Channel Conflict II: Grocery Alcohol Fights Across the Land

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

Craft Beer Sales Boom Continues… Best Is Yet To Come.

Craft Beer Sales Boom Continues… Best Is Yet To Come.

This weeks release of the full 2013 numbers on craft beer by the Craft Brewers Association confirms something many of us already knew: this movement is accelerating.  I’d go a step further and say the best is yet to come.  Here is the info-graphic the CBA published this week:

Craft Breweries 2013 Growth-Small_HR

Pretty incredible numbers – going from 4.4% volume share in 2009 to 7.8% in 2013.  On a dollar basis, even more impressive with a 20% increase over 2012 to $14.3 billion, giving craft beer a 14.3% share of the $100 billion US beer market.  The number of breweries grew at a slightly slower pace (15%), giving slightly more sales per brewery.

This is a booming market and with that there are multiple new entrants and there will be inevitably, winners and losers.  That said, a growing market makes up for a lot of mistakes and there are a lot more winners right now than not.  The key is matching investment to real potential in any particular INDIVIDUAL business.   A growing market is good for everyone, but it does an individual aspiring brewery little good if they spend too much on their building, don’t brew great beer that people enjoy, don’t create a brand that resonates with consumers and market place, take too long to get up and running, hire the wrong time, don’t know what their numbers are or what the right things to measure are, run out of money, etc.  I could continue, but there are a ton of ways to be unsuccessful in this space, no matter what the growth is.

That is why I got together with a number of industry thought leaders to create the Beer Industry Technology Symposium (BITS) being held in Napa, CA June 30 & July 1 in conjunction with the Wine Industry Technology Symposium (WITS)

BITS logo small for web3                  wits logo

Yes, technology is in the name and there will be a bunch of things at the 2 day event that revolve around technology, but that is NOT the main point.  The main point is what I am talking about above.  There are so many challenges with running any new business and craft beer is no different.  With all the new players and the many existing players who are experience growth beyond their wildest expectations, these businesses need sound strategic thinking around what matters.   Technology is not “What Matters”, but it is the great enabler that in 2014, done right, can create the conditions for a successful business venture.  Thinking through the myriad of options and what exactly one is trying to do is critical before you even start your brewery.  If you already have one, and skipped this part of the planning, it is never to early to get on it and address these issues.

I really enjoyed the new Siemens commercial (that seems to be running on TV on every show I watch – which is not very many) profiling the Schlafly Brewery and American manufacturing. Here it is:

 

What a terrific message and a boost to the craft brewing industry at the same time.  I reached out to the Siemens team and they jumped at the opportunity to be a part of the first BITS.  How cool!    This is also true of the California Craft Brewers Association who joined us recently as a GOLD sponsor and are marketing the BITS event to their 200+ members in CA.

CCBA_colorlogo jpeg

 

BITS will be announcing these and many other great contributors in the form of keynote speakers and panels who are lining up to be a part of what we hope will become a must attend event for everyone in the industry who wants to be smart about running their business.  Please reach out to me directly if you’d like to get involved.  Registration will open up in mid April.

The craft brewing industry is in its preteen days… there is much growth in front of us and a lot of learning and growing up.  This is an opportunity for collaboration with fellow breweries and professionals and leading edge thinkers in technology on how to grow up and be successful in your beer business.  The best is yet to come!

Cheers!  jsw at NSB pub

 

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