles over franchise protection and carve-outs are so lacking. Many of the arguments are focused solely on the here-and-now. I don’t hear too many folks projecting out what these things might mean 5 or 10 years down the road. And if history is any guide, tomorrow will actually show up. ;-)
That was one of the many insights of the founders of this country… they attempted to set up a system which would work today, next year, and 200 years down the road. Does anyone see any such thinking in these carve-out/franchise arguments today? Nope. Government is simply a means to achieve one’s short-term financial goals. Beyond that? Who cares! ;-)
Let’s all see who can control the power (and the feedin’ trough… ‘cause that’s what it all comes down to) and they are today’s winners. These battles are a microcosm of our larger society. The founders of this country stated “we mutually pledge to each other our lives, our fortunes and our sacred honor.” They meant those words and they captured the reality they faced. From that to “how can I set up the trough for me”. Sad.
I personally still see things lining up where the 3-tier system disappears in the relatively near future. As I noted before, beer and beverage distributors are the last line of defense. And I believe some of the larger distribs think they can survive quite nicely without it (I think they are wrong).
Craft brewers are going to regret the world they bring about. A handful will prosper via alliances with MC or ABI but the rest are going to be local brewpubs. And the Heinekens of the world will also have to choose a partner and hope it all works out for them.
Intellectually one can make a strong case that carve-outs are actually ass-backwards. Beer distributors actually do (can) build small craft brands much more than they do established nationally advertised and supported brands. One can argue that franchise protection should be applied to the small brewer with the carve-out being reserved for large, national brands. I won’t hold my breath but if one analyzes the reality on the street that is much more consistent with the way things actually operate.
My argument remains that these things don’t need to be enforced by government. Let the marketplace sort it out like happens in other industries.
It’s kind of funny but I’m working on an unrelated business start-up right now and I plan to offer strong franchise protection to my business partners. Not government enforced… I WANT to do it. I not only want them to make a good margin on the product, I want them to own and build equity in the manufacturing and distribution rights. This is a proven method to ensure commitment from a business partner and to allow them to share in the financial rewards of success.
Long ago I wrote a blog entitled, Plenty to Go Around, which you can find here. Perhaps everyone in this industry should give it a read. Do you have a mindset of scarcity or abundance? I won’t hold my breath for the BA and others to get on board but as I noted above, the individual craft brewers remain supply-chain partners, not the opponent.
But since I remain a cynic, I’m still betting the 3-tier system is going to be taken apart… piece by piece with little thought given to the future… and few will be happy with where this takes us. But what the heck do I know? ;-)