Dear Client:
Big Soda’s cannonball into the beer industry (Pepsi with Blue Cloud, and Coke with product partnerships) was among the big headliners at the opening session of NBWA’s 85th convention in Chicago this week. So was employee retention and recruitment, as “a workplace revolution is unfolding in real time,” said NBWA chief Craig Purser.
And so the theme of this latest gathering was adaptability, and new normals.
“At this meeting we aren’t going to spend too much time going down memory lane,” said Craig. “We will tip our hat to those that came before us. We will recognize the role NBWA has played in strengthening the independent beer and beverage distribution industry. And we will certainly celebrate the fact that despite the efforts of some that would like to tear down this wildly successful industry, the system remains strong. But the reality is, we must use this convention to talk about the future.”
You’ll recall, the NBWA also put their eye towards the future last year, addressing “the expansion of the beer distribution industry,” with the unveiling of their new logo and tagline — America’s beer and beverage distributors.
And that movement hasn’t slowed down a bit this year, Craig said.
“In addition to beer and seltzer extensions, we are seeing more action in the NA, spirits, wine and ready to drink cocktail arena.” Of course, “non-alcohol manufacturers are expanding their entrance into alcohol” too, Craig said, running down how Coke is coming out with more bev alc products, how Monster is gearing up to launch its first line of alcoholic products, and how “another food and beverage giant,” PespsiCo, “has also entered the alcohol arena, but they have chosen another route to market… literally.”
WITH BLUE CLOUD, COMES “CONTROVERSY.” PepsiCo’s entrance into bev alc through its distribution arm, Blue Cloud, “has created a great deal of controversy with several states denying them a license,” Craig said.
“Most states have a specific prohibition on large manufacturers owning alcohol distribution,” Craig reminded, adding that “nearly 10 states have taken legislative action in recent years to reinforce the notion of an independent 3-tier system.”
Beyond the cross-tier ownership, Craig also highlighted the controversy surrounding the product, as “some states have raised questions related to consumer confusion as Mountain Dew is a globally recognized soft drink.”
He said they’ve seen plenty of examples from distribs out in the field where the product Blue Cloud carries, Hard MTN Dew, “seems to be catching a free ride for placement and promotion as it is merchandised on the same aisle as paid for shelf space for the soft drink.” More concerning, Craig said, “are reports of merchandizing cross promotions with products marketed to children,” pointing to a picture of Hard MTN Dew next to Hot Wheels on an endcap. “Not cool,” Craig said.
Then too, there’s the issue of slotting fees, as PepsiCo, a Fortune 50 company, “pays millions to retailers for shelf space for its Pepsi, Frito Lay snacks, and other food and beverage products.” In fact, Craig said, “Pepsi’s own annual report notes that 14% of its revenue comes from just one mega retailer.”
And 14% of revenue from a company like PepsiCo is big time, with “more than $225 billion in market cap” is “over 3 times the size of AB.”
As Craig put it, “when the bigs jump, the whole ground shakes for everyone else.”
BREW AND FOCUS ON WOMEN. But besides the hot Big Soda topic, the day also focused on employee recruitment and retention.
Some hopeful news there — a good portion of the day’s program was devoted to BREW, NBWA’s program for “brewing a more inclusive beer and beverage distribution industry by tapping into women’s leadership capabilities to accelerate organizational, cultural and economic benefits.” In fact, NBWA brass shared that the program was borne of industry demand — especially those who “want to better set up daughters, sisters and women in our lives to meet success,” per Rebecca Maisel, SVP at Gulf Distributing and NBWA Board Secretary.
“We heard from so many of y’all asking for an initiative like this to benefit your companies, your families, and our whole industry,”she said.
“And as Craig said earlier, the documented fact is that more women in leadership lead companies to greater financial and organizational success.”
Female leadership also “provides important cultural benefits to organizations that leads to higher job satisfaction, increased productivity and lower turnover.”
NBWA chairman Peter Heimark added that “when it comes to retention, lack of growth opportunities is a major factor leading to employee turnover. This represents real financial costs for an organization.”
In fact “you can estimate 33% annual salary as cost just to replace an employee. And with that in mind, supporting women is a no brainer.”
For the next three years (starting in ’22), the program seeks to “Think, Act” and ultimately “Be Stronger.” The plan includes seminars and webinars, a best practices repository, and the launch of a “Leadership Academy” to give women more specific tools and training to enable career success.
Finally Rebecca announced the “Freida G. Maisel” Trailblazer Award,” a new annual award to be given to an organization or person that has been a trailblazer for inclusivity in the beer distribution industry.” Freida (Rebecca’s grandmother) was the first woman to own a beer distributorship outright (not through inheritance), in ’73.
BRENDAN ON BIG SODA, AB ONE AND MORE
NBWA chairman Peter Heimark hosted a fireside chat with A-B CEO Brendan Whitworth after the opening remarks.
Brendan’s participation was opportune, as he’d worked at PepsiCo for half a decade before his time at A-B, having “started on a route truck in c-stores.”
ON SODA IN THE SPACE. Natch, Peter asked how Brendan feels about “Pepsi and Coke following you in the bev alc space.”
“I think there’s a confusion on the retailers’ side,” said Brendan.
When he worked at PepsiCo, he “used to spend a lot of money to buy space” and “displays.” So there are questions around that.
For example, “if you have a door of Mountain Dew, and then immediately adjacent to it, a door of Hard MTN Dew — large chain retailers can be confused.” Independent retailers too.
The same goes for consumers: “If you put ‘hard’ or ‘spiked’ next to a brand, and then that shows up next to [the] non-alc version, I think there’s a lot of consumer confusion that can come along with that,” Brendan said.
ON THE ROLE OF AB ONE. Probably the most newsworthy portion of Peter and Brendan’s chat concerned AB ONE.
“It seems like some suppliers are doing whatever they can to drive wholesaler consolidation,” Peter said, clearly referencing Constellation, Diageo, New Belgium and other suppliers who’ve consolidated largely with Reyes in California. “In fact, it seems like the only wholesaler that’s getting smaller instead of larger from consolidation is AB ONE,” he said, referencing recent divestments in Ohio and California.
He asked about their “difference in philosophy.”
“We had some issues we worked through,” Brendan said.
“As we look at AB ONE, it’s always going to be a strategic part of our business. It’s where we find talent; it’s where we send talent to learn different things. It’s where we stay close to the realities of what our indy wholesalers deal with” in their day-to-day business.
And “it’s easy for us to fail on things in AB ONE … than try to do it with our system. So we try to fail first there” and bring learnings to their independent wholesalers.
But it’s all about “where it makes sense for us to be,” vs. qualified independents.
ON BEES: IF IT’S A THIRD PARTY THEY’RE ON THE SCENE “TO MAKE MONEY.” Inevitably they got to the topic of BEES, and the B2B e-commerce universe.
“For us, our first priority by 100 miles is our portfolio of brands, and growing the category,” said Brendan. “But then we have to look at, how do we enable” our wholesalers. “Sometimes if it’s not us doing it, it’s an independent third party only arriving on the scene simply to make money.” he said. But A-B views it as a “way to make our system better.
NEW NORMAL: A 1.5 BILL CASE SHIFT AWAY FROM TRADITIONAL BEER OVER NEXT FIVE YEARS
Later in the program, NBWA chief economist Lester Jones, citing a 2022 survey of members, pointed out a staggering figure: traditional beer makes up 76% of their current portfolio and it’s estimated to decrease to 68% in five years. It equates to a 10% shift of 1.5 billion cases away from traditional beer product into innovation/beyond beer.
That’s just one challenge facing the industry in coming years.
Another biggie? Worker recruitment and retention.
Lester called out 10,000 people/day retiring and fewer young people entering the workforce as reasons “we’re paying them more money.” But he also took a jab at millennial and Gen Z workers less likely to roll over for demanding distribution gigs.
“These people may show up to work with a pet aardvark and say it’s a comfort animal.”
Some tidbits from a panel on recruiting workers:
RECRUITING AT NIGHT/ MONITORING EMPLOYEES’ JOB SEARCH HISTORY. Dave Stander, COO at Columbia Distributing, said they’ve recently hired a third-party recruitment team after realizing their in-house folks work during the day, but job seekers “hop on Indeed at night.” So recruitment “starts immediately” when job seekers are online after-hours, Dave said. But those same third-party recruiters aren’t just vetting new talent, “they’re watching our employees.”
“If they see one of our current employees, surfing Indeed or looking at different jobs they can give us a call and say, ‘Hey, so and so is getting active and you might want to reach out to that person,’” Dave said.
MANAGING WORKFLOW KEY TO EMPLOYEE RETENTION. Consultant Wes Verno said flipping the script on the old adage “the customer comes first” is key to decreasing attrition.
“The number one reason that we find employees leaving across all departments is because of the workload,” Wes said.
Whereas working 10 hours a day or “coming in and grabbing that extra case” to run out to a customer may have been a badge of honor in the past, that work culture is a “risk” for maintaining young workers.
“This new workforce, they’re not lazy, they’re not bad employees. They just have a different value set and they value their time away from work as much, if not more than their time at work,” Wes said. “We need to honor that, we need to respect that.”
Making a paradigm shift from “bending over backwards” for delivery customers who all want their deliveries on the same days – typically Tuesdays – to “balancing the work and making it as consistent as possible” is key to providing quality customer service.
MAKING MERCHANDISERS HAPPY. Nick Economos, president of Eagle Rock Distributing Co. pointed to merchandising as a challenging position. To ease the burden on his full-time merchandisers during the busy season this summer, Nick said they recruited high school students to work part-time by getting recommendations from a local football coach.
Both Dave and Wes agree making merchandisers “happy” is important to decrease turn-over. Wes said for the distributors he’s worked with giving merchandisers at least one day off on the weekend and two days off in a row “is critical” for maintaining job satisfaction. As is sending merchandisers to work at retailers in pairs. Dave said the team at Columbia separated merchandising – which makes up 25% of its workforce- into its own department to get specific training needed to succeed in the role.
BANG FILES FOR CHAPTER 11 BUT PROMISES “FREIGHT TRAIN” COMEBACK WITH NEW DISTRIBUTION NETWORK
In the midst of NBWA’s kickoff day for its 85th meeting, Vital Pharmaceuticals (Bang) and “affiliates” announced the filing of “voluntary petitions for protection under Chapter 11 of the Bankruptcy Code in the Southern District of Florida.”
The announcement was hardly surprising, after a California jury awarded Monster Energy nearly $293 million last month in its false advertising trial against Bang — on top of the $175 million levied against the energy drink maker, in another trademark infringement case earlier this year involving Monster and Orange Bang.
Indeed, the company called the latest action “restorative,” to help the company “recover from recent challenges” and “the cost impact of reconstituting the company’s national distribution network.” (You can read a bit about how we hear that’s goin, here [see BBD 10-04-2022].)
But not to worry, per Bang’s release, which promised that Bang would soon be coming like a “freight train.”
“All business operations will continue, with improved product delivery and service to retailers through VPX/Bang Energy’s newly constituted legacy distribution network consisting of more than 269 best-in-class distributors. VPX’s Chapter 11 efforts are being supported by $100 million of additional financing from VPX’s esteemed syndicate lenders to help ensure operations continue uninterrupted during the restructuring process.”
Bang founder Jack Owoc praised the “new distribution system” that they’ve “spent the better part of this year assembling,” promising “pre-Pepsi meteoric annual success of several hundred percent year over year growth.” The company “officially completes” its exit from Pepsi this month.
“VPX/Bang Energy intends to reclaim the formidable market share that dwindled while Pepsi was the national distributor of Bang energy drink products,” per announcement. “Immediately prior to VPX/Bang Energy switching to Pepsi in early 2020, Bang’s share of the energy drink market was roughly 9.7%. Under Pepsi’s distribution, roughly 3.4% of that market share was lost. At $200 million per share point, that equates to $680 million in today’s energy drink market.”
The ultimate goal now, is to “regain the massive market share” of the pre-Pepsi days, and “progress vigorously beyond 20% market share in energy drinks.”
Until tomorrow,
Harry, Jenn, Jordan & Bianca
“They always talk who never think.”
– Matthew Prior
———- Sell Day Calendar ———-
Today’s Sell Day: 7
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