Manhattan Beer Distributors

February 1, 2008
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Manhattan Beer Distributors

By Sarah Theodore

Big city wholesaler keeps its focus small
Like the bustling metropolis it serves, Manhattan Beer Distributors is at once large, extremely diverse and always changing. With more than $570 million in sales, the company is the largest single-market beer distributor in the country, delivering more than 28 million cases a year throughout the five boroughs of New York City and the surrounding area. Despite its size, when Manhattan Beer executives talk about the business, they describe it as a case-by-case and neighborhood-by-neighborhood endeavor. The company features a lineup of products to target each segment of its diverse consumer base, and it operates with a no-order-is-too-small policy that gives it access to both the largest and smallest retail customers.
Manhattan Beer is the largest wholesaler in the United States for both Coors and Corona, and the company considers Samuel Adams among its other flagship products. But the company represents 40 beverage companies in total, and its roughly 560-SKU lineup also includes small local craft beers and imports from far-flung regions of the world.
Simon Bergson, president and chief executive officer at Manhattan Beer, got his start in the beer business in the late ‘70s, operating a home distributor business — a concept that is relatively unique to the New York market that includes both retail and wholesale elements. He got into full-scale distribution when he acquired the rights to several regional brands, and soon added a number of imports to the lineup. While the company maintained its Manhattan moniker, it soon moved its headquarters to the Bronx, and over the years added four more distribution centers in Queens, Brooklyn, Long Island and a recently opened facility in Suffern, N.Y., that will serve Westchester and the northern metro counties.
The company’s sizable distribution territory covers about 6,000 square miles that includes everything from inner city neighborhoods to suburban locations, which is why each sale is a unique interaction. “We service about 23,000 customers, and we figure about 20,000 to 21,000 are independently owned,” Bergson says. “It’s an independent buyer, it’s an independent credit risk, it’s an independent account call that our salesmen have to make every week, every time they go into an account.”
Bill Bessette, chief operating officer at Manhattan Beer, adds: “Because of the cost of real estate here, the room that customers have to store beer is very small, so it’s very frequent levels of service. We offer service to every customer every day, with no minimum order.”
That no-minimums policy extends to all of its brands, from flagship products to the niche brands carried by the company’s new specialty products division. The company organizes its sales force by both facility and retail category, with five general sales managers who are responsible for sales through each of the warehouse locations, a general sales manager dedicated to the home distributor market, and one for the specialty beer division. Manhattan Beer’s 200 route salespeople also are specialists in their class of trade, with those who handle supermarkets, the on-premise and up-and-down-the-street channels, and home distributors.
According to Bill DeLuca, senior vice president of sales, marketing and business development, the company’s business breaks out into roughly 23 percent each in traditional on-premise, off-premise and supermarket accounts, and the remainder in the home distributor business.
Competitive spirit
Manhattan Beer’s consumers are as diverse and individual as its retail base. The area’s population hails from numerous cultural and ethnic backgrounds, which has led the company to carry brands from all over the world, and to tailor much of the marketing for its brands.
“We started as a specialty wholesaler,” Bergson says. “We then became a large volume wholesaler with mainstream brands like Coors, Corona and Sam Adams. But my history, my perception of the beer business, has always been people want to be able to drink brands from their own country, from their travels, from their experiences.”
Last summer, Manhattan Beer created a new specialty products division to focus on some of its smallest-volume products. The company had considered the idea in the past, but was spurred to action early last year by the loss of the InBev portfolio to Anheuser-Busch. Brands such as Beck’s, Bass, Stella Artois, Leffe and Hoegaarden represented about 8 percent of Manhattan Beer’s business, but when InBev and Anheuser-Busch negotiated a U.S. distribution agreement, A-B chose to move the brands to its local distributor.
Once Manhattan Beer realized the move was inevitable, it took the initiative to sell the brands rather than wait for the decision to come down from St. Louis.
“It was like being married and hearing from your spouse that they wanted a divorce,” Bergson says. “Once somebody has a mindset that this is what they’re going to do, no matter what you say, it’s not going to change it and you’re not going to be able to convince them to do anything other than that. Plus ... the last thing I want to do from a business perspective is have my competitors or my competitors’ staff in my organization on a regular basis seeing what we do, seeing how we do it, understanding how we go to market.”
While the company didn’t want to prolong the pain of losing the InBev brands, it realized the move would be a blow to its sales organization, which had found great success with the higher-priced imports.
“The InBev portfolio was about 2.5 million cases, and for a lot of our route salespeople, that represented a significant weekly deficit in their paycheck,” DeLuca says. “That was a concern of ours because we didn’t want them focusing on the loss of the InBev brands.
The company committed to making up the difference in the commission its sales team would lose on the InBev brands by working their average weekly InBev sales into their regular salary.
“It turned out to be one of the best things we’ve ever done for our people, and it paid off for us too,” DeLuca says. “We didn’t lose anybody to the competition, nobody resigned for the fact that they were concerned about how they were going to make the living that they used to make when they were selling InBev, and I think it just inspired people to get behind the portfolio that we still had.”
The company made up the losses in record time. When he announced the sale of the InBev brands, Bergson issued a challenge to recoup the 8 percent sales loss within 18 months, but the company achieved the goal in only 10 months, finishing 2007 flat.
“Honestly, that even surprised me a bit,” Bergson says. “But the passion and desire of my team to go out and win just enabled them to take our existing brands [and sell them].”
Bergson says brands such as Coors, Corona, Blue Moon, Newcastle and Spaten all were up last year. “We didn’t pick up any new brands of significance,” he says. “A couple of minor brands here and there, but nothing of volume. So a lot of this growth is organic.”
The sale of the InBev portfolio also left Manhattan Beer with the realization that some of its smallest craft beers and imports were essential to its business, and last summer, the company created a division dedicated to those products.
“Selling off the InBev portfolio sort of brought to light a little more clearly that we needed to get more serious in that specialty division, to hopefully not lose accounts that we were doing business with exclusively with the InBev portfolio,” DeLuca says.
The company created the specialty beer division, headed by Rob Mitchell, an 18-year veteran with Manhattan Beer. The division is charged with both calling on specialty accounts such as bars and restaurants that want only the most unique products, as well as educating the rest of the sales organization about specialty beers.
DeLuca says the brands carried by the specialty division represent less than 1 percent of the company’s business, “but if we can provide service to another 200 customers that aren’t buying any of our other products from us, that’s what it’s all about.” He estimates more than 100 accounts already have been added to the company’s business since the division began operating in July.
Ethnic mix
In addition to carrying unique products for specialty accounts, Manhattan Beer carries a number of small import brands for ethnic consumers in its territory, and tailors the marketing of its more mainstream brands to New York consumers.
“We deal with some very sophisticated suppliers, and they all have a pretty good conception of who their target consumer is,” Bessette says. “... Basically, New York is several markets at once in terms of ethnic mix, in terms of income levels. You have Wall Street, probably the financial center of the world, all the way out into the various boroughs of Brooklyn and Queens. It’s very diverse.”
Like the specialty products division, import products present an opportunity to target unserved markets. “There’s not a lot of distributors our size that are going to take on a brand that may, at the end of the year, only represent 5,000 cases,” DeLuca says. “But if it’s 5,000 cases of a brand that we’re going to sell to a certain pocket that we probably wouldn’t be selling any other brands to, we’re going to be taking that brand on. That just makes us a full-service distributor.”
When it comes to marketing, the company develops its own marketing programs and also works within the national programs created by its brand owner suppliers. It works with Coors Brewing Co., for example, to implement its Latino 360 program. “Sometimes they’ll draw up a program in Colorado that is more of a Mexican theme, and that’s not the Hispanic consumer here,” says Al Greco, vice president of marketing and business development. “So we work collectively and closely with them to make sure they stay focused on the Puerto Rican and Dominican consumer – those that are drinking our products.”
Steve LaGreca, general manager for New York Metro at Coors Brewing Co., says the collaboration has made it the most successful implementation of the program in the United States. “They’re capable of taking a program, giving it real solid feedback,” he says.
LaGreca describes the relationship between the companies as, “very dynamic. There’s a tremendous amount of energy on both sides of the fence,” he says.
Coors Light is the No. 1 light beer in the area, and Greco also credits Coors’ Rocky Mountain theme and the focus on “cold” as keys to its success in New York. In addition, Coors is a sponsor of the New York City Marathon, and Manhattan Beer created a special commemorative can for the event. It also created special packaging for the New York Giants and the Jets.
In order to serve all of its suppliers, big and small, the company has an art department in each of its facilities that can create point-of-sale materials such as banners and cooler stickers, as well as a point-of-sale room to house materials supplied by the brand owners.
Preparing for changes ahead
Manhattan Beer’s ability to react to wide-ranging demographics and changes in the marketplace perhaps stems from Bergson’s belief in the old adage that the only thing that’s constant is change.
“My philosophy has always been that our relationship is controlled by our suppliers and if our suppliers are consolidating or being acquired, whether it be on a national or international level, that’s going to work its way down to the distributor level,” he says. “I think the wholesaler of today, the beer distributor of today, has to get bigger, has to be a larger wholesaler to be relevant in its market. But you also have to be responsive to the actions of the suppliers.”
As if to illustrate the point, Coors Brewing Co. announced late last year that it plans to merge its U.S. business with Miller Brewing Co. The move no doubt will result in further consolidation in the distribution business, including perhaps, the New York market. Bergson and other Manhattan Beer executives decline to comment on possible scenarios, except to say further change is inevitable.
“We have no idea what the new company will do with respect to combining things,” Bessette says. “New York is a market where an individual distributor can last a long time ... our point of view has always been to invest, build the infrastructure to make ourselves attractive and go from there.”
Regardless of what happens with the merger, some at Manhattan Beer are pointing to 2007 as a pinnacle year for the company. Says DeLuca: “I think our execution this year has by far been our best effort as a distributorship.”
Beer specialists
Craft beers require a great deal of care and attention, but Manhattan Beer Distributors thinks they are worth the extra effort — so much so that last summer, the company created a specialty beer division to handle its smallest offerings. The company tapped 18-year veteran Rob Mitchell to head the new division, and hired a team of beer experts to hand-sell the brands in hard-to-reach accounts and help educate the rest of Manhattan Beer on the finer points of specialty products.
"We went out and looked for extremely well-educated, knowledgeable beer professionals," Mitchell says.
The group's first mission was to help the rest of the sales organization understand what craft beers are all about.
"The most important thing they need to do is raise the intelligence level and sort of create a comfort level for our average route salesperson or on-premise supervisor so they can speak confidently about these brands," says Bill DeLuca, senior vice president of sales, marketing and business development.
To that end, the specialty team presents new beer styles during sales meetings, conducts beer tastings, and rides along on sales calls with route salespeople to talk about specialty beer opportunities in the marketplace.
In addition, New York's restaurant and bar scene lends itself to specialized accounts that want only the newest, sometimes eclectic, hard-to-find products. The specialty beer team also is responsible for finding and maintaining those retailers — in fact, it's those types of accounts that define which products the division will carry. Samuel Adams, for example, is a specialty beer by industry standards, but the brand is carried by many mainstream bars and restaurants, and its higher volume places it within Manhattan Beer's mass market selections. The specialty division, on the other hand, serves accounts that carry only the most unusual styles.
"Sam Adams isn't on [tap] in these places," Mitchell says. "Sierra Nevada isn't on. But Sierra Nevada Extra Special Bitter Cask Conditioned will get on. People go there because they know they're going to get brands they can't get anywhere else."
Once the division makes a sale to the specialty accounts, its team is able to draw on the distribution power that comes from being part of a large company. "Our strength is that we'll deliver five or six days a week with no minimums, in all of our counties," Mitchell says.
The division's lineup includes local, regional and imported products, some of which include Southampton Publick House beers, Kelso beers from Brooklyn, Keegan Ales from the Hudson Valley, High Point Brewing Co.'s Ramstein beers from New Jersey, Legacy Brewing Co. products from Pennsylvania, Arcadia Ales from Michigan and imported beers from Shelton Brothers in Massachusetts.
Manhattan Beer's specialty division is a member of World Class Beverage, which is a group of distributors around the country with a similar philosophy about specialty beer. Other members of World Class Beverage include DeCrescente Distributing Co. in upstate New York, Monarch Beverage Co. in Indiana, Gulf Distributing Co. in Alabama, J.J. Taylor Cos. in Florida and Crescent Crown Distributing in Arizona. The companies all operate independently, with their own customers and brands, but together they have created a calendar that features different beer styles each month and a consumer Web site on specialty beers. On occasion, they also combine their buying power for special displays or variety packs.
"Out there it might be great beers of the Midwest; here I'm doing great beers of New York," Mitchell says. "It's the same concept, but it changes based upon where you put your head on the pillow at night."
According to DeLuca, the ability to open up new accounts and establish a presence in areas where the company did not previously operate pays dividends beyond the small amount of volume these brands offer.
“We don't expect any one of those SKUs to ever do more than 1,000 cases in a calendar year," he says. "This is true specialty. You order 30 cases at a time. You have to walk it through the entire system — ordering it, then selling it and delivering it.
"There is no way that we could have taken this specialty initiative and just plug it into our structure of 550 sales and marketing individuals," he adds. "We're just not geared for that. It's a whole bunch of tender loving care, from the time the brewery produces it to the time it's consumed."

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