The National Association of Beer Wholesalers marks its 70th anniversary.
By David Weldon
Members of the National Beer Wholesalers Association are celebrating their 70th birthday this year. And while that occasion is certainly worthy of lifting a tall, frosty glass in celebration, the party has been a bit dampened by recent events in the industry.
Among them is the simple fact that there are fewer wholesalers to join the birthday bash, and those attending may also feel less celebratory.
“There has been a lot of consolidation among wholesalers,” explains Craig Purser, president of the association, a national lobbying and advocacy group headquartered in Alexandria, VA. In addition, “there has been a real shift in power to the retail sector.”
As with several other industries, the beer wholesale sector is falling victim to the trend of more retailers getting into their market space. This includes the so-called “big box” retailers such as Wal-Mart, and membership club retailers such as Costco. The sale of beer, as well as wine or spirits, is controlled on a state-by-state basis. Many allow such sales in food and convenience stores, and increasingly, in retail stores.
According to Purser, that trend is reducing the clout of wholesalers, since the large retail players have the ear of federal authorities that regulate distribution and taxes on beer, wine and liquor on an inter-state basis. He says 18 of the Fortune 500 corporations now hold beer sales licenses.
Further eroding the clout of wholesalers is the fact that the majority of delivery trucks hauling large loads of beer are not owned by the manufacturer, but are independent contractors that serve large regions. As an example, Purser says that “99 percent of the time, the Budweiser delivery trucks that you see on the road are privately owned by a local distribution company, which has been awarded the contract to deliver in that district.”
Still, a bigger concern for Purser right now is what he sees as a growing assault on the right of individual states to issue and control the licenses granted to sell beer, wine or liquor within their borders. That state right is currently being challenged by a few national retailers, who do not want to be subject to multiple sets of regulations on the distribution and sales of multi-state inventory items.
The reason that Purser says the Wholesalers Association supports the current state control system is due to the historic emotional debate that has always been linked to alcohol in any form.
“We have a very unusual history with alcohol,” Purser explains. “Since Colonial times, Americans have had a very fickle attitude about alcohol, and we have had a need to balance what’s right with what’s not.” And attitudes over right and wrong vary widely.
It might surprise the general public to learn that Purser is a strong advocate of local controls, so that different states can reflect their social views on beer and alcohol within their state licensing regulations.
“Under the 21st Amendment, alcohol is primarily regulated by the states, in order to reflect that local attitude factor,” Purser says.
That may ultimately produce some variation in how wholesalers have to deal with customers in each state, he notes, but it keeps the public in each state in a supportive frame of mind on the products in the first place. Basically, it protects the ability of beer wholesale distribution to continue under the current system, without anyone feeling the need to tighten regulations.
“It provides a balance of enabling increased sales due to the public interest, versus the responsibility of selling and marketing the product.” It is a system that isn’t broke, Purser says, and doesn’t need fixing.
Balancing act
The National Association of Beer Wholesalers was created in 1938, right after the repeal of Prohibition. The founding members had Prohibition very much in mind when they saw the need to create a national advocacy and educational organization. Purser says they wanted to ensure that the beer industry could maintain a healthy relationship with public opinion on the sale of its products.
It was also hoped that the national organization could put an end to what had been a history of corruption and abuse among individual beer manufacturers and distributors, in how they got their products to market, which further eroded public favor.
“It was a largely unlicensed and unregulated industry to that point,” Purser says, “and the balance was way out of whack. There were a host of abuses going on.”
Since then, the association has enjoyed a relatively good relationship with the federal licensing authorities, with state regulators, and with retail consumers.
There are currently 750,000 licensed beer retailers in the United States, according to Purser. Membership in the National Beer Retailers Association is 1,850 wholesalers, manufacturers and distributors. The association has a staff of 25, and an annual budget of $10 million, which covers the cost of producing its annual trade show.
The association has also seen changes along the way, including a growing practice of states actually getting into the beer, wine and liquor sales business. There are now 18 “controlled” states for beer sales, meaning that the state has established its own state-owned package stores.
Purser notes that controlled states frequently establish such retail stores at state borders, to attract out-of-state customers. An example is the state of New Hampshire, which has stores on both the northbound and southbound sides of the major highways at its borders, attracting Massachusetts and other customers.
Purser also has definite opinions on the practice of selling wine in food stores, and exempting it from non-liquor sales, as is done in some states.
“The wine industry has done a good job of convincing the public that wine is not alcohol, which, of course, it is,” Purser says. “The Constitution does not differentiate between alcohol products, but state regulations do.”
Another major trend in beer sales is, of course, online purchases. Anything you can buy, you can get online, and Purser says online sales now amount to over $1 billion dollars.
Because online sales, or e-commerce as it is commonly called, often involves inter-state sales, there is growing interest in having online beer sales regulated at the federal level as well, Purser says.
But again, Purser’s attitude is that for the most part, the system ain’t broke.