It’s 2015, Where Have All The Leaders Gone?

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Leadership principles stand the test of time. To me these are defined by integrity, a strong sense of right and wrong, hard work, persistence and resiliency. Finally a commitment to a greater good or cause (helping others) is integral. Letsal20081-206x300(pp_w124_h180)adership is not popularity; good leaders will have times when they are more or less in and out of favor (see Sir. Winston Churchill). Leaders have a strong sense of their core principles from which they don’t depart, regardless of current popular opinion.  Leaders are human beings and by definition are not flawless.  That said, all true leaders have a sense of service – service to their organization or community and to other individuals – from which they strive to lift up organizations and people.  I agree with Robert K. Greenleaf’s view on the topic.

In my travels, I frequently have the opportunity to spend quality time with extraordinary individuals in all walks of life. These include Business CEOs, nonprofit directors, education experts, entertainers, politicians and just ordinary people doing their thing. Many of these individuals are not interested in public leadership, yet in their very day-to-day actions, quietly provide outstanding examples of true leadership.  In a recent interaction with one highly successful CEO, our conversation led to the question of political leadership and the level of vitriol in much of the public dialogue going on. Whether in race relations, economic and entitlement disputes, or combating terrorism, one need only turn on the television and flip channels to hear it on all sides of the political spectrum.

I grew up in a family of teachers and liberals. I was known back then as the “Alex P. Keaton” of my family (Michael J. Fox’s character in Family Ties) by many relatives. In other words, I was a conservative thinking person in a household of liberaFamily tiesls. I grew up debating the issues of the day at the kitchen table. And while at family get togethers even today, we may disagree on approach, inevitably there is agreement on many of the problems in the world and that the status quo is unacceptable. There is no name calling or questioning of each others intentions, but rather a healthy disagreement on solutions. I’m struck by how rare this is in today’s public discourse.

For example, there is widespread agreement that America’s education system is failing our country, our communities and our kids.   Teachers think this. Parents think this. Kids think this. CEOs think this.

See What’s Holding Back American Teenagers?

Why American Education Fails

The Failure of American Schools

The Graph That Shows How Badly U.S. Education is Failing

I view the bureaucracy and the statist entrenched interests as fundamental impediments to change for effective education. One can be quite liberal and agree with that viewpoint. Where there is significant disagreement typically are in the methods and approaches for changing it. Without addressing the solutions here (my point is leadership and constructive discourse not solving education in this post), the level of personal attacks and vitriol around the debate, is often times exacerbated by our public officials. The current fights around Common Core are bringing out some of this (see Who Is Fighting Against Common Core?).   Common Core has brought conservative and liberal groups together in opposition (for very different reasons). In every state and locality, there are the powerful teachers unions who tend to oppose most reforms of any impact. In many cases they have captured the statehouses with members who pledge allegiance to them regardless of position (see Teachers union fights Cuomo’s school reforms).  The debate in most cases is not a debate, but rather, a contest of sound bites to make political points, usually denigrating the opponents.

 

Back to my conversation with the CEO above, we reminisced about leaders in the past who seemed to bronald-reagan-brandenburg-gate-west-berlin-june-12-1987-picturee above the fray and always showed class and respect for their opponents. I mentioned President Ronald Reagan, whom I never had the chance to meet, but admired greatly. I have read and heard from those who knew him, that Reagan treated everyone with respect. He would speak to the gardener, as he would address a world leader. He was also willing to take tough stands regardless of the political winds. His advisors and speechwriters, the State Department and all around him reportedly advised strongly against any mention of the Berlin Wall coming down. When Reagan made his now famous speech at the Brandenburg Gate he overruled them all as he spoke that incredible call to action “Tear Down This Wall”. All agree it was a pivotal moment in the history of cold war, and it would not have come to be had he been willing to say what he thought was right at that moment.  I remember Senator Daniel Patrick Moynihan exhibiting these qualities and being willing to tackle tough issues regardless of the dogma of his party.  He had an ability to reach across the aisle and collaborate with political foes on important issues.

Former Indiana Governor and current Purdue University President Mitch Daniels has this quality as well. Mitch served for a purpose, and it was NOT for the purpose of being in office. These were leaders in the true sense of the word.   Individuals who would stand by their convictions in spite of opposition, but who never seemed to make personal attacks against individuals. They also served in the true sense of the word. I miss that.

Smoke & Mitch Daniels

I’m not saying there are no leaders today who exhibit these characteristics, but it is simply too rare. As long as personal attacks of motives and cult of personality (regardless of how bad the behavior) are accepted and even encouraged, this will remain the case. I fundamentally believe one can disagree on ideas and still have great respect for others. This is true in politics, business and life. As serial entrepreneur, Sir. Richard Branson posted today “The importance of good neighbors is often underappreciated. By fostering a healthy and respectful relationship, everybody stands to gain.”   I have many friends who exhibit these qualities traveling to Melbourne, Australia this week for the Global Leadership Conference (GLC) for the Young Presidents Organization (YPO/WPO).  In business and nonprofits, and community organizations, there are individuals exhibiting great leadership every day. I’d be interested in hearing your examples of people who exhibit the qualities of true leaders in their words and deeds.

Channel Conflict II: Grocery Alcohol Fights Across the Land

Last week I wrote about Channel Conflict in the 3 tier system of alcohol distribution between wholesalers and Anheuser-Busch Inbev and the craft community. I received quite a few interesting comments from my friends on both sides of the issue.   One highly respected industry member commented to me “Very nice job trying to ride the third rail of these issues and explain a complex issue in simple terms.”

Well here goes again with an issue that I get asked about frequently. Another interesting channel conflict is between and among the members of the retail tier. This channel conflict involves questions regarding who (what types of retailers) can sell which types of beverage alcohol and when alcohol can be sold (e.g. Grocery Sales of beer spirits and wine and Sunday Sales). These questions are raging across the country in different states. The conflict pits independent liquor stores (and specialty chain liquor stores depending on the state) against the corporate chains (Costco, Kroger, Publix, Target, Walmart etc). An example of this is the Sunday sales of alcohol at retail in Indiana. After passing out of committee with a “poison pill change” Sunday sales was killed in the Indiana legislature. Sunday Alcohol Sales Meet Familiar Fate.

liquor store sign liquor sales sunday closed

In a closely related question pertaining to which type of retailer can sell which products, in 2014 Tennessee passed a law allowing grocery stores to sell not only beer, which they already could sell, but also wine. Wine in grocery stores passes; what’s next?

In Florida, Walmart and others are pushing legislation for the right to sell spirits within the same store as groceries and not be required to have a separate stand-alone entrance. Publix, another grocer, does not support the change since they already have stand-alone entrances throughout the state. Beer and wine are treated differently in Florida and groceries are able to sell inside a grocery store. Publix opposes, Walmart backs Florida bill to let grocers sell liquor.  Update – More Here: Florida: Spirited Battle Ahead over Florida’s Liquor Separation Law

3/23 Update: Beer bill on tap in Florida House on Tuesday

 

kroger store outside kroger wine shop walmart store shot outside

In some cases, these fights are spilling over into the courts and not just the legislatures. Walmart lawsuit highlights Texas’ surprising alcohol laws. In the case of Texas and Walmart’s litigation, it is about their right to sell products that the specialty retailers currently have a lock on and have created work-arounds for ownership of large-scale chains.  UPDATE:

Costco joins coalition to broaden liquor sales laws in Texas

The reality is there are so many new brands, it is hard to keep up with them all, for people in the industry, let alone consumers. This proliferation of new brands is driven by today’s consumer thirst for new things, literally. Generally speaking, I believe more open markets are better for consumers, but taken to extreme can cause massive consolidation and the independent specialty liquor shops and specialty chains find themselves at a significant disadvantage to the corporate chains. Markets like California and Arizona are examples of wide-open sales of beer, spirits and wine. This has been the case for a long time. In these markets the corporate chains dominate the retail landscape. The independent sector is a much smaller portion of the total business. The large specialty chains have also been very successful in these markets (Bevmo! and Total Wine & More).

Bevmo store shot Bevmo logo

 

The relative advantage of full line retailers (grocery) is what is driving the fights over Sunday  sales. Liquor stores are not open on Sundays, but the grocery chains are. The groceries of course want to be able to sell alcohol, as they are open, fully staffed and have consumers in their stores who would like to purchase it. The liquor stores would have to man their stores with staff and the thinking among many is the incremental sales on Sunday will simply come out of sales during the week they would get anyway. Their worse fear is that the groceries will end up with a greater share of the incremental business with so many consumers already shopping in their stores on Sunday.  The package stores won the recent Indiana fight by taking a quite reasonable position – that all retailers should be under the same sets of laws.  In the end, the groceries could not support losing the significant freedoms they currently have just to get Sunday sales.

Sunday-alcohol-sales-prohibitdotcom

To people (consumers) who live in both more “open” or “closed” states, these fights seem strange indeed.   There has been a long-term trend to more liberalization of alcohol laws on a state-by-state basis. But this liberalization has been gradual and certainly not continuous. As the large grocery/mass retailers have shifted their attention to gaining share of the increasingly important beverage alcohol market and Total Wine continuing their massive expansion around the country, the independent sector will continue to be under pressure and where organized, able to continue to slow the pace of change through state legislatures and regulations. That said, the most strategic of the independents and specialty chains are innovating and investing

in their ability to serve their customers and compete effectively with the other retail sectors. Walmart and most other full service retailers will never have the specialized staff that a focused specialty retailer of alcohol can have (There are exceptions on a store level, but this is true overall). This high level of knowledge and service with customers is what will keep consumers coming back. I think the bigger fear is a large specialty retailer (Total Wine) that has it all – scale ($1.5 million in alcohol sales) and low pricing, product depth (10,000 skus typically) and highly knowledgeable employees. They are very strong.

Total wine logo total wine store shot

The wholesalers and most of the suppliers all try to stay out of these arguments, since both sets of retailers are their customers. DISCUS (Distilled Spirits Council Of The United States) though has a long-standing policy to fight against anything that disadvantages spirits to other types of alcohol. They have been quite effective on this front in many markets. The craft (beer, spirits and wine) producers definitely benefit from a thriving independent market as they get more opportunities for their smaller or new brands than in the corporate chains, but they also benefit by having a more open market with multiple channels for consumers to buy alcohol. It’s a tough balance to maintain with many competing interests, but in the end the market will drive it, albeit more slowly than many consumers want with the local legislation and regulations market by market.

I’d love to hear you thoughts on these issues and other examples in your state.

Cheers,
Smoke

Channel Conflict: 3 Tier Battles Heat Up – Stinging Defeat in KY Raises Questions

The headlines and press statements around some of the latest beverage alcohol industry channel conflict are extraordinary and gaining attention across the country.

A new craft brewery is opening up every day, adding to the over 3,000 currently operating in the USA (Brewers Association).   There are 100s of new craft distilleries that have opened up over the past few years with many more in the works (American Distilling Institute). There are more than 7,000 wineries as well (Wines & Vines).

This buds for you

All this growth in new entrants is the result of renewed consumer interest in trying new things. The Millennials have driven much of the new growth and vibrancy. It’s an exciting time in the beverage industry. That said, every large-scale established consumer brand across multiple industries is trying to figure out what to do and how to keep their base, grow it and remain relevant.   Anheuser-Busch Inbev was roundly criticized for their “anti-craft” beer advertisement for Budweise

r during the Super Bowl. As I wrote about, this was them playing the hand they hold and making the best for a giant brand in decline.

These issues are a lot more complex than they appear and have interesting and changing industry alliances. I am constantly asked (last night included) why the laws are the way they are, by consumers and business people who are not from the industry. Here is a brief explanation:

The simple answer is the current legal and regulatory framework in the US is the result of two Constitutional Amendments. The first one was to ban all alcohol aka Prohibition (18th Amendment in 1919). The second one was to repeal Prohibition (21st Amendment 1933). To pass a Constitutional Amendment the Congress must pass it with a 2/3 majority vote in both houses and then it goes to the 50 states and must pass ¾ of the statehouses to become ratified.   A very high bar indeed. Prohibition was a national disaster of epic proportions. However, it was created in response to some significant excesses by the industry and public. A lot of the excesses were blamed on what is known as “Tied-Houses”, whereby the brewers owned the taverns. The drunken excess of many in the public was attributed to the brewers have a direct interest in selling as much beer as possible and controlling the point of consumption. The saying “There is no such thing as a free lunch” came from this era. The brewers would give away free sandwiches at the taverns they owned. Sounds good, but they would salt these sandwiches excessively so that the patrons would drink more beer.

Whether you agree or not that “tied houses” were the root of all evil, this was the majority view when in 1933 the nation’s failed experiment in Prohibition came to an end. Even though it was clear to most that this government intrusion into industry was a disaster, there were still large numbers of anti-alcohol constituents throughout the land. The compromise to get the 21st Amendment passed was to allow each state the absolute right to regulate the sale and distribution of alcohol within its boarders. The 21st Amendment does not have an opinion on tied houses or any other aspect of how the industry does business. The Federal Alcohol Administration Act did spell out specifics on regulations of the industry to insure the revenue and to protect consumers. It did not however, spell out any specifics regarding a “3 tier system”, but rather defers to the 21st Amendment that in turn defers to the states.

IMG_6572

Each state proceeded to set up its own set of laws and regulations.   There are 50 states and 50 sets of laws that while some may resemble each other, none are identical. Layered onto the specific statutes and regulations are the interpretations by alcohol boards or chairmen and the courts.  The most common way in which the states addressed the tied house issue was to legislate a middle tier (wholesaler) to be a buffer between the suppliers and the retailers. This is what is commonly referred to as the 3 tier system. There have always been some states that allowed brewers to own wholesalers, though this was the exception.

In the case of Kentucky’s new law, Anheuser-Busch Inbev has owned distributors there for more than 40 years and had attempted to buy a 3rd. That prompted the wholesalers to attempt to stop them and when other means failed, it ended with this new legislation not only not allowing them to buy the new distributor, but also forcing them to sell their existing businesses. I have no idea of how the courts will view this, but from the sound of it, ABI will not go quietly.

I can’t help but think the latest turn in the 3 tier beverage alcohol industry channel conflict is an example of overreaction that will do nothing but cause further escalation. When one considers all the new brands that have launched and keep launching in beer, spirits and wine and the need for each to find ways to market, it is clear that broad based full line distributors provide a viable route to market for many. All of the main distributors have giant books of brands now, and they serve some very large suppliers and many smaller ones well. In many cases they serve these needs of smaller brands by creating specialty sales divisions. They do not serve every brand well, nor can they. This has created market conditions in most states where a new crop of smaller start up distributors have emerged, primarily handling specialty or craft brands. Where specialty/craft distributors have emerged, they have become a necessary escape valve for small and new brands getting distribution to retail. In markets that allow it, and many states have provisions up to a certain size, craft breweries can self distribute. This is expensive but a necessary option in cases where there are no viable distributors to carry a new brand. Stone Brewery in San Diego and Sun King in Indiana seem to be examples of self-distribution that has been successful. I wonder if this will become more prevalent with spirits as the number of craft distilleries grows.

2015-01-21 11.18.45  IMG_6561The current approach, though ugly at times, has worked to provide a route to market for a thriving craft community.   The pressure to get new brands to market is only going to increase. It is unclear to me where the craft community will end up better off – with strict laws that don’t allow suppliers to own distribution (of any size) or with looser laws that give options. I tend to think most small/new brand will end up supporting a more flexible system, but the bigger brands, that are doing well in the traditional 3 tier system, will support the stricter system.

It may be that there are simply too many competing interests to work out viable solutions to everyone’s satisfaction on these issues. It would certainly be better for the industry if there were agreement as opposed to legal or legislative fights. ABI is a powerful entity as are all the major suppliers. Poking them in the eye with a local legislative win, may end up being a case of winning the battle but losing the war in some ways. It is unclear to me that the KY law actually helps craft brewers or simply hurts ABI or it it even does that. ABI can still control largely the activities of an independent distributor, as they have been able to do, in many other states. What is clear is that this KY battle is not the end to this fight.

It will be interesting to see how this continues to play out. Love to hear your comments or questions. Cheers! Smoke

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Smoke has worked in all 3 tiers of the industry, built beer wine and spirits distributors, owned a craft brewery, a winery, and multiple craft spirits brands.  He built the leading technology for pricing between suppliers, distributors and retailers. He also represented the WSWA as Chairman & President and the Brewers Association on the Government Affairs Committee.

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Fiscal Cliff – Lack of Leadership in Washington – calls for a bit of “grace”

In our WISE (Wine Industry Sales Education) class on Public Speaking with world renowned public speaking coach Linda Spillane, we all had to write a short speech.  Anitra wrote and delivered a touching and compelling commentary on the current lack of leadership among our major political parties and politicians.  Our whole group thought it was important and compelling given what is going on in Washington.  Here is her talk… let me know what you think.

 

 

Family Predictions… 2012 Outcomes

So, we don’t do a lot of politics here, but occasionally will weigh in on what is going on or an important event.  Today is one of those important events – the US Elections.  I thought it might be fun to ask around a few of my family members what their predictions are going into today and also share a few thoughts of my own.  You will note I have family with widely divergent views to my own, but in the spirit of this great nation, and the true purpose of debate…  “not victory, but progress” – I share a few of them here with permission:

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First, my prediction:

Romney wins in a landslide. All those normal folks who were afraid of the drone slinging pres/gov and would not answer pollsters, actually vote their conscience.  That is, for a smaller, less intrusive government led by a moderate smart successful caring  person, who did what he had to do to get the nomination.  The country moderates back to a post ww2 equilibrium of about 20% fed gov spend of GNP and taxes. Balanced.   This fixes the problem. Yes there are some sacrifices re various worthy spending causes.  But alas, my parents retire with full current benefits, and those of us under 50′, buy into a new social pact whereby we know gov is there for a certain amount, but not for everything we need.  The gen x and later generations have to make the hard choices that the free spending baby boom generation of bill Clinton and our parents did not make.  Instead we focus on personal responsibility, hard work and innovation to get us to the place we need to be as a nation.  No more blaming the past or others for our predicament.

There is a complete rethink in academia…. Ayn Rand was right.  Hayek is the new Jay-z.  As a people, we recall what made us revolt from the British empire and create the greatest nation in history. We will remember Ben Franklin.

This will unleash an unprecedented burst of entrepreneurial activity fueled  by the billions and trillions of money on the sides lines during these dark times.   This will create opportunity for all. Women, Hispanic, Black, American Indian, Asian, all of us will benefit as a result.

Life will be grand.  🙂

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Now my Dad’s – Luke Wallin
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“The president is re-elected by comfortable margins in the popular vote and the electoral college.

The senate and house remain as they were.

In the coming year many republicans copy the strategy of “say anything.” However, it doesn’t work. This causes PhD dissertations to be written on why it worked for Romney but not for others. When the first of these works comes up for oral defense, a faculty member points out that “it didn’t work.” The thesis is rejected and all the others are quietly tossed as new topics are floated.

Chris Christie leads the party back toward moderation. This brings a war with the Tea Party, backed by the Koch brothers. Karl Rove backs Christie. Outcome too close to call.

The NRA HQ disappears in a flash of light.

Somebody said they thought they saw a drone.

What say you?”

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Now my oldest son, Skye Wallin
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“I predict a narrow Obama victory… almost certainly a victory in Ohio.

But he certainly could lose and I don’t pretend that it’s out of the realm of possibility.  Indeed, with the hurricane disruptions of voting in NY, NJ, CN, Obama may lose the popular vote and still win the College.  I hope this isn’t the case.

If Obama loses, it will be a sad thing not because he’s the greatest president, but because it will make cynics out of his supporters and cynics out of the citizens of the world who witness America fire the young man they chose to rescue us from the most catastrophic presidency in history.  People like to say that after 4 years, you can’t blame Bush anymore.  Well, I blame a lot of people and two parties, but Bush changed the world forever and wrecked a lot of things with draconian, expensive policies.

If Obama loses, it says that Americans really don’t have an ounce of patience and give up on promising individuals.  Barack still has lots of potential… after 4 years, I think he has learned what works, what doesn’t, and will approach governance more forcefully in the second term.  What kind of people are we to not even give him the chance to succeed.  As the economy improves, as the occupation of Afghanistan winds down, and as the recovery in Sandy-effected territories gets underway, what kind of sense does it make to fire the Commander?  With all the legislative nonsense that has occurred of recent, I think people blame Obama way too much–Congress is to blame for the vast majority of our problems.

With respect to foreign policy, Obama acts with a restrained neo-conservative strategy full of violence but less stupidity.  He is a scholar of the world with empathy, but unafraid to fire missiles and send in the SEALS…and go to war.  He has adopted responsible Republican tactics, so any argument that he’s soft on terror is entirely cynical and political.

WIth respect to the Supreme Court, it goes without saying that a more liberal court is a good thing.  If you are socially liberal, you understand that the Court is where those decisions get made at the end of the day.  Romney will nominate a smart, but potentially draconian conservative justice with lasting implications for civil rights and other important topics.

In the end, these men are not all that different and to assume there is a fundamental divide just isn’t true.  THe question is, do we fire our guy after his first try?  Just as things seem to be improving?  Or do we throw it all away and let Romney take the credit for someone else’s leadership?

Again, Obama wins Ohio.”

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Whatever your views, if you do not exercise your right to vote you really do not have much of a basis to argue about the outcome.  When all is said and done, I do hope as a country we can try to come together.  That does not mean abandoning ones principles just for unity.  It does however mean, finding ways in which, given the realities of a divided and diverse nation we can come focus on the big problems that need big solutions.  Stop politicizing everything and everyone.  Our nation cannot continue on its current trajectory and expect to maintain or grow our standard of living, our standing in the world or create opportunities for the next generations.  Stop pretending we can leave “as is” the social programs put in place in a different day and age when in fact they cannot continue as is.  That is not political.  Stop spending more than we take in.  That is not political.  Possible?
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There a people out there who are indeed thinking along these lines. I recommend checking out Dave Maney and his recent piece in the Denver Post, and this CLAYTON M. CHRISTENSEN - NY Times piece “A Capitalist’s Dilemma, Whoever Wins on Tuesday”
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Back to the family, exercising our duty as citizens, this morning at 6am at the polling station in Carmel, IN – Anitra and my oldest daughter Sierra (who got to vote for her first time today).  Pretty cool.
  
Well that about sums it up.. the family disagrees.  Do any of you have family members this divergent?  I may add more family predictions here as they trickle in.  Stay tuned…

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