It was (mostly) a rout.  Almost every ballot measure that sought to legalize recreational weed passed yesterday: 2 states, and 2 cities.  Alaska and Oreg joined Wash to secure the northwest.  How long will Calif hold out, especially as voters there reclassified typical drug crimes as misdemeanors?  Across US, DC legalized too, by huge margin (69-31%).  But Congress may have say in what actually happens there in dealing with irony that same substance in same town could be considered legal by the locals but still felonious by the feds.  Then too, South Portland, ME joined Portland as more pot-friendly, tho Lewiston did not.  Fla nixed medical marijuana, even tho 58% of voters supported it (needed 60%).   Like alcohol, each jurisdiction will have its own rules and regs as experimentation rules in this retreat from the war on this drug.  By the way, jury still out on legal pot’s ultimate effect on beer sales, but data thru Sep from Beer Inst shows Colo beer volume + 1.3%, Wash running +1.2%, each far better than natl trend.   

“That would be the greatest thing that could possibly happen, for Pabst to come back to Pabst.”  That’s unsurprising reaction to possibility that Pabst could return to Milwaukee to open up pilot brewery and/or taproom and possibly more, reported in Milwaukee Journal Sentinel this morn.  Comment came from developer at complex called The Brewery in town, which is actually the old Pabst complex there, now a “downtown mixed use development” site.  New Pabst owner Eugene Kashper is “scouting locations to open a small brewery, possibly with a tasting room,” including spaces at The Brewery and Pabst’s former main offices.  “We want to be in an authentic, old Pabst space,” Eugene told the paper.  Bein’ back in Milwaukee “would really bring home what our brands are about.  It’s American heritage. And it’s originality.”  As Eugene has said elsewhere, he aims to experiment with recipes for discontinued brands – naming Old Tankard Ale to paper – and create “cool products that we can sell locally,” as Pabst aims to strengthen its ties to craft world/ drinkers.  Re-establishing Milwaukee presence could also mean some Pabst mktg employees head back to original home too, Eugene reportedly told one of article’s sources. 

In unusual move, one of the top MillerCoors distribs, Beer Capitol in Sussex, Wisc, selling off small part of its territory to Ott Schweitzer Dist in Milton.  It’s reportedly around 7% of its approx 11-mil-case biz, expected to close at the end of Feb, mostly in a rural area.  “This allows us to compete more efficiently,” said Beer Capitol ceo Aldo Madrigrano, who is also chair of MC’s distrib council.  In territory it sold, Beer Capitol faced different AB competitor, with different pricing.  This made it more difficult for Beer Capitol to have uniform pricing throughout its territory, added Aldo.  Ott Schweitzer Dist was interested in acquiring, had also bought a small piece of outlying territories when Beer Capitol purchased Milwaukee and will now be over 2 mil cases.  

Final figures coming in from different sources suggest spirits volume growth beat beer last yr, but gap pretty narrow.  Control state volume up 2.4%, reports NABCA and $$ up healthy 5%, noting strong Dec sales.  But total US spirits volume up just 1.5%for the yr, estimates folks over at Shanken News Daily.  As we reported last week, with big Dec shipments gain and including cider, US beer may be up near 1% when it’s all said and done, so spirits’ share gain of absolute alcohol likely to be very small.  Distilled Spirits Council (DISCUS) will announce its take on the spirits year in volume and dollars at supplier level next week.  

“Going forward we’re going to see there are fewer [global beer] deals to be done. They might be more complicated, given the ownership structures,” said SABMiller ceo Alan Clark in wide-ranging interview with Institutional Investor.  There will be more consolidation, Alan believes and SABMiller “will play its part in that, but it’s unlikely to be as active as it was.”  Is “final wave” coming?  “Yes, I do think so,” said Alan, expecting another “five years or so of kind of large scale consolidation.”  Each of top 4 players has “very different strategies,” Alan pointed out, emphasizing SABMiller’s priority is emerging mkts, where it already gets 70% of revs/volume.  Given demographics, economics and current drinking levels, Alan focusing on “large markets [and] high growth position and when we can get leadership,” citing “fantastic” oppys for growth in Africa, Latin America and Asia.  Also, “it’s what brand portfolios do they have, because the major market in M&A is still in national markets and national brands.”

SABMiller Still About Local Brands, Being “Accepting of Diversity”; ABI-SAB Chatter “Like the Weather”   Implicitly and explicitly, Alan drew distinctions between SABMiller and chief rival AB InBev.  Repeated that he doesn’t view lack of global brand as a “handicap…. It’s a reality” that goes back to beginning of SAB expansion which was about “how to run assets better, a belief that we could move into developing and emerging markets and develop the foundations for the beer culture.”   He sees it as “advantage” that SABMiller has “built very strong local portfolios and across the price points,” while adding regional brands.  “The point I make to the leadership team often that we are a global company, but when we operate in Columbia, we are Columbian.  If you talk to employees in the Czech Republic, they’ll talk to you about Plzensky Prazdroj, our local business…. We’re accepting of cultures, we’re accepting of diversity.”  The interviewer followed up: “So sell to me, not to Carlos Brito?”  Alan: “That’s it.”  While well aware of “chatter” and “noise” about an ABI bid – it’s “kind of something you get used to…like the weather” – SABMiller he’s focused on its own biz, customers and consumers.   All that said about local vs global, SABMiller hasn’t abandoned idea of global brand.  “No firm decisions yet,” but SABMiller looking at oppy of building Snow into an international brand, tho that “takes a long time,” Alan reminded.

Moving More towards Craft, an “Indulgent Space”  “We have found it hard to turn our attention to it,” Alan admitted when asked about craft.  “It’s a space that was ignored for quite a long time by the major brewers.”  That’s even while Blue Moon and Leiny Summer Shandy among largest craft brands, Alan sez.  “Consumers are fragmenting” and “they’re looking for more interesting beers.  It’s moving away from core lager as be-all and end-all of our business.  We’re moving into this more kind of indulgent space.”  Getting to 20 share of high end biz will mean combo of driving current brands, replicating success of Peroni in UK in US, new brands and “assessment of acquisition opportunities on a brand basis, targeting brands that we think are of high value in selected spaces”

Ignoring, Insulting Women has “Robbed” Major Brewers of “Major Opportunity”  Asked about biggest change to come in SABMiller mktg over next 5 yrs, Alan returned to theme he sounded at recent investor mtgs:

“Transformation in the way that we express beer to modern consumers in developed markets.”  Specifically, major brewers targeted “males almost exclusively for very, very long period of time.  Not only has it ignored women, it has often been insulting to women. And I think that’s robbed us of a major opportunity.”  There will still be beer for men but “we need to change beer so that it is not excluding women and not disparaging women,” so expect communications to address “a much wider range of occasions – to be more natural, less laddish.” 

Construction is “well under way” to transform Eagle Rock Dist Co’s unused portion of 440,000 sq ft of  warehouse space in Norcross, GA into Eagle Rock Studios for tv/movie productions, reported Gwinnett Daily Post.  “The $13 million renovation is expected to be complete by the end of March.”  This is not Eagle Rock’s first foray into entertainment biz, having already transformed its Stone Mountain warehouse that it no longer needed into a filming studio last yr.  “Lucky for us, ABC/Disney came knocking on our door and the Stone Mountain facility lent itself so well to what they had in mind,” said ceo Steve Economos.  He believes with “right pricing model,” Eagle Rock will recoup its investment in under 3 yrs.  

Not the best of times for big Oh distrib Heidelberg, tho biz is fine.  And things may be lookin’ up in family dispute. Recall, 50% owner Al Vontz III sued co late last yr, claiming his sister and her family took control of company (see Dec 11, 2014 Express).  In amended complaint quickly withdrawn last week, he added charges.  Objected to “excessive and unjustified” bonuses for 2014 totaling $3.78 mil, including one for himself of $1.4 mil, and claimed Miller family which is runnin’ the biz “added fuel to the proverbial fire,” reports Business Courier of Cincinnati.  But after Jan 21 mtg with judge, amended complaint withdrawn and both sides issued joint statement of no comment and that each would report to court on Feb 9, according to Biz Courier.  Documents suggest dispute born back in 2013 when Miller family approached Vontz to sell his stake.  There was mtg in early Dec 2014 where Millers rejected “three of four potential transactions proposed” by Al, and the “take it or leave it” price Millers proposed was “grossly undervalued, inadequate and unfair” in Al’s view, paper reported quoting court papers.  Hopefully, Jan 21 withdrawal of new charges and joint statement means family settlement in works.

Meanwhile, Teamsters separately lashed out at Heidelberg with leaflets to fans attending Sunday’s NHL All Star Game lamenting: “Tell Labatt: Destroying Ohio Jobs is Tasteless” and “Labatt Beer: What the Puck?”  Turns out Heidelberg workers in Columbus voted to join Teamsters in 2013 and subsequently tried to negotiate first contract.  “But the company is unyielding in its insistence that Columbus workers pay more for their health care than Heidelberg workers in other locations,” Teamsters claim. In addition, distrib allegedly fired union supporters in Columbus, paying them $30K in settlement with Natl Labor Relations Board.  Not surprisingly, Teamsters tapped in to family fight too, including in statement: “The Miller and Vontz families who own this company spend thousands to sue each other and fight among themselves; in the meantime they are abusing hardworking Ohio employees.  This behavior is unacceptable.”          

Many presenters put complaining about fast-growing SKU counts aside at recent future-focused Supply Chain and Operations Leadership Conference from Tamarron Consulting. Instead, they explained how their companies invested in changing shape to better face growing complexities. Considering operations focus of event, most of those investments came in form of rejiggering space or utilizing innovations that help smooth out ops (see below). But keynote from Crescent Crown’s finance veep Neil Baier was (almost) all about the Benjamins.

A finance vet, Neil’s roles for CC now include “Grant Finder,” seeking local, state and national-level grants and rebates that’ll help save his big distrib big bucks. “We have to find new ways” to both increase revs in top-line and create efficiencies to grow bottom-line in “the most complex industry I have ever seen in my life,” Neil said. Past grants have come from local utility co rebate programs, state training grants and federal solar rebates. But a current project seeks to mitigate effects of “looming CDL driver shortage.” Estimates Neil’s seen peg shortage to tune of 2, 3 or 400K drivers over next 5, 6, or 7 yrs. “Average age of the current drivers is 55,” per Neil, and younger workers turning to “higher pay in construction.” Facing this issue, Neil found a new federal job grant offers money for “public/private partnerships to start apprentice programs with community colleges.” So CC looks to partner with Maricopa Corporate College, which operates 10 community colleges in Ariz, to offer CDL driver training. Ideally, program includes “recruiting tool,” to help CC bring in recently-trained drivers. And Neil pointed to broader upside: gov’t funding programs as community colleges they’re more “easily transferrable to other markets.”

Plenty of Options for Improving Ops, Lotsa Tech Talk Too  Pairs of distribs and vendors offered more operationally-focused answers to managing more suppliers, brands and SKUs in series of case studies presented during SCOL. Also looking at an aging group of drivers and big payouts going to keg-related workers comp claims, Origlio Bev ops veep Ron Ward tasked Rehrig Pacific Company with creating simple mechanical solution to reduce those injuries. After spending half a million in workers comp claims in 2012, including 50+ keg-related claims, Origlio implemented new keg-holding trays for side-loading trucks and “electronic winch kit” from RPC to ease unloading. In 2013, the distrib didn’t see a single injury from handling kegs.

While that presentation offered mechanical innovations, many others looked to other technology, collecting and using data, turning to cloud-based storage, gps tracking and the “internet of things.” Houston Distributing genl mgr/svp Rick Roberts “chose a handful of metrics” when bringing in new trucks that had fleet tracking and mgmt technology from Telogis. Drivers can use smartphones to see how they stack up against other drivers based on chosen metrics, a “gamification” to “get them to be better on their terms,” Telogis’ Kelly Frey said. Both Tom Turcotte, ops veep for DeCrescente Distributing in upstate NY, and Rob Sims, corporate director of ops for Craig Stein Beverage, were challenged by vendors PDC Consulting and Encompass Technologies, respectively, to think differently about their biz and harness technology to improve. Darrin Spence of Encompass brought up how the “internet of things” might affect distribution: like “a warehouse might become aware of what’s going on” inside it, a “forklift knows what’s on it” and “the shelves can count themselves.”

Kaley Parkinson of Rehrig Pacific Co pushed further here, encouraging movement in this direction to “create visibility through the gathering of data,” which can increase capabilities as well as “cut costs.” He wondered “what if we gave kegs a voice? What if we gave palettes a voice and they could generate data” and then talk to each other? Consumers heavily use mobile technology, so Kaley encouraged distribs to consider how to be “mobile-first” too. “We can do more than just get items from point A to point B,” he argued. One audience member reminded of the importance of “balance” when using Big Data, the “responsibility” behind “who gets to use this information.” True, Kaley said, “it’s dicey, no doubt. But that’s not a reason not to do it.”

In lengthy and mostly glowing profile of Dean Metropoulos, The Washington Post recounts “his dominance of the lucrative American grocery aisles,” and besides Pabst sale, “his masterstroke” as the “savior” of iconic Twinkies snacks.  Dean’s “deceptively simple” playbook, to buy long-known brands that have lost their “mojo” and revitalize them for hefty profit has helped him amass net worth of $2.1 bil, noted Post.  In making what Post sez is around $500 bil in profit on Pabst deal within 4 yrs, Post claims Dean (and sons who ran biz) grew Pabst sales 35% in 3 yrs, though total volume actually flat during that time period, while PBR brand sales grew 25%.  Under Metropoulos ownership not all ran smoothly, however, as story recounts that “dozens” of employees left co when it was moved out to LA and “some top executives spoke bitterly about their new owners,” who “belittled and overloaded employees with impulsive, oddball ideas.”  “No one at Pabst ever screamed obscenities into the phone before (Daren and Evan),” recalled field mkting rep Bryan Cook. “They were trying to manage through fear and aggression,” he added.  What’s next for the family? Dean is looking at becoming an NFL team owner and “other deals are coming along soon enough,” he told Post.      

Harvard Biz Review released its annual ranking of top 100 CEOs this morn, based on “hard data,” namely “the increase in total shareholder return and market capitalization.”  And ABI ceo Brito named #46 on the list which looked at 1200 global cos. The only other bev exec to make it is Starbucks’ Howard Schultz.  Brito also embodies another theme emphasized by HBR: like #1 CEO Amazon’s Jeff Bezos and 22 others, he has an engineering degree.  Actually, a lot of ABI’s top execs are engineers.  And here’s what Harvard Biz School dean (an engineer himself) sez about engineers leading a biz: “Studying engineering gives someone a practical, pragmatic orientation….  Engineering is about what works, and it breeds in you an ethos of building things that work ‒ whether it’s a machine, a structure or an organization.  Engineering also teaches you to do things efficiently and eloquently, with reliable outcomes and with a margin of safety.  It makes you think about cost versus performance.”  HBR also worked with Reputation Institute, a reputation mgt consultancy, to rank top CEOs/cos in terms of “work environment, citizenship, leadership and so on.”  There ABI somewhat lower on list, at #79 out of top 100.