Last year, Del Papa Distributing Co., Galveston, Texas, marked the company’s 100th anniversary. To honor its centennial, the company organized a year-long celebration that highlighted the history of the Anheuser-Busch InBev distributor and the role it has played in the 17 counties in which it distributes in Southeastern Texas.

Throughout its history, two things have remained the same: the company’s family ownership and its commitment to Del Papa Distributing’s motto, “Quality people building brands and friendships… one case at a time.”

Del Papa Distributing was founded by Italian immigrant Omero Del Papa, who converted his retail grocery business in Galveston into a wholesale establishment in 1910.

“The story of this company is really the story of what I would call the quintessential American dream,” says Mike McAfee, Del Papa Distributing’s vice president of marketing. “An immigrant comes to the United States with probably not much jingle in his pocket, but he had a dream of what he wanted to do, and this was the place that he thought he could do it.”

The business grew throughout the years and in 1930 Del Papa Distributing formed an agreement with Anheuser-Busch to be a distributor of malt, syrup, baker’s yeast, soft drinks and a “near-beer” product called Bevo. Three years later, when Prohibition was repealed, Del Papa Distributing began carrying Anheuser-Busch’s beers.

The company’s family ownership and its Anheuser-Busch franchise relationship have endured throughout the years. Omero’s son, Lawrence Del Papa, serves as chairman of the board, and Lawrence’s son, Larry Del Papa, has been company president since 1988.

Del Papa Distributing also continues to maintain a strong relationship with Anheuser-Busch InBev, which remains its primary supplier. Anheuser-Busch InBev products make up 95 percent of the company’s business, Del Papa estimates.

Del Papa Distributing has 350 employees and operates three distribution facilities along the Southeastern Texas coast. The company’s territory is a growing area with a population of 1.3 million, says Alex Guidroz, executive vice president of sales and marketing. Its location along the Gulf Coast also expands during the year as the area attracts tourists and vacationers from March through October.

The area’s growth combined with the company’s business strategies have helped the business expand in recent years.

“We came through 2010, a year in which our industry was down, and in our markets we gained market share,” McAfee says. “Now to do that, that means you have to take it away from competition because there’s no incremental growth. Now if you’re doing that, and at the same time you’re gaining these operational efficiencies, you’re maintaining profitability, which is obviously the ultimate goal.”

In 2010, Del Papa Distributing reported a case equivalency volume of 9.5 millon cases, which represents a 22.1 percent increase in volume during the past 10 years, the company says. Its market share also has grown 19 percent in the past decade, and the company finished 2010 with a 57.9 percent market share in its territory, it reports.

Market snapshot
The company’s portfolio includes many of the industry’s top brands, including Bud Light, Busch and Natural Light. Due to state franchise laws, Del Papa Distributing holds the rights to No. 1 import brand Corona in a portion of its territory. The company also has rights to Anheuser-Busch InBev’s Stella Artois in limited areas.

The company has experienced incremental growth from several emerging Anheuser-Busch brands.

“In our business, it’s really rare that something will come out and really do gangbusters; it’s slow, steady growth over time,” Guidroz says. “We have a lot of those brands in our portfolio. Most of them are with Anheuser-Busch, brands like Land Shark, Ziegenbock, a brand that’s unique to Texas, and ShockTop, which is a national brand that does well and competes with Blue Moon.”

Del Papa Distributing maintains distribution facilities in Beaumont, Galveston and Victoria to serve its market. Its accounts are made up of 60 percent chain and independently owned convenience stores, 20 to 25 percent supermarkets and mass merchandisers, and the remainder includes on-premise accounts, Del Papa says.

The company serves approximately 1,500 accounts off-premise and 1,300 on-premise accounts throughout its territory, Guidroz says. Through the years, the company has seen the volume of its on-premise accounts shrink, but recently experienced a rebound in its draft business, McAfee says.

“For years the draft business was down annually,” he says. “But for the last three to five years, draft is starting to come back. A lot of that is due to craft beers. We’ve done a really good job of promoting these beers on premise with a lot of sampling and on-premise promotions. The InBev brands that we’ve taken over, like Stella Artois, have enhanced our draft business, too.”

The draft business also has benefited due to the sixth barrel keg, which is taller and skinnier than a traditional keg and can double or triple the number of tap handles at an on-premise account.

The company’s market covers a wide area with a diverse population. In the north, Del Papa Distributing’s Beaumont facility serves eight counties near the Louisiana border. The northern portion of its territory is a rural marketplace with many blue collar workers and a sizeable African-American population, Del Papa says. In this market, value-priced brands tend to perform well, he says.

The center of Del Papa Distributing’s area is served by its Galveston facility and spans two counties that include the island of Galveston as well as high-growth Houston suburbs. Consumers in the central area favor Bud Light along with some of the company’s higher end and craft beer brands, Del Papa says.

The southern portion of Del Papa Distributing’s territory serves seven counties from its Victoria warehouse. This portion of the market has a heavily Hispanic population with whom Bud Light is a favorite, Del Papa says.

Business adaptation
Del Papa Distributing saw the economic downturn as an opportunity to analyze its business and identify opportunities for the wholesaler, Del Papa says.

“We have been through a few of these cycles, all of us together, and so we know we’re going to come out of it,” he says. “We look at these as opportunities to reorganize, reinvest and we’re always talking about what the next structure looks like.”

Last year, the company converted its organization into a regional structure. Previously, employees were grouped according to their central office location, but in the regional structure, employees are organized around the marketplace, Del Papa says.

The new structure provides balance in the workload between locations, Guidroz says. Prior to the reorganization, a sales manager in one location might have twice as many people, accounts and volume than a co-worker at another location, he says.

In addition to internal changes, Del Papa Distributing continues to monitor the industry for new trends. Although Del Papa Distributing’s business is made up of 95 percent Anheuser-Busch brands, the company monitors the potential for new suppliers and brands to its portfolio.

“We bring on additional suppliers to enhance our overall market share,” Del Papa says. “We don’t want to swap one case for another. I always say, ‘It’s plus-plus. It’s not either/or.’ We don’t want to replace this brand or that brand. We want this brand plus that brand.”

The company carries a selection of craft beers, including products from Sierra Nevada Brewing Co., New Belgium Brewing Co. and Craft Brewers Alliance. In addition, the company has had success with selections from Houston’s Saint Arnold Brewery, Guidroz says. The craft beer trend has yet to hit its peak in Del Papa Distributing’s territory, which allows the company to work out the best route to market for its craft brands, Del Papa explains.

“We’re excited because we’ve got a great portfolio of good craft brands,” he says. “Even though they don’t contribute a lot of volume, yet, because in our marketplace craft beer is not really as established, so we’re not really playing catch-up. We have a portfolio to drive the business forward as the consumers and the demographics catch up.”

The company also is careful to maintain a manageable amount of brands, Guidroz says.

“We’ve found that you can probably have too many suppliers,” he says. “There is a right number in terms of accounts that are manageable. That’s important to us, too, to make sure that it’s the right partnership and from logistics that we can get the supply. Because they’re smaller quantities, we are not going to buy a full truck of every craft beer or import that we pick up.”

In addition, to ensure that the company does not lose focus on its core Anheuser-Busch InBev brands, Del Papa Distributing has three brand managers who each manage a defined portfolio. The brand managers write sales plans, work with the marketing department on promotions and with field staff for implementation, Guidroz says.

The company’s personnel organization also includes high-level sales representatives who are known as account development managers. Instead of going into the market writing orders, rotating beer and placing signage, account development managers visit higher volume and prestige accounts to sell programs, such as displays, themes, new packaging and price points, Guidroz says.

Company leadership
Throughout Del Papa Distributing’s 100 years in business, customer service has remained one of the top operating principles for the company.

“I’ve been in the business all my life, and as long as I can remember even before we had the scale and the leverage, we always seemed to have the best people,” Del Papa says. “What that tells me is that the retailers are saying we take care of them. It’s been instilled probably from my grandfather that the customer truly is king. It’s not something we say; it’s something that according to our retailers, we do.”

Most of the members of Del Papa Distributing’s senior leadership team have grown from entry-level jobs in the industry, which has given the executives perspective, Del Papa says.

“We’ve all started at low-level positions, so we recognize what’s important,” he says. “We try to get out as much as possible. Every one of us in leadership gets out one day a month and gets out on the street and tries to understand the competitive landscape, the changes that are going on and talk to retailers. What our retailers always reflect back to us is that we have the best people.”

In addition to its personnel, Del Papa Distributing also constantly invests in tactics and technology to advance its operations, says Peter Williamson, vice president of performance systems.

“We were first to market with pre-sell in our marketplace that was back in the late ‘80s,” Williamson says. “With Mike [McAfee]’s help, we were first to the market with bulk delivery in our territories back in the mid-‘90s. We invest not only in people, but we also invest in equipment and technology.”

The company also was one of the first to implement a warehouse management system in its three locations, says Bill Falkenhagen, executive vice president and chief financial officer.

Earlier this year, the wholesaler announced an $18 million project to build a new multi-million dollar Coastal Distribution Center in Texas City (see Plant Focus article for more). Del Papa Distributing is researching additional advancements to be implemented in the new facility to make it as efficient as possible, Falkenhagen says.

As the company looks forward to its next 100 years, Del Papa wanted to give back to the beer wholesaler industry and is acting chairman of the board of the National Beer Wholesalers Association for the 2010-2011 term. As chairman, Del Papa plans to continue advocacy on behalf of the industry, he says.

“There is an effort in this country to de-regulate alcohol,” he says. “From my view, and I think the view of many, I think that would be a disaster. I’m going to do everything I can to try to give back to an industry that’s been very good to me, my family, my employees and my retailers and do the best that one man can while I’m there serving my term.”

Del Papa also wants to preserve the forward momentum of his family’s company.

“Opportunities will present themselves, and we need to be mentally and financially ready when those opportunities come and make sure that we have enough foresight to continue to make good investments in our future,” the company president says. “I don’t tend to worry about those things, but at the same time we’ve got to change and we have to keep pushing for the right kind of change. We can’t just sit back and neglect the future and think everything’s going to work out for you. We work for our future very hard, but it starts with the people we hire. If we make the right investments, they’ll give us a reasonable return and that’s what you can expect in business.” BI

Sidebar: Centennial celebration
Del Papa Distributing Co. is heavily involved in special events and community outreach in the 17 counties that it serves in Southeastern Texas. The company sponsors at least 45 events across its territory and contributes gifts and donations to at least another thousand, says Mike McAfee, Del Papa Distributing’s vice president of marketing.

With so much experience in events in the local area, when it came time to celebrate its own 100th anniversary Del Papa Distributing set-up a committee that spent two years researching the company’s history, planning special events, creating a marketing campaign and community outreach programs, McAfee says. It also set up a $220,000 endowment to benefit 13 colleges and universities located in its territory.

“I think it brought awareness to our communities about the company that was not appreciated prior,” says Larry Del Papa, the company’s president. “We only plant buildings in so many locations, and we cover a pretty broad territory. The word really got out, and it was a proud moment for us and our employees and a lot of our retailers appreciated it.”

Its primary supplier, Anheuser-Busch InBev was instrumental in supporting its centennial anniversary celebrations. Del Papa Distributing hosted galas in Beaumont, Victoria and Galveston, which each included a special appearance by the Anheuser-Busch Clydesdales. The brewer also created an anniversary label for Budweiser bottles that were handed out as favors along with a commemorative beer stein highlighting family members and a model of a 1930-era delivery truck that the company refurbished for the occasion.

Anheuser-Busch’s media department also supported Del Papa Distributing’s radio campaign that promoted historical and local events that happened in its territories during the company’s 100 years in business. The anniversary celebration will culminate this year with the release of a 150-page book as well as a video that document the history of the company, McAfee says. BI