Most of the time, change doesn’t happen overnight. But in the case of Silver Eagle Distributors, its acquisition of BudCo Ltd. in 2007 catapulted its business in an instant. Not only did the company become the largest Anheuser-Busch InBev (AB InBev) distributor in the country, but it also became one of the largest Grupo Modelo distributors in the nation, according to its website.

Less than two years later, Silver Eagle acquired the distribution rights to a number of craft and import beers from Glazer’s Family of Companies, Dallas, in effect quadrupling its portfolio. To accommodate its continued growth and increase in SKUs, the company plans to open an additional warehouse in Houston in approximately 17 months. It currently operates five distribution centers in Houston, San Antonio, Cypress, Rosenberg and Conroe, as well as two depots in Carrizo Springs and Del Rio.

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In the late ‘80s, Silver Eagle employed 210 people and delivered just more than 8 million cases a year in three counties in the Houston area, says John L. Nau III, chief executive officer of the Houston-based company. Nau first became a part of the Anheuser-Busch wholesaler family in 1984 as a partner in Silver Eagle Distributors located in Homestead, Fla. He and several partners built the business in Homestead for a few years and then sold the company. In 1987, he, along with different partners, purchased Southwest Distributing, located in Houston. Shortly after the acquisition, the company name was changed to Silver Eagle Distributors. In 1991, Nau and his wife, Bobbie, bought out their partners. Today, the company now also has two minority owners, Robert L. Boblitt Jr., who serves as executive vice president and chief operating officer, and John Johnson, who serves as executive vice president of sales and marketing. The company employs more than 1,200 people and distributes approximately 46 million cases annually in 16 counties in southern Texas. In Houston, the company has increased its market share from 24 percent to 68 percent, Nau adds.

Considering the recent acquisition of Grupo Modelo by Anheuser-Busch InBev, Silver Eagle predicts continued success.

“I don’t see a down side,” Nau says. “What I do see is increased operational efficiencies [and] standardization of pallet sizes. [Grupo Modelo] opened that big, new brewery near the Eagle Pass area of south Texas, and I just see Anheuser-Busch’s production efficiencies being able to help improve the production and, therefore, the availability of a wide range of products and packages.”

Although Silver Eagle’s growth denotes strategic business sense, its company philosophy and adaptation to change also earned the company Beverage Industry’s 2012 Wholesaler of the Year title.

From market to market

“My whole view of our role as a distributor is that of being a marketing organization,” Nau says. “… We see our job as to take the products [of] the brewers that we represent [and] they produce, take advantage of their national programs and then customize to fit the local needs selling beer in Houston, San Antonio and surrounding areas.”

Capitalizing on its locations, special events can occur 52 weeks out of the year, Nau says. Since its beginnings, Silver Eagle has provided service and beer — particularly new products and craft beers — at special events in south Texas.

“We also have very developed marketing logistics and technical systems so that we’re able to identify the consumer demographic surrounding every one of our thousands of outlets,” Nau says. “The consumer in downtown San Antonio is going to be different than the consumer in the rural counties, so it’s incumbent upon us to use data, to use goals and measures, and to understand our market better than our suppliers. We use their umbrella programs, but we’ve got to make them impactful at the local level.”

To do so, the company first identifies the wide range of consumers in its territories, which account for a total of 7.5 million people. According to Nau, Silver Eagle attempts to identify its dominant consumer demographic within a square mile of each of its outlets, or at least within a zip code.

According to Nau, Houston is the fifth largest Asian market in the United States, and African-Americans make up approximately 22 percent of the Houston market. In southern Texas, the percentage of Hispanic consumers is high and rapidly increasing, he adds. All of these demographics impact the types of products and accounts that Silver Eagle services.

“Within the last 15 years, it’s become very apparent to us that you need to look at the geographic makeup of the Hispanic market,” Nau says. Marketing to northern Mexican immigrants is different than marketing to Mexican nationals from southern Mexico, nationals from Central American countries or natives of northern South America, he explains. Similarly, consumers in the urban areas of Texas, such as Houston and San Antonio, are different from suburban and rural consumers, he adds.

Silver Eagle’s portfolio includes many Mexican imports, including Grupo Modelo’s Victoria, Corona, Corona Light, Negra Modelo and Pacifico brands, as well as Corona Extra and Modelo Especial, which Nau says are two of the best-selling Mexican imports. Bud Light and Michelob Ultra also are very popular among Hispanic consumers. Asian import brands include Asahi, Chang, Kingfisher Lager, Kirin, Saigon, San Miguel, Sapporo, Singha, Tiger and Tsingtao.

It’s also important to consider the uniqueness of the southern Texas market when it comes to retailers. In both Houston and San Antonio, more than 50 percent of Silver Eagle’s business flows through independent and chain convenience stores, Nau says. The second most popular channel is supermarkets, followed by mass merchandisers.

“The convenience store is far and away the dominant No. 1 outlet type, at least in our markets here in south Texas,” he says. When compared to supermarkets, convenience stores sell a higher percentage of premium and sub-premium products, and a much lower percentage of import and craft beers. Supermarkets tend to carry a higher percentage of import and craft beers, Nau explains.

Even though import and craft beers are in high demand in south Texas and represent major growth in Silver Eagle’s portfolio, Anheuser-Busch InBev’s Bud Light, Busch and Budweiser round out the Top 3 best-selling brands. Within the distributor’s product mix, Anheuser Busch InBev brands make up 85 to 90 percent, Nau says.

New product selections

Silver Eagle also notes the recent successful launches of Bud Light Platinum and Bud Light Lime ‘Lime-A-Rita.’

“Bud Light Platinum and Lime-A-Rita are two huge pluses, not just because they’ve begun to reach critical mass in terms of volume, but they have come in at higher margins and obviously a higher selling price, and as we go through and look at how much is cannibalized and how much is net incremental volume, it is clear to me that 40 to 50 percent of this volume at a minimum is incremental, so that helps the entire corporate portfolio,” Nau says.

When it comes to launching new products, Nau says that distributors should be willing to take on new products, find their niche in the market, find out who the consumer is and be selective in placement; however, once they find new products that fit these criteria, they should be ready to roll them out throughout the market as quickly as possible. In the import and craft beer arena, Silver Eagle asks itself the following questions before taking on a new product: Is the product itself unique? Is it repetitious of other products in the company’s portfolio? Does it address a consumer niche? Is the brewer able to support the product via marketing and supply?

“The other flip side of that question is, at some point in time, do you also rotate out of products?” Nau says. “And the answer to that is, in this new day and age with craft beers and imports, I do think that that’s going to be a part of the evolution of the growth of these new products. They have a lot of products, a lot of packages, and some are going to evolve. Some are going to survive, and some will fade from the market.”

As a result of new domestic, import and craft beers, draft beer at on-premise locations has almost doubled during the last five years, Nau says.

Considering Silver Eagle’s vast portfolio of brands, including AB InBev’s Budweiser, Michelob and Busch; Grupo Modelo’s Corona, Modelo Especial and Negra Modelo; import brands St. Pauli Girl, Stella Artois, Hoegaarden and Beck’s; and Pyramid, Rogue and Sierra Nevada craft beers, specialization is key.

Nau points out that Silver Eagle gives attention to each of its brands by implementing a marketing department that includes brand management, point-of-sale production and design, special event management, media relations, purchasing and handling national accounts.

“That’s No. 1 in an organization the size of Silver Eagle,” Nau says. “You need to put special focus on [import and craft beer] brands, and these brand managers need to be educated and then they need to be the resource to help educate the sales force.”

The salespeople at Silver Eagle each specialize in a particular outlet, such as convenience stores, mass merchandisers or supermarkets. Typically, import and craft beers are sold in supermarkets in the southern Texas market. Therefore, the company focuses its training of import and craft beer brands on the supermarket sales personnel, Nau explains. Every salesperson is trained in the entire portfolio; however, focus is provided on the product mix that fits a particular outlet.

“You cannot expect all of your sales personnel to be experts in this evolving craft beer category,” Nau says. “It just won’t happen.”

Promoting local products

Silver Eagle’s large portfolio also includes local beers, such as Saint Arnolds, ZiegenBock and a recent addition to the portfolio, Karbach.

“We have a number of beers that are produced in either the Houston area or the San Antonio area, and everyone knows about Texas pride,” Nau says. “We all are proud of the state, proud of our history, and we’ve been able to put together promotional activities that combine a number of these Texas beers. We’ve been able to really have a good, positive result and help promote these local businesses.”

The company also participates in many national promotions. One such program was a national Budweiser promotion for the Fourth of July called “Walk Off A Hero.” In the Houston area, Budweiser cans, bottles and secondary packaging all featured patriotic designs. For each case equivalent of Budweiser sold from May 20 through July 7, Silver Eagle and Budweiser donated $0.05 up to $2.5 million to the Folds of Honor Foundation, which provides post-secondary educational scholarships for families of U.S. military personnel killed or disabled in service. The brand also donated $5,000 to the foundation for every Houston Astros walk-off win at the Minute Maid Park during the 2012 Major League Baseball season. Consumer donations also were accepted digitally on Facebook and via text messaging. Similarly, in the San Antonio area, Silver Eagle and Budweiser donated $500 for every Missions’ walk-off win at Wolff Municipal Stadium during the 2012 Minor League Baseball season to Hope4Heroes, a non-profit organization that gives

90 percent of all donations to veterans and their families. The company contributes to more than 750 charitable organizations and events in Houston, San Antonio and the surrounding areas. It also works with Anheuser-Busch on dozens of responsible consumption programs to prevent underage drinking, prevent drunk driving, promote responsible drinking among adults and address responsibility among college-aged individuals.

 According to Nau, it’s all about “doing what’s right.” BI