As brewers continue to retool their workforce, distributors have seen the call coverage from their local or state brewery representative decline.  In certain instances some of the smaller brewers have gone to a tel sell process where they manage the relationship over the phone.  Like distributors who have to address service levels to lower volume retailers,  brewers have to make decisions on reducing in market activity with the smaller distributors.   Many distributors look at this lack of presence by the brewery as something good as they do not have anyone evaluating their performance on a regular basis.  Unfortunately cutting back on personal distributor interaction and the desire to not have the suppliers visit your market does a disservice to both parties.  Not working in the market with your brewery or distributor on a regular basis, limits the understanding of each other’s capabilities.

 

This “under the radar” approach by the distributor sets that distributor up to be passed over when opportunities may arise in his or her geography.  Being a distributor who merely tries to stay out of the limelight makes it very difficult to grow through acquisitions when no one knows anything about you.  This type of approach has resulted in distributors wondering why they do not get opportunities others do.  Not being a part of the conversation when a supplier is looking at new brands or territories means that you are on your way to extinction.  As I have written before, trying to maintain the status quo only means you are losing ground.

 

A distributor must breakout of not being noticed and be heard by their suppliers.  Those distributors that have grown through acquisitions and those who will grow in the future have done so by making sure others see and hear from them.  When a supplier is looking at approving any potential candidate for a new market they will first look at how you have managed your existing portfolio and how much they know about your management and ownership.   While jealously surely exists among distributors, no one can deny that those distributors who perform well in the market, work the crowds at meetings, serve on distributor councils, and build personal relationships with their brewers are the ones who have the advantage when it comes to consolidation opportunities.  Not only do these distributors thrive on this type of activity but I believe the brewers need and want this type of interaction so they understand more about their network.   I know from personal experience that distributors who were not thought of as consolidators quickly changed that through their performance and enhancing their communication with their suppliers.  Once a supplier feels like you are trying to work with them to move their business forward and not trying to battle them along the way it becomes a win-win situation.  One also needs to remember that a strong brewer/distributor connection is not built on a single personal relationship.  People come and go, even at the higher levels, and a distributor should never hinge a supplier relationship on just one person with that brewer.  If for any reason that person leaves then all of your hard work to build a strong relationship with that supplier is gone.  Getting to know all of the decision makers is crucial.  Those that are good at relationship building understand this and are always working to improve their rapport.   

 

  Regardless of your size, I believe a distributor must invite suppliers to work with them.  Asking for guidance is much easier than being told what to do by someone who has never been in your market.  Even though most suppliers cannot fully relate to the grinds of operating a multi brand distributorship they generally know what works best when marketing and selling their brands.  I have always felt it is best to be proactive when working with your suppliers as this allows for a much easier discussion.   In addition, brewers need to be more aggressive in understanding the market conditions by working with distributors at the retail level.  If a brewer would take a more aggressive approach in working with the distributor at retail, outside of the token “Holiday” audits, I believe they could better address the needs of the market.  The ever elusive “share of mind” that brewers are always looking for is not only obtained by spending more money on your brands but by spending more time with the distributor and better understanding the market.  How you do this by reducing staff at the field level is puzzling to me.  Call me old school if you want to but I believe that getting out of the conference room and into a retailer’s back room is the best way to sell more beer with your distributors and brewers.               

 

I have written on a number of topics regarding the consolidation of distributorships.  Deciding when to sell or buy, the perceived value of an operation, and what synergies you should expect are just a few.   Regardless of how perfect you feel the acquisition is, you will only be able to maximize the business if the culture you create is healthy.  The health of any organization should be judged on the culture that exists with the employees.  While capturing synergies will drive the operating profit, doing so at the expense of a positive work environment will eventually lead to a decline in your business model.  I have seen great work environments destroyed in order to achieve synergy goals.  The loss of key employees along with the reduction of support to enable those remaining to do their job can have lasting effects on the workforce and thus your future profitability. Culture is something that is not manufactured but grows from positive leadership and support over time.

 

In an acquisition or merger the molding of two separate entities, which have historically competed against each other, takes time as animosity built up over years does not disappear overnight.  In order to breakdown this animosity one must address this both before and after closing.  Meeting with all employees of the organization you are acquiring prior to the closing is a must.  Not only does this allow you to better understand who you may be hiring, it allows these employees to know what will be expected of them.  If you are buying an operation in the same market you will not need all of the employees, but you will need more than you expect.  Making sure you recruit the best and brightest cannot be done with one meeting.   You should not only talk to your customers about those who work in the market but schedule a lunch, dinner or just a beer with anyone you may have questions about.  Sitting down in an informal setting will relax the potential employee and allow both of you to better understand what the expectations are.  I have always felt one should over communicate during this transition period.  Over communicating not only means being available for employees to answer their questions but to have weekly social gatherings prior to and after closing where employees from both companies have time to talk and share thoughts about the new organization.  These events should be structured where employees from both teams have an opportunity to talk and not formal business meetings where they only hear you talk about what you want.  Having the employees feel like they have input into how the business will operate helps compensate for the demands you will put on them during the change.  Knowing where the issues are with the company you are buying is critical and don’t count on their senior management to tell you the depth of the problems.  Include the administrative staff in your hiring as many times they will be able to tell you more about the organization as they work with each department. Do not just depend on your current employees who are competing against these individuals to make the decisions for you, as they may have unwarranted issues that you are not aware of. Remember you are trying to build the best team you can, and you may not always have the best person for a specific job in your current organization.

 

While everyone will be anxious about their new job you have to first make sure you create an environment the employees will want to be a part of.  You will end up losing the good employees to your competition and probably keeping many that you otherwise would have let go, if your work environment is not seen as positive.  You need to be honest with everyone as to how you see them fitting in with your plan.  Delaying decisions on who will take on specific roles and compromising instead of making difficult decisions does not allow you to build a culture that has confidence in the leadership.  Live by the standards you have established, listen to the input from others, trust your instincts, and move forward.  Those who want to be part of a winning organization will jump on board and make your new operation better than ever. 

 

I have frequently reflected on a book that I have read several times, “It’s Your Ship” by Captain D. Michael Abrashoff.  Captain Abrashoff commanded the USS Benfold in the Persian Gulf and was known as a leader who was able to take a group of young men and women from all walks of life and mold them into a team who performed above all others in the U.S. Navy.  I believe how he managed his ship can be part of how one can manages their business.  His four principles of management were;

 

·         See the ship through the eyes of the crew

·         Communicate, Communicate, Communicate

·         Create discipline by focusing on purpose

·         Listen aggressively

 

Creating a winning culture is an ongoing process and doing so is critical to the long term success of your business.  While working in a positive culture is important in any type of organization making sure one is created at the time of an acquisition or merger is critical.  Managing the numbers becomes much easier if you create a work environment all want to be a part of.