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August 2018

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« More on Mergers | Main | A-B + InBev + Miller + Coors = Change »

Consolidation of the MillerCoors Markets

About a week and a half ago, the Miller Coors joint venture was approved by the feds.  Right on the heels of this announcement the new MillerCoors organization let distributors know… we will drive consolidation in unconsolidated markets and we will let you know who the preferred wholesaler is.  This will be done before the end of the year.

Speaking as a black hearted mercenary who works all sides of the street, one generally doesn’t have to be a genius to decide who’s a keeper and who is leaving the industry in this process… they might be kicking and screaming but they will be leaving.

I have clients who are clearly keepers… and I have clients who clearly have a bulls-eye on their chest (or is that back?).  Here is some advice for all.

·                    Rid your mind of wishful thinking.  Much like the mob might say, “nothing personal, this is just business”.  In 99.9% of the situations, it ultimately won’t matter what your relationships are.  I know it shocks many smaller wholesalers but performance doesn’t matter too much either – in fact it probably doesn’t matter at all.  Yes, you might be much better on the street than the larger, chosen distributor but step back and think about it from MillerCoors’ perspective.  They want consolidation… they want fewer wholesalers.  Each of you is a cost to them.  Reducing the number of their wholesalers by say 20% or 30% saves them a bunch of money.  As an example, look at your business.  If you could reduce the number of retailers you service by 20% to 30% and still sell the same amount of product… would this have just a little impact on your bottom-line?  Oh yeah. 

·                    I have written about the incredibly difficult emotional decision to sell the family business.  I do not take this lightly.  But for some of you, this is a “decision” much like having terminal cancer is a decision.  It is what it is and all you can do is deal with it.  It is not a stretch to compare this to the Five Stages of Grief.  Grief occurs in response to the loss of someone or something.  It is a natural and normal response to loss.  Trust me, for those being forced to sell their businesses, the grief is very real and very sharp.  The 5 stages are:

o       Denial – Not going to happen to me.  I’ve been a loyal distributor for years and years.  My organization outperforms this schmuck everyday on the street.  No way.

o       Anger – Not going to happen here.  I’ll take them to court.  I’ll sue everyone and his dog.  We’ve got strong franchise protection and I’ll fight to my last dollar… as a side note, business lawsuits are extremely expensive.  You can blow through $100K in a very short period of time… and this won’t get you remotely close to going to court.  And the major suppliers have legal teams already on staff; they are paying them regardless… that’s not the case for the wholesaler.

o       Bargaining – OK, here’s a solution.  We’ll merge.  I’ll continue to run my territory and I’ll add the Miller or Coors to my operation and we’ll just become one big, happy family.  Another side note, my last post was about mergers, they can and do work but there are features of mergers which determine this.  In many of these forced consolidations, there is no reason for the “winner” to negotiate a merger with the “loser”.  Not always, but often.

o       Depression – There is no freaking thing I can do.  I’m heading to my favorite watering hole.

o       Acceptance – Well, if I’m going to be forced to leave… I’ll go but I want a premium price.  And unlike terminal illnesses where there generally is full acceptance, in these situations I suspect you will still curse and spit whenever this forced exit is brought to mind… I know I would.  Not that this helps much, but remember you aren’t the only ones to experience this… there are a whole lot of Stroh, Heileman, Schlitz, Hamms, etc. distributors who aren’t around any more either.  It wasn’t that long ago that there were 8,000 wholesalers in the country.  They didn’t all go happily to the exit.

·                    There is still a half year to get a deal done; there is time to get it done in 2008.  Especially if you are a seller (a happy one or not), I would demand it occur this year.  Regardless of your personal political leanings, it is difficult to imagine a near future without much higher taxes… capital gains, personal, probably everything.  If you have to go, NOW is the time to leave.  Retroactive tax increases have already been done during the Clinton years.  Getting something done in the first quarter of 2009 is no guarantee that the rules of the game won’t be changed AFTER you are already done playing.  Bullshit?  Oh yeah.  Impossible?  It’s been done before.

·                    If you are a seller, put your deal together and get it done.  Ask for a premium?  Of course.  In fact demand it.  If the buyer doesn’t like the price, contact the supplier and let them know you are quite willing to exit and the other guy is being the obstacle.  Put supplier pressure on them.

·                    If you are a buyer, now is not the time to try to steal it… pay a good price and get the deal done.  That’s the goal and that’s how deals get done… perhaps even rack up a few supplier brownie points while you are at it.  If the seller refuses valid offers, contact the supplier and let them know you are quite willing to buy but the other guy is being the obstacle.  Put supplier pressure on them.

It is an amazing time in the beer industry.  MillerCoors JV… InBev making a very serious run at A-B.  Absolutely no one is immune from this incredible change… brewers, distributors, retailers… no one.  As the Chinese curse goes, “may you live in interesting times”… well it sure is interesting out there. 




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Interesting one !!

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