“Cheers to 35 years of good times!”

Sometimes, nobody says it better than the people that actually lived it. What follows is a communication from ownership of one distributor to their employees and why they decided to sell their business.  What rings true to you?

“Hello guys,

We wanted to reach out and thank everyone of you for your many years of loyalty and hard work. There were a few reasons in play that we wanted to share with you that led to the decision to sell our business.  

Some of the old timers saw the changes that the beer industry has gone through over the years and saw some warning signs.   First off, year-after-year growth of our brands was increasingly harder to achieve and that was a red flag.  Another troubling industry headache that will eventually change all beer wholesalers is the emergence of automated ordering by big retail chains.  Even in our city, there are two software firms actively trying to develop an app for on-premise ordering.  These trends combined are a bellwether that foreshadows the decline or eventual death of the era of the individual salesman.  

Customer service in the beer industry will eventually come to mean just in time delivery with minimal human contact.  Customer loyalty has changed for the worse.  There aren't too many long-time customers left who would ever want to do you a favor or give you a tap handle based upon past good service shown to them.  

New brands were always hard to come by but new great selling brands are few and far between from any brewery.  The new trend is hastily thought up mega brewery brands with many SKU's that seem to last for about a year or so then abruptly die.  It's increasingly tougher to get excited about or readily want to invest in questionable new offerings.  

Lastly, perhaps the most startling new trend is the younger generations' work ethic.  When I first started in 

the business, I can distinctly remember that getting a beer route came with a sense of pride and the employees would generally stay with us a long time.  600 cases or more delivery days were nothing unheard of in the summer.  Not so today.  There are exceptions but for the most part, today’s worker wants fewer cases, more help, and higher pay.  This was creating another new headache with keeping routes filled and employee turnover to an acceptable level.  This industry is quickly changing and we felt as if we have taken it about as far as we could with the brands we had.  

Looking back, it is easy to see that we had a great run!  We sure did it our way and not necessarily how our breweries wanted to do it.  Being a throwback to small family-run local wholesaler house is what made it fun. We thought it essential that in order to create a positive work environment and foster good employee morale, that you should be able to have a beer or two with your coworkers after a hard day at work.  We embraced the laid-back environment for our employees to be themselves.  Who says you can't do that, maintain a safe and professional culture, and still make a good living?  Creating a relaxed yet accountable atmosphere made for a favorable work place.   

Actively pursuing and investing in key hot brands helped us in expanding our business too.  Whatever the ingredients, we sure had something special in that we were able to remain competitive and profitable for as long as we did, all the while going up against monster sized competitors.  We take a lot of pride in saying that we went out on top and yet were able to keep money in our pockets for as long as we did.  Our distributorship allowed many hard working off the street guys the chance to feed their families earn a good living.  It became a home for many good employees and we ran it like a big family.  Above all, that gives us the most pride. Thank you to all for making our business a great success!

We certainly will miss all of you.  It will be awkward moving on.  We had a lot of fun over the years and it sure made the hard work easier to accept.  As far as the state MillerCoors distributor ranker (our largest supplier), we did go out on top as showing the best increase in sales for year 2018.  As usual, we rocked it when compared to much bigger wholesaler operations.  We regularly did that because of you.  

To those going on to the other two distributors and everyone else, we wish you nothing but success......

Cheers to 35 years of good times!” 

Ask a better question, get a better answer

My observation has been that many family businesses don’t have formal or quarterly board meetings. I think it would be fair to say even more do not have independent board members. 

Why is that? Often there is no perceived need. Shareholders typically comprise the board. The business is running fine, not great, but good enough right now. That leads to a short meeting but not any tough questions facing the business.

When thinking about your board, is everybody candid with one another? Are there challenging questions?   Are different perspectives welcomed?  If the board is all family, how much does that impact an honest discussion? 

Nobody likes change. However, if you are willing to step out of your comfort zone, you may discover untapped upside.  Think about the times you went to an industry meeting or seminar and walked away with just one idea that materially benefited your business. Or if you ever hired a consultant, consider why you did it. You obviously wanted some outside perspective at a point in time.

Would a knowledgeable, trusted and independent board member add value to your business? The pay is likely less than a consultant and the value could be delivered on a regular basis. Not a bad deal.  Often, tough questions lead to different solutions than in the past.  

Ask a better question, get a better answer.

Breaking up is hard to do

Recently, Kraft-Heinz announced a write down of $15.4B related to a decrease in goodwill value of the Kraft and Oscar Meyer brands.  The stock is down over 50% from its 52-week high. Weak organic growth driven by shifts in eating and shopping habits that Kraft-Heinz failed to address led to its weak performance.  Jorge Paulo Lemann, the co-founder of 3G Capital and major shareholder of Kraft-Heinz was recently quoted in Forbes saying “I’ve been living in this cozy world of old brands and big volumes,” where “we bought brands that we thought could last forever,” and “you could just focus on being very efficient... all of a sudden we are being disrupted.” 

Sound familiar? 

Early on in my stock market investing, I hit a real winner in Sun Microsystems. Bought it at $38/share and rode it all the way to $247.  Then things didn’t go so well and the price dropped and dropped and dropped. I was so emotionally attached to this winner. I simply could not bring myself to sell it. I thought it would come back like it once performed. But it did not. Finally, I sold at $55/share. A 45% gain did not feel as good as it should. Now I use stop losses on all orders to lock in gains or minimize losses if things turn the wrong way. No emotions.

Emotions are not your friend when it comes to business. It clouds your otherwise good judgement. I was once told by a business owner, that he aspires to run the family business like a business. No emotions. That is easy to say, but harder to do.

The biggest asset for beer distributors is the right to sell brands exclusively in a territory. On the balance sheet, this valuable asset is often not fully captured as many distributors acquire brands from supplier appointment instead of acquisition. Of course, for those distributors that have been acquisitive, their asset value may be more reflective of market value, depending on when the brands were purchased. 

As you assess your suppliers, is the majority of your volume coming from brands more or less like Kraft-Heinz? If more like them, is your real love of the business prohibiting you from being more intellectually honest about what you should do? Delaying the right decision almost always costs you money. 

Breaking up is hard to do.