The New Reality for Retailers: Is Consumer Choice at Risk?

Monday, March 13, 2017 2:29:00 PM

Source: NBWA

MAR 9, 2017

America's independent beer distributors love their independent retailer customers. In many markets, small and independent retailers and beer distributors are some of the last family-owned and local businesses operating on Main Street. When independent retailers and local beer distributors are united on building brands, delivering consumer choice or advocating before the state legislature, great things happen.

Independent beer distributors are dedicated to the brewers of the beers they distribute. This includes brewers ranging from the largest, global, iconic brands to the newest, smallest, most local brewers. Much of the excitement in the beer category is driven by the innovation, energy and new products generated by thousands of emerging brewers across the country.

I've heard more than one beer distributor say that craft beer has made selling beer "fun" again. Beer distributors take immense pride in their ability to help small brewers get established, grow these craft brands and celebrate in their partners' successes. And sampling at the brewery has become one way that brewers can introduce their products to thirsty consumers. 

But as more and more brewery-owned retailers are established, and as breweries' direct-to-consumer sales continue to grow, the competitive landscape is being upended. In some states, brewers are aggressively expanding their retail privileges from their brewery location to stand-alone, non-brewery taprooms or tasting rooms. And these modern-day "tied houses" are often exclusive outlets, selling only alcohol products that they own.

The consumer, with $20 in their pocket, may have previously gone to an independent bar or restaurant for a burger and a beer or two. Now that same consumer can go to the local brewery taproom or brewery-owned retail establishment for beers and a complete dining experience. These taprooms are increasingly serving as competitors to licensed, independent retailers.

So is there anything wrong with this? That is up to policymakers in state capitols.

But imagine if this rationale were applied by global alcohol giants like Anheuser-Busch InBev, Diageo or Gallo? Competition would slow as these giants grew market power at the expense of brand building beer bars.

Beer industry overall sales are traditionally flat to up 1 percent. However, the fastest growing sales in the beer industry have been sales outside the three-tier system, specifically beer sold on brewery-owned premises.

The largest international brewers have noted this small brewer trend and are now doing the same thing. Anheuser-Busch InBev has bought numerous craft breweries in the last couple years and all of them have taprooms, which makes the company the fastest growing taproom brewery. Constellation's Ballast Point has noted plans for increased retail operations. And now Diageo is getting in on the game with a reported Guinness taproom slated to open in Maryland.

The open system of independent distribution and retail beer sales has been an unparalleled success, providing record choice to U.S. consumers and access to market for all brewers. Is that now all at risk?

The blurring of the lines between who is a brewer and who is a retailer presents both a business and political challenge for beer distributors and independent retailers. Retailers are distributors' customers, and brewers are their suppliers. Distributors' retail customers are losing sales and are not happy that their suppliers are no longer their partners but now are competitors. The common agreement that the three-tier system is the best path to the consumer is being challenged. Suppliers see money in bypassing the distribution and retailer tier, despite the long-term implications.

As independent retailers face this issue, they must be bold in telling their story. Thousands of Main Street jobs. Local investments. Access to retailers for all breweries. Consumer choice including a wide variety of brands. And long-lasting community partnerships. Independent retailers have a great story to tell.

The stakes are high, and independent retailers need to act to support the open and independent distribution system that serves consumers so well.

National Beer Wholesalers Association President & CEO Craig Purser provides industry commentary each quarter for ABL Insider, a publication of American Beverage Licensees (ABL), a national trade association for retail alcohol beverage license holders across the United States. Each column provides insight on issues of concern to beer distributors, their retail partners and others in the alcohol beverage industry. To learn more about ABL Insider, please visit http://ablusa.org/news/abl-insider.

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re: The New Reality for Retailers: Is Consumer Choice at Risk?

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