Guest editorial - open letter to beer wholesalers from Conlin Beverage Consulting Inc. President John M. Conlin - Editorial

Dear Beer Wholesalers:

You've all heard it before, the beer wholesaling world is changing like never before. In fact, at the recent NBWA convention this message was made over and over. Outgoing NBWA Chairman Kevin Forth noted "Wishful thinking is a waste of time, so don't sit around commiserating about the 'good old days' with the expectation that they will return. They won't."

Incoming NBWA Chairman William Thies also discussing the changes facing the beer distributor stated that, "... it's probably the most critical challenge each of us, as business people, have faced in many years."

Leo Kiely, President and C.O.O. of Coors Brewing Company also stated "All you have to do is read the newspaper and see what's going on all across America. These days, things are changing faster than they have ever changed before, and they're changing on every front of our business..."

Mr. Kiely makes a point that shouldn't be lost, there isn't an industry in the U.S. that isn't changing like never before. Instead of lamenting the passing of the good old days, why not try to learn from the experiences of other industries.

Why make the same mistakes that other's have made? Let's learn from their pain so we don't have to experience it.

Many industries have gone through similar gut wrenching transformations. Let's quickly go down some of the paths other industries have walked as they face fundamental change.

First, of course, is denial. The situation is a short-term aberration, caused by things beyond our control. In no time at all things will go back to the good old days. Often we resort to blaming the customer. If only the customer would open his eyes, then he would see that we are right and he is wrong. For wholesalers we have a double bonus, we can blame the retailer or the consumer. Second, is continued denial. It's lasting longer than we thought but sooner or later that gullible customer will wake up and smell the coffee and we'll be right back on track for the good old days. During this time though, our focus begins to expand. Maybe this temporary thing is going to last longer than we had originally thought, and hey, this pain is becoming real.

So we move to step three.

Third, is where we seek protection, usually from the government. Yes, the same government that we often complain about being so intrusive in our lives. But this is different! We're not some special interest. We are being hurt through no fault of our own and someone has to do something! It is our right to have things just as they have been in the past. We need protection from this unfair competition or unfair changes! Once again, as wholesalers we have an added benefit, we can hope that our suppliers will help protect us, and of course it gives us one more person to blame for our troubles. If only they had better advertising! If only they gave us bigger margins! If only, if only...but the pain still increases.

Fourth, and this happens whether the industry receives government protection or not, we finally decide that we must do something. We finally start to improve and to address the true changes that have happened to our business and to the marketplace we serve.

Sound familiar? Many industries around the world are following these steps. The U.S. auto industry is a perfect example. In the early 70's they were producing the lowest quality vehicles that they ever had. This opened the door for the Japanese. Let me repeat that idea again, this arrogance opened the door for competition. As the auto makers lost market share, they cried foul and rushed to the government. It was their right to dominate the American car scene. After all, they always had.

They blamed the consumer. He or she was just foolish. being duped into buying lower quality cars. They blamed the competition. slave wages made their cars so cheap the U.S. auto makers couldn't compete. Unfair competition! Unfair change! We need government protection! It was anyone's fault but their own.

After giving up 50%! of the U.S. consumer car market, they finally responded and now are on the road to making world class automobiles that can compete with anything produced in the world. In fact, a recent Wall Street Journal article reported that the U.S. auto companies are becoming exporting powerhouses. Sook around, many businesses are presently at one of these four steps as they too confront fundamental change. In fact even political systems seem inclined to follow these four basic steps. Let's just skip steps 1 through 3 and aggressively start with step 4. The world is changing faster every day, don't you think your business has to change too?

The auto companies, along with many businesses, also learned a painful lesson about change. They learned that you must continuously improve. Because if you don't, others will. You can never be satisfied with the status quo, and seeking government protection often just gives an excuse for not making necessary improvements.

I suggest that as your business is confronted with various business challenges, you look to create barriers to entry that are based on performance and superior strategy. not state law. I am not against using state laws to protect my industry, but any state law should be viewed simply as a "safety cushion". rather than an excuse to not prepare your business for the competitive realities of the coming years.

Too often this industry has followed an operating pattern where we allow someone else to initiate a program and then we react to it. But as we seek to retain or initiate government protection, we must be careful. This industry must also think long and hard about the results of your actions. Will they open the door for others to take your business? Can you really predict every possible competitive interplay and counteract every possible outcome?

Do you really want to compete with soft drink bottlers, wine and spirit distributors, food brokers, retail giants, general merchandise distributors, perhaps your own suppliers, along with two guys with a van and a garage? Or should you, through proactive planning and superior executions, make it a poor business decision to use the services of anyone but yourself.

Over the long haul, one of the most significant barriers to entry are those based on performance.

The beer wholesaler has many significant challenges. The battles will not be easy and some wholesalers will not survive. But you must address these challenges head-on, with clear thinking and quick action. There are tremendous market opportunities available but only to those who accept the fact that the world is an ever changing place and we too must change.

Hockey superstar Wayne Gretzky captured the essence of this when he described what made him such a good hockey player. He stated that he, "always skated to where the puck was going to be, not to where it was".

Take this opportunity to shape your future. Expand your planning horizon. Determine where the "puck" is going to be and work hard to get there. Be the one to define the rules for the others to follow.

Let's learn from the mistakes others have made and spare ourselves needless pain. Quit hoping for easy answers; there are none. Run from those selling magic, no pain cures. There is no single solution that is going to magically address all of the challenges facing the beer wholesaler. We are experiencing fundamental change. In "business speak" we need to discover new paradigms to address our situation.

The future is racing towards us whether we like it or not.

Let's look forward with a clear vision and ensure that the future we want to happen is the one that factually does. Remember that change is the only constant, stability is an illusion.

For your families sake, for your employees sake, and for your sake, get moving and take charge of your futures NOW! There are tremendous opportunities but you do not have as much time as you think.

John M. Conlin is president of Conlin Beverage Consulting, Inc., a national operational and financial consulting services company, based in Littleton, CO, which specializes in the beverage distribution industry. Conlin's background includes 14 years of practical business experience in areas ranging from high-tech software to wholesale distribution.

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