Annual oppty for distribs to rate suppliers on 9 "key competencies," Tamarron Consulting’s survey of 500 wholesalers, once again has good news/bad news. Most suppliers are getting better in distribs’ eyes: 8 of 11 suppliers in survey since 2000 "scored their highest average scores in 2002," Tamarron wrote. But when asked for an overall letter grade measuring supplier performance and supplier-distrib relationship, wholesalers not so positive. On performance, "the majority of suppliers were graded between B and C with an average of C+." Only 1 supplier (AB) scored a B+ in performance. Wholesalers scored supplier relationship a little higher: "all suppliers received at least a C, with an average of B-." Again, only AB scored better than B.

Recall Tamarron asks distribs to rate suppliers on 9 competencies using 1-5 scale. Most important competencies to distribs in order: mktg mgmt, portfolio mgmt, retail execution, leadership/planning, communications, operations. Since 2000, portfolio mgmt and retail execution gained importance, leadership and communication dipped. When asked for general rating, nearly 90% of distribs said relationships with suppliers met or exceeded expectations, but when distribs took closer look "average competency score totaled 2.86 – indicating supplier performance was short of having met expectations." What’s more, for last 3 yrs suppliers came up "short of having met expectations" in 7 of 9 competencies and most important issue--mktg mgmt--"has consistently been scored the lowest of all 9." Where do suppliers generally meet expectations? Only on portfolio mgmt and operations/logistics. Gotta note general improvement tho: in 2002 survey "scores for 8 of the 9 competencies improved." Network mgmt score was only one lower; retail execution showed most improvement. "Immediate opportunities" for supplier improvement, according to Tamarron, in areas distribs deem important but scores low: mktg mgmt, retail execution and leadership/planning. "Long-term opportunities": network mgmt, communications, technology, human resources. Only a single "existing strength," an important area where suppliers meet expectations: portfolio mgmt. And one "overkill," a competency of low importance to distribs yet expectations met: operations/logistics.

In 2002, 500 distribs participated, down from 587 in 2001, up from 460 in 2000. Tho number down, same 40% of total volume represented as in 2001. Avg distrib in survey sold less than 1.5 mil cases, annual rev under $20 mil, but more distribs over both thresholds than in previous yrs. Look at big differences between AB and non-AB wholesalers: majority of AB distribs sold brands of 3 or fewer suppliers, avg AB distrib had 101-249 SKUs. But nearly 3/4 of non-AB distribs sold brands of 10 or more suppliers and avg non-AB distrib "carried more than 250 SKUs." Wholesalers "more optimistic about the industry" in 2002 than in previous yrs, fewer "indicated that they were contemplating divesting in 2002" and "in general, wholesalers who were optimistic…anticipated no change in their portfolios." Pessimistic distribs more likely to be anticipating a deal.

Ain’t pretty for big brewers in nation’s largest beer mkt Calif (10% of US biz) where economy tuff, tourism down and consumers movin’ to imports. AB shipments off 59,000 bbls, 1% thru Jun in Calif even as it intro’d Bacardi Silver. Down 49,000 bbls, 0.5% for 12 mos too. (Thru Jul, AB sales-to-retailers up 0.5% in Calif, following double-digit Jul gain.) Miller shipments down 103,000 bbls, 6% for 6 mos, including 3 new malternative intros. Down 3% for 12 mos. Coors off 38,000 bbls, 3% for 6 mos and 88,000 bbls, 3.4% for 12 mos. Coors also down in 2d biggest beer mkt Tex, 9% of US biz, where it’s off 100,000 bbls, 4% for 12 mos. So Coors has lost almost 200,000 bbls in 2 states in last yr thru Jun 2002. For 6 mos, Coors off 30,000 bbls, 2% in Tex. Miller's Tex trend same as in Calif: -3%. But it shipped 60,000 bbls of malternatives there so its beer brands down 6%. Miller volume down 3% for 12 mos too. But much different story for AB in Tex: even with 106,000-bbl, 11% drop in Jun, AB still up 240,000 bbls, 5% in 1^st half and 369,000 bbls, 4% for last 12 mos.

SAB dove right in and imprint of new ownership already being widely felt in Milwaukee just 1 mo after deal closed. SABMiller appointed Barry Smith as Miller's senior veep of corporate strategy and Bevco (SABMiller’s Honduras co). Barry had previously run Pilsner Urquell USA which he will continue to oversee "until such time as it is integrated" with Miller, according to message Miller sent to distribs. Miller also just announced that veep finance Paul Napieralski will leave Oct 1, replaced by Gavin Hattersley, formerly cfo of SAB Ltd in Johannesburg. This is familiar scenario in takeovers: just about first guy you bring in is one that watches the $$$. As Paul said in statement: "Miller is moving into a whole new financial system as a significant part of an international company based in London." Meanwhile, a team of McKinsey consultants taking in-depth look at many aspects of Miller. And Barry Smith took over strategy role from sr veep Dick Strup who is now sr veep integration/intl, which is a "virtually" full-time responsibility working "with SAB and "representatives of McKinsey & Co to combine two great beer companies" according to prexy John Bowlin in statement. (Correction: After integration process, Dick’s future at Miller unknown.) In early Jul in London, SABMiller appointed Mark Sherrington as worldwide mktg director. Mark reports directly to ceo Graham Mackay, who said at time: "The addition of the Miller`Brewing Company to SAB and the importance of the US market underlines how key this role will be in the future development of SAB." Already some significant changes in ad approach reported in Ad Age, tho unknown if these triggered by change in ownership. SABMiller "planning a mammoth corporate branding effort" wrote Ad Age, with theme: "If you make the time, we’ll make the beer." Distribs "will vet" new ads at NBWA meeting, wrote Ad Age. But corporate branding effort "may not break until next year." Miller also shifted Gen Draft ad spending to Miller Lite (see last issue). Meanwhile, SABMiller got a feather in mktg cap as Miller Lite ads scored very well in USA Today Ad Track which surveys consumers (33% liked them a lot compared to 22% avg for survey).

As Coors sales growth stalled out over last 2 yrs, its relations with many distributors gradually deteriorated. Some top execs acknowledge there are issues which they are working to resolve (see below), but don?t agree with all we report here. Lots of distribs (tho not all) say Coors demands more without looking in the mirror, blames wholesaler execution for its own shortcomings and frequently does not listen. To many, Coors (especially its sales team) acts as if it?s still growing 4-5% instead of flat. These distribs feel Coors makes demands as if it had much greater share and clout in most markets than it actually does. Another common beef: Coors lacks street presence to go head-to-head with top 2 and in some mkts, even against leading importers. To a number of these distribs, Coors execs seem either unwilling or unable to face these realities. It is no secret that Coors has struggled in 2 of its biggest traditional markets, Tex and Calif (22% of biz in 2001), largely related to its inability to attract young adult Hispanic male drinkers. That weakness yrs in making and yet at a recent Calif mtg with distribs, sr Coors execs downplayed seriousness of competitive threat (especially from Mexican beers) and made rah-rah pronouncements. That didn?t sit well with distribs. Meanwhile, Coors had heated debates, sometimes battles, with about half of its top 10 distribs in last 12 mos over issues like: who will run the business, how it?s run, which brands get focus, or who should buy or sell. These same issues play out with other distribs in network and create bad feelings. In general, more grumbling about Coors being inflexible in consolidation situations. In already consolidated houses especially, where Coors is often a small, not growing % of distribs? biz, these bad feelings can?t be good for Coors.

Some distribs INSIGHTS talked to didn?t express same unhappiness and several also pointed to mitigating factors: panel members did feel Coors listens and makin' some good moves; lotsa distribs still like new ads; at least 1 major distrib who has had significant problems with Coors in past described dramatic recent turnaround in Coors attitude to his mkt; some distribs also pointed out Coors is in much better shape than Miller. But lotsa distribs also talking about results of recently released Tamarron survey (a consulting co) of 500 distribs where distribs rank suppliers according to 9 competencies (see below). "Wholesalers scored" Coors "lower in more competencies" in 2002 vs 01 "than any other supplier," wrote Tamarron. Coors fell from 2d best-ranked supplier to 4^th overall and didn?t meet distrib expectations in most areas. (Note: these surveys were taken before Coors new mktg campaigns hit and they?re qualitative more than quantitative, but over 200 Coors distribs responded). The Tamarron survey and other distributor relationship issues were discussed at a constructive Coors distrib panel meeting in early Aug, several sources say. "We acknowledge that there are issues," Coors sr veep sales Carl Barnhill told INSIGHTS. "We?re going to work very hard to resolve those issues" and to "have a great partnership with our distributor network."

Normally, one thinks frequent turnover at top of co is not conducive to growth. But 2 of top importers, Labatt USA and Guinness Bass Import Co, buck that theory. Labatt USA’s new prexy Steve Cahillane starts Nov 1. Takes over from Marc Portelance. Steve will be 5^th LUSA prexy in last 10 yrs. During that time, LUSA has climbed from 1.4 mil bbls to well over 4 mil bbls in 2001. Grew almost as much as Coors during last decade, tho some of that thru acquisitions. Timing of change unusual because LUSA national sales conference just 2 weeks away. Guinness Bass Import Co has had even more turnover at top and almost as much growth. GBIC had at least 6 prexies in last 10 yrs. And grew from under 900,000 bbls in 91 to over 3 mil bbls this yr. GBIC just switched prexies last mo as Tim Kelly leaves and John Replogle took over. That timing also unusual because GBIC having exceptional, profitable 2001 on strength of Smirnoff Ice. Interestingly, both John and Steve under 40, both Harvard MBAs. Finally, both GBIC and LUSA are subsidiaries of large international cos, Diageo and Interbrew. Each places high emphasis on growth in US mkt.

At presstime, word just starting to come in about AB’s price plan in select states starting Sep 30. In some of its largest mkts, AB not shy about going up. AB suggested distribs go up 45 cents to retailers on Bud and Bud Light in Calif and Fla, with typical 70/30 split. That’s about a 3% increase on premium brands in 2 states where AB sells 17% of its volume. Interestingly, pricing plan diverges in those 2 states on other brands. In Fla, a big subpremium mkt, AB taking subpremiums up suggested 45 cents, about 4%, to retailers. But no subpremium increase in Calif, which is a small subpremium mkt. In Fla, front-line on Michelob going up suggested $2.10, 12% to retailers, but AB distribs give retailers quantity discounts of $1.70 on 10 cases of Michelob family, $2.35 on 25. So gotta question how big Michelob family rev increase will ultimately be. Fla is AB’s biggest Michelob mkt, where Ultra has tested well. One Fla Bud distrib INSIGHTS talked to concerned that current round of price increases keeps price gap too narrow with imports (compared to both premiums and superpremiums). Imports in Fla still hot and on deal recently in major chains for $9.99 per 12-pack, sources say. (Wasn’t latest round of price increases supposed to get imports off that price-point?) "Imports are suckering domestic brewers" into price increases, distrib added. Meanwhile, Michelob family already went up $2.00 to retailers in Calif earlier this yr; its trends soft out there. Draft prices going up $3.00 in Calif too. AB going up on suitcases and single-serves in NC too. Other states expecting increase, unconfirmed at presstime. More next issue.

“What we’re saying is the taxpayers of this country ought to set a limit on how much advertising they want to subsidize.”  So said Senator Stabenow (D-MI) to Reuters recently, referring to her bill that limits the amount drug companies can deduct for ad expenses.  Senator Durbin (D-IL) chimed in that current level of drug ads “is ridiculous.”  They’re recycling an old anti-alcohol proposal that never got traction when aimed at brewers.   Gotta figure if pols willing to target drug co’s, alc bev biz might not be far behind.

That’s name of Miller-Jack Daniel's cola-flavored malternative, Reuter’s reported this morning.  On-premise rollout will be in Jul, off-premise by Sep.  Expected shipments in 2002: about 5 mil cases, said JD brand director. 

So sez most recent survey from Mediamark Research, Inc from fall  2001.  Approx 43% of adults 21+ said they’d had a beer in the month prior to survey.  Compares to 39% who said they drank liquor (79.5 mil), 33.5% who drank wine (68 mil).  Obviously, some drank 2 or all 3 alc bevs.  Over half of 21-34 yr-olds drink beer, and nearly half of those 35-44 are beer drinkers, then figures drop sharply to just 26% of those 65+.  Similar pattern for spirits, but not wine: in fact 29-30% of 21-24 and 65+ say they drink wine.  We don’t have previous Mediamark data to report trend, but back in 96, another big mkt research co had reported 46% of those 18+ were beer drinkers. 

As of last Friday, there were 218 co-sponsors for bill to repeal 1990 excise tax increase on beer. "That kind of support from Congress speaks very well about our image," Beer Inst prexy Jeff Becker told INSIGHTS, clearly upbeat about "recognition of what?s our most important issue." No bill yet in Senate, but this "positions us well for the next debate" on taxes, said Jeff.