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February 4, 2011


Some of you may remember the 1979 Pittsburgh Pirates and their slogan by Sister Sledge “We are Family.”   Willie Stargell led the Pirates over the Expos by uniting everyone in Pittsburgh around that song.  Being family in the beer business is something that permeates the generations of our industry.  Like so many, the leading breweries and distributors in our industry over the years have been grounded in deep family legacies.  While few still exist today, the Busches, Millers, Coors, Pabsts and Strohs, all brought beer to America before and after prohibition.

In addition to these great brewers many long standing family legacies also exist with distributors.  In looking at the current landscape it would appear that distributors have done a better job of continuing these legacies than the breweries have, considering there is not one of the original breweries left that has family ownership in a controlling fashion I would think Coors may be the only one where family management is still in place.  I guess that is progress?

As distributors struggle with decisions on how to continue the family legacies handed down through generations, the ability to continue to hold on is becoming more challenging.  As the industry becomes more competitive due to synergistic moves by competitors the ability to compete as you have operated in the past is gone.  Change is inevitable and if you don’t move forward each year you may never catch up.  As your competitor reduces backroom costs through synergies and invests more into the market through equipment, systems and manpower, you have to keep up.  If you cannot garner cost reductions through synergies then you either have to reduce spending and services, improve your gross profits, or get out before you get run over.  Each year you see distributors exit the industry as they realize they do not want to see their net profits decline to a point of no return and they realize they can manage their legacy better without having their competitor control it.

I have found that the hesitancy to sell is as much about transferring wealth to future generations (legacy) as it is about preserving wealth for today.   Today’s wealth in many cases has already been made.   I have heard more than once that “I would entertain the thought of selling but I don’t know what I would do with my proceeds.”  This has always been a puzzling thought to me as it generally comes from someone who does not have any one to pass the business along to and quite frankly could make as much if not more through a wealth manger and not have to work nearly as hard.  I know it’s about losing that pride of ownership, the community recognition, and the bond with employees and fellow distributors, but there is a way around that also.  In today’s world keeping family involved in a legacy while taking something off the table is a real possibility.  Since the formation of MillerCoors there has been increasing interest in joint ventures and mergers.  This type of action can allow one to keep the family legacy going (name of company), maintain family involvement, while creating a more profitable and sustainable entity going forward.  It also allows one who may want to back away to do so and still reap the benefits of being an owner of the distributorship.  
I contend that the industry as a whole has not done a good job of planning for the succession of businesses.  The current distributor agreements allow for passing the business along to the next generation, as generally the current generation has worked hard to build wealth within the business and should be allowed to pass it along.  In many cases sons or daughters have stepped into their father’s or mother’s shoes without missing a step and I salute those situations.  The issue in some cases is not ownership but operational capability.  Can that next generation operate the distributorship as well and do they have the work ethic their father or grandfather had?  I am not generalizing here, but stating a fact in more situations than anyone is willing to admit.  In order to solve this I think one needs to be more active in hiring professional management to run the business and look into mergers and joint ventures in situations where current ownership lacks the capacity to move the business forward.  While negotiating mergers is much more challenging the benefits far outweigh the additional efforts it takes.  The fact you can build a new more profitable company with limited capital needs and you are able to put the best of all parties together, in my mind is a big plus.  One of my favorite thoughts about the future is it is “Not what you gather that matters but what you scatter that tells the kind of life you have lived.”  When it comes to building the family legacy I think it is important to not worry about today but build a business that will be there for future generations.

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