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May 24, 2011

Status Quo

According to the Merriam-Webster dictionary Status Quo is defined as “the existing state of affairs.” In the ever changing world of the beer industry is there really a status quo?  Knowing that there are always outside issues that influence the status of your business can you ever expect the status quo?  Despite this ever changing environment, there are many today who want the status quo but expect to achieve it with minimal effort. The absence of effort to change your business or look forward in planning for the future means you are, in reality, losing ground in building your business. 

The ostrich approach of ignoring what is changing around you will not only prevent you from maintaining the status quo but will make you more susceptible to the potentially detrimental effects of these changes.  I have often heard, from those who want normalcy that they see no need to change.  These individuals will typically say that they have been operating this way for years and are happy with the results. Those who do the same thing over and over and expect different and or improved results are not being realistic.  In these cases, the businesses status quo is not being maintained, the market and their competitors are changing, which means the existing state of affairs is not the same.  I would contend that those distributors who are not changing operationally or in their approach to growing their volume do not have long term viability in the industry.  Once they realize the need to change it will be too late as their options will be limited or their expansion opportunities will have been completely eliminated.  As consolidation in the beverage industry continues to evolve, those who are not being assertive in their efforts to grow will be less and less viable operations. 

As I previously mentioned, distributor consolidation is an area where there is no status quo.  The norm going forward with brewery and distributor consolidation scenarios is that they develop on a daily basis.    Because of this, I believe, those who are just trying to “wait it out” will lose as the environment for consolidation has never been better.  The cost of money is as low as it has been in years and the number of willing buyers for brands has suddenly grown from outside the typical ABI or MillerCoors transaction.  As a result of these two elements there will be more buyers for a business than ever before and they may be willing to pay more than ever before.  I would be at fault to not point the other argument that says the environment to keep the status quo is better than ever.  This argument is based on record setting gross profits and the absence of a method to place meaningful pressure on distributors that suppliers want out of their systems.   If you are not actively involved in making an acquisition or selling your business I believe you should reconsider your strategy.  As consolidation takes place around you, being the last one to take action may not always be in your best interest.  I would suggest that if you are the last to sell, your price is dictated to you by those who sold before you.  If you are waiting to make that one acquisition, you may want to move now.  It is difficult to determine who will be there to compete with you for that opportunity when it happens in the future or even if that opportunity will still be present.  

So what price do you pay to ensure you are not left waiting when the train leaves the station?   There is no one answer to this question, but if you plan on growing either through consolidation or organically, NOW is the time to invest.  One thing is certain….the “status quo” of tomorrow will not look like the “status quo” of today. 

“There are three kinds of businesses:

Those that make things happen…..

Those who watch things happen…..

Those who wonder what has happened.”

Peter Drucker

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