The Impending Train Wreck Over 10 Barrel

it appears that AB-InBev has a fairly high tolerance for irony...

 

Yes, perhaps? Then again Maletis has also been around the block more than once, they are not a new comer to the business.
And yes AB can pull out but not for lack of a price. And Maletis is not small.

 

Agreed...will be interesting to see what shakes out. InBev...arrgghh...

 

Yea dont really care who owns what as long as quality stays on par but this would be a shame.

 

Just to back my last statement up here is a little back story on Maletis: http://www.maletis.com/maletis-story/

 

Maletis and Morgan (now Western) have both been around since the days when what is now known as "East County" (the suburbs of Gresham, Oregon City, Clackamas, etc) were seperated from Portland proper and neither distributor was big enough to cover both. Prior to Western buying them out, Maletis and Morgan both had AB products as well as craft, though Morgan's craft selection was extremely limited and didn't overlap Maletis at all. Once Western stepped in they dropped or sold every non-AB product in the book to other local distributors.

No, we can only purchase AB products from one or the other, and yes, the metro area is carved up in a rather strange fashion. Maletis has everything west of the Willamette River (ie downtown) as well as the majority of the east side. Western has a weird chunk of NE Portland and all of the eastern suburbs.

From what I've heard, Montejo and Occulto are the two brands being withheld, which is a laughable threat.

They can't pull 10 Barrel without a big payout. Depending on the terms of the contract, AB would have to pay somewhere between 2-5 years worth of expected gross profits in order to buy them from Maletis, and given that 10 BArrel had roughly 60% growth last year to become the 5th or 6th largest brewer in the state (pre-buyout) we're probably talking tens of millions to acquire the brand.

As for Maletis losing the entire AB portfolio, that's also a risk, but that would come with an even bigger payout in the hundreds of millions range. From my conversations with some of their reps it seems like AB accounts for a little over half of Maletis' business, so while it would certainly sting it wouldn't outright kill them. It would also leave them as the fully independent distributor in the area, and with that huge cash injection they could easily go on a buying spree and snag some growing brands from the other companies in town.

I think Maletis has seen the writing on the wall for a while now, which is why they've been aggressively seeking brands and growing their craft portfolio into one of the best in Oregon. In addition to 10 Barrel they've got Firestone Walker, Breakside, Gigantic, North Coast, Logsdon, The Commons, Fort George, Duvel/Boulevard/Ommegang, the Merchant du Vin portfolio, and a couple dozen others.

 

Just a little background here on me. I work for an American branch of a distributor of beauty products. We partner with our home branch in Italy and then resell it to wholesalers throughout the country where they retail to the consumer. With this said, I have a serviceable understanding of both sides of the coin even if my experience is not in the beer industry.

Looking over Maletis' website, they do have wine and other alcoholic beverages they wholesale so that's a big plus. But, they do not have any SABMiller products. As such and without knowing too much, I'd venture to guess that their AB-Inbev sales account for over 50% of their gross beer sales even in the anti-business, hipster-haven that is Oregon. They are trying to retain distro rights to a brewery that likely accounts for .01% of their beer sales...let's face it, 10 Barrel is tiny. I'm sure they have several years left on their agreement (in my experience distributor agreements run on a 10 year cycle) and they want to be compensated for the balance of the years remaining.

So what they are essentially doing is risking 50%+ of their beer sales to salvage .01% of their beer sales. Does this sound like a wise business decision to you? Does it sound like they hold any cards here? Of course not. If they give AB the finger and say we are keeping 10 Barrel through the end of their contract, then AB pulls all their distro rights upon expiration of their contract out of spite as they already have another distributor in the area who I'm sure would be happy to take over more accounts. No wise business owner would do this. They are trying to leverage for a buyout but they have to tread lightly.

Sell them back the inventory at a low premium or liquidate, take a percentage of the annual sales extrapolated out over the remainder of the contract and be done with it. They get paid up front for product they aren't selling and AB gets their distro rights. Unless AB refused to buyout the remainder of the agreement, and I can't see why they wouldn't, this is the best scenario for both parties.

 

I never even saw this post until after mine. We are on the same page for the most part.

 

After reading both posts I still think it is a wise decision AB cant pull out without a payout, and that seem substantial. So yes it sounds like they do hold some cards. And being independent of AB to me would be an Ace or maybe a King.
Then again that's me and I don't own the company.

 

Except there are no contract limits in the three tier system for alcohol. The manufacturer also cannot just go with another distributor, if they pull their product from a distributor, they can no longer sell in that territory - by law and enforced by the State.

You would be surprised how strongly a distributor will hold onto a brand even if they have no intention of promoting it or selling it. Every brand is potential competition if given to another distributor. Distributors are more than willing to hold a brand hostage for a payout far and away from any reasonable figure.

They hold all the cards. At best In Bev can take them to arbitration (not sure about the rules in Oregon) and get a reasonable buy out figure. At worst, In Bev has to pay whatever fee the distributor wants.

All of these laws were put in place to prevent large manufacturers, e.g. In Bev (nee AB), Miller, and Coors, from jerking small distributors around and moving between distributors without proper compensation. Now, the distributors hold the power and jerk around small manufacturers.

 

From my perspective, I think they have to play nice. Yes, they want a large buy out but at the same time, they don't want to piss off their largest manufacturer who by accounts is responsible for 50% of their revenue. I still feel like AB has the power in this situation whether we want to admit it or not.

AB wants to self-distribute from my understanding. Plus, there is another distributor in the area with AB distro rights. So Maletis is not the only game in town for AB and obviously not exclusive. I do not know how long AB's agreement with either distributor is and how long it would actually take for AB to screw Maletis if they really want to. But as a business, as I've said over and over, it's not the best idea to piss off the guy who accounts for 50% of your business.

 

Sorry for the bump, but I just heard from a Maletis merchandiser that they sold 10 Barrel to Western. I haven't heard details, but it may just mean Western will distribute it in their AB-InBev territory.

I work in the beer/wine distribution business in Portland area.

 

I beleive that Western Bev was only just bought recently by AB.

 

So there ya go.

 

Actually AB owned it prior and sold around the time of the InBev merger.

http://m.stltoday.com/business/colu...11e1-af88-0019bb30f31a.html?mobile_touch=true

 

Maletis-10 Barrel Update: The franchise rights to 10 Barrel brands have reportedly been transferred from Maletis to AB-owned Western Distributing in Portland and Salem. As you know if you've been following along, this was an area of contention between Maletis and the suits in St Louis. Details of the deal were not released.

-via beervanabuzz

 

My store in Portland buys beer from maletis and they are by far the best distributor in Oregon. They're well aware that Budweiser sucks, but without bud they wouldn't exist.

 

What's your store in Portland?

That's an answer to my question about where he worked.

 

No place fancy just a Bi Mart in the Portland area.

 

It's getting rather complicated, but Maletis still "owns" 10 Barrel in most of the city. What we're actually dealing with is the fact that Maletis is made of several divisions (for lack of a better term); there's "Maletis Beverage", which has the rights to AB products in most of Portland, and then there's "Maletis South", a separate division they created to distribute everything other than AB in places where other companies have the rights to AB's portfolio.

Maletis South's territory overlaps most of Western Beverage, so until the buyout they were able to sell 10 Barrel, Ninkasi, and everything else "non-AB" in that area. What they actually agreed to was selling the 10 Barrel rights for Maletis South to Western, so that Western could actually sell their own brand in their own territory. Since Maletis Beverage still owns the rights to the AB portfolio in most of the city they get to keep selling 10 Barrel in their territory.

Here's a crappy image showing what I mean: