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August 2018

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« Prepare for Opportunity | Main | End of Year Thoughts »

The power of your people, other thoughts, and legal weed

Well I hope the Thanksgiving turkey was good.  Steve and I are most thankful for the opportunity and feel privileged to consult with a great group of folks; owners, management, staff, and affiliates… all of whom continue to make the beer business one of the greatest industries in the entire country.  It continues to be a most rewarding experience to say the least! 

Here are a few random thoughts from Littleton…

Your people are what matters.

From one of our associates, The Herman Group – Trend Alert ([email protected]), comes notice of something that intuitively has always made too much sense and confirms what we as consultants continue to see as a “game changing paradigm.”

“Finally there is a study that confirms what we have known for a long time: the best way to boost the bottom line is to lead people better. “

The report, by the Boston Consulting Group (BCG) and World Federation of People Management Associations, titled, "From Capability to Profitability: Realizing the Value of People Management," has confirmed that companies with stronger people-management capabilities consistently have significantly stronger financial performance.  Moreover the report found companies had 3.5 times higher revenue growth and 2.1 times higher profit margins than those of companies with poor people management skills. Also emphasizing leadership development, talent management, recruiting, onboarding and retention, employer branding, and performance management and rewards were particularly important.

"[Higher performing companies] take their people investment much more seriously", says Roselinde Torres, senior partner and managing director at BCG. The report examined more than 100 countries worldwide and surveyed over 4,000 managers from human resources and other fields. The study used the corporate managers' ratings of their organizations' people-management capabilities, while BCG conducted independent reviews of companies' financials.

As part of that review, BCG included a review of "Fortune" Magazine's list of the "100 Best Companies to Work For." Those that consistently made the list outperformed the Standard & Poor's 500 eight of 10 years. The software company SAS Institute Inc., based in Cary, North Carolina is one company that has consistently landed on the "Fortune" list every year.  SAS has repeatedly received recognition for its people practices.

SAS demonstrates its sensitivity to the interests and talents of its employees by offering lots of different tracks for employee growth, including "subject-matter expert" and "critical-skills expert".

Though the company has more than 13,000 employees, its turnover rate is only 3.3 percent. HR VP, Jennifer Mann believes that turnover is so low because the company provides opportunities for advancement. It also provides countless extra services, including an in-house health clinic, daycare and fitness centers, and focuses on employees' work-life balance.

Roger Herman’s closing comments are concerning – “Studies like this one will raise the consciousness of executives in corporations worldwide. Their challenge will be to embrace the culture of improvement and develop. Too many corporate leaders are not ready.”

Something to think about when you look in the mirror and at your management team as this New Year begins.  In a nutshell it really comes down to culture… and far too many companies just let their cultures happen rather than actively trying to direct and develop the culture you desire.  Not to brag- I’d never do that ;-) but one of the reasons for my success in helping companies improve is my ability to collectively help forge a common vision and then together building a unified, coherent system to achieve this vision… along the way helping individual employees (and owners) change their ways of thinking.  Give me a call and let’s talk about how Steve and I can help transform your business. 

If you haven’t run for the door yet, I’m guessing you are here to stay.  Might as well get after it and get your company ready for the long-haul too.

More on Chesbay

First let’s think a little about what the Chesbay MillerCoors dustup means.  My last few posts on this got a few folk’s blood pressure up to unhealthy levels ;-)  But my point remains the same… you must be able to make logical, coherent arguments to those who may not think like you do… or know the industry like you do.  We have good, fact-based arguments but each one of you needs to be able to make the case.  This is true whether you like to hear it or not.  I simply gave you some of the objections you are likely to hear.  Like any good sales rep, you need to know every possible objection and have a response(s) for each and every one.  And turning red in the face is not likely a winning response.

In this arena you aren’t the boss who can simply slap the table and say that’s the way it is.  In this public/legal arena you are simply one voice of many… you need to ensure you are prepared for this world.  And lastly, a tip of the hat to Denny and the Virginia Beer Wholesalers.  He told me they had the best franchise protection in the country and he certainly showed it.  And now I owe him big time ;-)  Denny, I’ll be over to mow the lawn once spring gets here.  Glad I didn’t give in on shoveling the dang snow.

And remember, these fights are just like the street.  Just because you won today doesn’t mean the battle is over.  The other side learns from their defeat and comes back tomorrow… and the day after that… and the day after that.  It doesn’t ever end.  So yes, congratulate Virginia but always keep on the offensive.  Don’t let your guard down ‘cause this battle is a constant one.  Make certain you and your company are playing offense at both the state and federal levels… it is not hype that your futures depend on the performance of your state associations and the NBWA.

Some ask why would I do this?  Why not keep my head down and not enter any of these controversial areas?...  Do like most of the other providers to this industry, simply make what I can and stay out of anything which might upset anyone at all.  I refuse to do that because I am a passionate supporter of this industry… and from years of directing business reorganizations and driving corporate change I know that better solutions are always arrived at by vigorous debate. 

Just ask yourself the next time you need a quality valuation or help brokering a deal or help in improving the profitability of your business or consulting support that provides objective, fact-based recommendations… who would you like to have at your side?  A passionate, committed partner who will work with you to help you accomplish your goals… and one who will challenge every assumption you and your management team have… or someone who is quite willing to take your money yet refuses to join the battle?  Perhaps I’m wrong but I know who I’d want on my team.  At least that’s the way I see it.

Portfolio Growth

As for deals… in my last post I noted that my guess is deal flow will dry up for the next few years.  But that is for distributorships… brand deals (both transfers and potential additions) will perhaps become even more abundant.  The dance of the elephants is not remotely close to ending and it is difficult to imagine that ABI, SABMiller, MillerCoors, MolsonCoors and others don’t get some sort of deals done over the next few years… whether with each other or someone else… it’s a very good bet that deals will be happening at the suppler level, both large and small.   And of course these have the tendency to realign brand/supplier/distributor footprints. 

So for all you deal happy folks out there, don’t fret… brand deals driven by supplier acquisitions/divestitures are certain to occur.  Who knows, if quite a few happen it might actually help the footprint/supplier alignment issues… it’s always easier to get a deal done when one is trading brands rather than simply purchasing them.  Few want to sell brands (and I agree with them) but trading is another thing all together.  For those in states with weak brand transfer laws, I guess you need to hope that the brands go your way versus the other guy… or work to get stronger laws enacted for everyone’s benefit… ‘cause the issue is coming one way or the other.

In the Haze

And on a completely separate topic, we here in Colorado are starting a grand experiment in the next few weeks… the legalization of marijuana.  I’ll leave it to others to debate the merits and wisdom of this act but the voters have spoken and they want legal marijuana.  Even though all the big dog politicians from both parties were against it, it passed via referendum quite easily.  Colorado has already had “medical” marijuana for a couple years and the sky hasn’t fallen but this is it full bore… as the supporters note, the goal is to regulate the manufacture, sale, and distribution of weed just like the alcohol industry.

There won’t be folks lighting up on the streets, public consumption remains illegal… but of course how much enforcement effort will this get?  Private establishments, like bars and restaurants and cafes can decide whether they will allow lighting up or not.  I’m thinking about starting a chain of pubs called Weed and Feed ;-)  Or perhaps a Starbucks-type place, Buzzed and Confused.  As you can see, the possibilities are endless.

Possession of under an ounce will be legal and everyone can have 6 plants of their very own… perhaps the big opportunity is for the garden centers?  Perhaps I need to become a “grow” consultant?  In addition, individuals can form co-ops and combine their six plants with others into large growing operations… as long as they don’t sell anything they grow.

How it will affect beer consumption and this industry?  I have no freaking idea.  None.  Will it be successful?  Again, no freaking idea.  Is this the start of a national legalization?  Again, no idea but the trend is in that direction.  Is there a ground floor opportunity to become a weed distributor?  Seriously.  Who the heck knows.

I’d guess if it is successful here (and in Washington which also voted to end the weed prohibition) it will probably spread around the country.  The feds still say weed is illegal under any circumstances… yet one can drive around Denver and find medical marijuana stores in abundance so it can’t be all that illegal... and the “medical” threshold was pretty low… “can you fog a mirror?  Then you are eligible to purchase this medicine.” 

Down along the industrial section of the South Platte River, I hear there are already large warehouse growing operations plugging away (as they have for a few years) and the feds haven’t closed them down either… they have threatened their bankers though.  This is an interesting point of attack… think about how you’d do business if no financial institution would accept you as a client?  If you support the feds position, not a bad strategy.  But your guess is as good as mine as to what course the feds will ultimately take.  My gut is federal officials, from the Pres on down simply don’t want to touch this issue.  Either way they go they know they are in a lousy political position.  Thus kicking the can down the road (and doing nothing) is a politician’s usual action when confronted with this type of issue… see spending, debt, entitlements, taxes, etc.

I heard from a lawyer friend that he had a buddy making $80K per month (profit) from his medical store… so there is definitely legal money to be made in the ganja industry.

There is only one area which I feel pretty confident about making a prediction. This is a somewhat unique situation where unlike the end of alcohol prohibition where it was a national act, only 2 states in the nation will soon have legal smoke.

I’d guess visits to our fair state will increase substantially… the ski areas will love it… (some craft brewers might find an opportunity here too… rather than just tap rooms, tap and toke rooms?... high quality craft beer and high quality ganga?) and almost all of these new visitors will drive.  And when they head home they’ll all have a trunk-full of high-quality weed tucked safely away.  It remains a felony to mail the stuff and I’d have to guess that taking a bag or two on an airplane is probably not a wise idea. 

This industry is quite familiar with the market response of having a large dry area next to a wet area.  In effect Colorado and Washington are the only 2 completely “wet” areas in the entire country … does the entire state become like that wet retailer who sits right across the dry boundary?  Of course this will be illegal but are the feds or surrounding states really going to try to stop every car and truck heading out of the state?  I don’t think so.

And just in the local paper today is another issue this raises… off-duty use of weed.  A case is pending before the Colorado Court of Appeals on whether employers will be able to fire workers who smoke marijuana off duty.  This one started under medical marijuana laws… a medical marijuana patient was fired from his job after testing positive for marijuana, even though there was no evidence he was impaired on the job.  With full legalization one can expect a torrent of these cases.  Can someone be fired from their job for doing something off duty which is legal? 

For this industry a similar argument would be that an employee could be fired for drinking on the weekends.  The legal argument allowing the termination for off-duty marijuana use is that since marijuana is illegal under federal law, it is illegal period.  As with far too many things in our lives, some judge will ultimately determine this.  But before that I’d guess a lot of Colorado and Washington beer distributors will be caught up in many lawsuits regarding off-duty smoking.  Are Class A CDLs a cover?  I guess we will find out… but what about all the other positions in your organizations? 

So there are three experiments here…

  • First the legalization
  • Second the impact of having only two wet areas in the entire country.  But 18 other states already have medical marijuana so maybe it isn’t as dry as one might think.
  • Third how does an incremental bottom-up change in drug laws affect a whole range of other laws… laws which will most certainly be in conflict with each other.  

Stay tuned and we’ll see how it all turns out.  What do you think?  Click the comment button at the end of this post and let us know your thoughts.  Good idea?  Crazy as hell?  Somewhere in between?  What’s your prediction on how it all works out?

Now I’ve got to get out to my garden ‘cause planting season is just around the corner ;-)  Dang wife won’t let me turn the garage into a hydroponic wonderland!




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On the termination of employees for medical marijuana; I think I would prefer to face the legal battle from terminating someone for marijuana use as opposed to the legal battle I would face if there were an accident involving one of employees that uses marijuana. One could cost a little bit of money, the other could cost the business.

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