Distribution

Wholesaler of the Year: Ben E. Keith Co. Beverage Distributors

The fourth largest beer wholesaler in the country, Ben E. Keith Co. Beverage Distributors, will sell more than 39 million cases of beer this year. This feat makes Beverage Industry’s Wholesaler of the Year one of the largest Anheuser-Busch InBev distributors in the United States in a territory that covers 61 counties in North Texas and takes the company across the state of Texas distributing import and craft brands.

Ben E. Keith began selling Anheuser-Busch products in 1933, but it wasn’t until 2008 that the company expanded full force into craft and import beers. Two years ago, the Fort Worth-based company acquired the Texas division of C.R. Goodman Distribution Co., College Station, Texas, and picked up more than 60 import and craft brands, representing around 400 different styles of beer. The acquisition included brands such as Spaten, Chimay, Duvel, Real Ale Brewery, Full Sail, Anchor Steam and Ace Cider. In September 2008, the company purchased Authentic Distributing and added another 30 brewery partners, including Left Hand Brewing, Bosteels, Urthel, St. Feuillien and Meantime.

Then in early 2009, Ben E. Keith acquired more than 60 additional beer brands from Glazers Distributing, Dallas, and, in turn, doubled the wholesaler’s existing craft and import offerings. The wholesaler added brands such as Sierra Nevada, Pyramid, Paulaner, Asahi, Sapporo and Flying Dog at this time.

“We had always been an exclusive A-B distributor up until 2007,” says Robert Hallam, Ben E. Keith’s chairman of the board and chief executive officer. “What that meant was every other product outside of the A-B line was being distributed by someone else.”

Concomitantly, two big movements in the beer industry caused the wholesaler to rethink its position, he explains. First, consolidation in the beer industry merged many competitors under one house in Ben E. Keith’s market.

“While these products were divided up, I think that we could compete pretty effectively with our A-B line against mainly imports,” Hallam says. “But when they came together, they presented a higher wall of strength. When they became consolidated under the same management, the same drive toward the market, the same retail program offerings and the same retail specific plans for all its imports, they became more formidable.”

Additionally, the popularity of craft beers began to grow exponentially during this time. Ben E. Keith had picked up distribution of craft brewers such as Deschutes, Brooklyn and Summit Brewing, but it wasn’t until its acquisitions in 2008 that the company emerged with a large portfolio of craft beer brands.

“While we consider ourselves on the one hand always a devoted, loyal A-B distributor—we wouldn’t be here without them—we couldn’t help but notice what was taking place out in the retail trade and couldn’t help but notice craft taking up more of the shelf,” Hallam says.

Groceries to beer

Ben E. Keith’s business always has been an evolution and not just in recent years. In 1906, the company was founded as the Harkrider-Morrison Co. and was a wholesaler of groceries and sundries. Within a few years of its founding, Ben E. Keith’s knowledge of routing, operations and sales pulled him into a leadership role, and, by 1931, the company was renamed after him.

While Keith accomplished many remarkable business achievements, the company’s venture into beer can be attributed to his decision to add ice cream syrups to offset the summer loss of sales of vegetables and fruits. In 1928, Keith visited St. Louis and met with Adolphus Busch, whose brewery was making syrups, baker’s yeast and other products since it could not brew beer during the Prohibition years. When Prohibition ended, the company became a wholesaler of Anheuser-Busch beers.

Gaston Hallam, the father of Robert and President and Chief Operating Officer Howard Hallam, began his career with the company in 1924 and later became a major stockholder, president and chairman of the company before he passed away in 1990.

While the Hallam family is certainly involved in the company, the total company now employs more than 3,700 people with 1,200 full-time and 127 part-time employees in its beverage division. While many produce distributors that took on beer gave up their produce business to be solely beer distributors, Ben E. Keith was one of the few companies that decided to keep both lines.

As one of the largest full-service institutional distributors in the country, its independent food division supplies a full line of produce, frozen foods, meats, dry groceries, refrigerated foods, paper goods, equipment and supplies to restaurants, hospitals, schools and other institutional businesses in 11 states. The beverage and food divisions are run separately, but the two merge together at corporate in terms of financial accounting, information technology, risk management and administration.

The beverage division accounts for $700 million of the company’s expected $2.6 billion in sales this year. The division operates 11 distribution facilities, with the largest being in Dallas, and five sales centers. The facilities are organized by population concentration. Ben E. Keith’s beverage division represents more than 1,000 brands from 156 breweries and 86 suppliers.

Expanded portfolio

When InBev acquired Anheuser-Busch two years ago, Ben E. Keith did not benefit from the addition of import brands to its portfolio like some wholesalers. Under Texas law, a brewer cannot move its brands from one wholesaler to another, but a sale of a brand can be negotiated if both wholesalers are willing. In Ben E. Keith’s market, InBev brand wholesalers did not want to part with the brands, and none of InBev’s import brands were added to the company’s portfolio with the formation of Anheuser-Busch InBev.

“I guess the $64,000 question for us had we acquired those brands—we tried to acquire those brands—would we have been in the craft and import business today at all?” Hallam asks. “Very possibly not. Had we gotten those brands, we might have just stopped right there, but that drove us to trying to find some other alternative.”

In 2008, Ben E. Keith went from a beer distributor with just its toe in the craft beer market to being a beer distributor with more than 120 brands across the state. The company had made two acquisitions in an 11 month period in which it acquired 1.4 million cases of beer, says Flint Prewitt, Ben E. Keith Co. Beverage Distributors’ vice president of sales and operations. This year, the wholesaler will sell more than 2.1 million cases of import and craft beer in addition to its 37 million cases of A-B InBev products.

When the company acquired the brands from C.R. Goodman, it also acquired some small distribution offices that needed to be modernized into larger sales offices, but it also needed to fill in the geographic gaps.

“We either took their facility and remodeled it, expanded it and made it better, or we built a new facility in the same part of town,” Prewitt says. “In El Paso, they didn’t have a facility there, so we leased a building and renovated it for beer distribution.”

The company’s expansion plans continue. The company is expanding its Dallas corporate office and branch office and warehouse by 130,000 square feet, which should be completed by the end of the year. While the company and Dallas division has expanded, its Dallas office space had not since 1982, says Paul Holton, Ben E. Keith Co. Beverage Distributors’ vice president of operations. The company also is scheduled to add another 60,000 square feet for product storage that is expected to be completed in the next year, he says.

The company also quickly ran out of space in Austin after acquiring several of Glazers’ import and craft brands in the Austin market. Ben E. Keith initially distributed from the original leased facility it acquired from C.R. Goodman and expanded into a second facility. It since has leased a larger facility while it plans to build a new approximately $10 million, 100,000-square-foot facility on 24 acres in Austin within the next two years.

“We weren’t wanting to build a facility from the ground up, but trying to find a suitable facility in Austin to remodel was pretty tough,” Holton says. “…In Austin, the craft beers are increasing, and the space there is very limited. We are doing what we can with technology to help with that space now, but I foresee when Austin gets built that it will go in with a pretty unique racking system and have a full warehouse management system implemented into it.”

Ben E. Keith’s top selling craft beer, for which it is experiencing explosive growth, is Fireman’s #4 from Real Ale Brewing Co., Blanco, Texas, which is outside of Austin, Prewitt says.

“This is a trend you will find across the country,” he says. “Local beers are doing very well in their home markets. People are looking for local products because they are unique and high quality. Consumers are also looking to support local businesses.”

Sierra Nevada, Dogfish Head, Stone, Woodchuck Hard Cider, Ace Cider, Brooklyn, Full Sail and Harpoon are other top selling craft beers in Ben E. Keith’s market. For import beers, Spaten, Chimay, Duvel, Sapporo, Paulaner are the top selling beers in the wholesaler’s market.

New products from A-B InBev also have done well. Bud Light Lime, Bud Light Golden Wheat and Select 55 in addition to new flavors from Michelob Ultra like Lime Cactus, Dragon Fruit Punch, Pomegranate Raspberry and Tuscan Orange Grapefruit have all performed well.

This year, larger pack sizes, such as 30-packs, of sub-premium brands like Natural Light have helped to grow that segment of the business for the wholesaler. In addition, a very aggressive price promotion of Natural Light 24-ounce cans from September 2009 to June 2010 sparked sales of the can size, which has continued without the promotion, Hallam says. Overall, in its A-B InBev portfolio, the company has witnessed a gradual movement from bottles to cans in the last couple of years, Prewitt says.

In addition to its beer offerings, Ben E. Keith represents one winery, Chateau Diana, Healdsburg, Calif., for which it distributes its Black Oak, La Baron Ranch and 1221 wine brands. It sells on average 400 to 500 cases of the wines a month. While Ben E. Keith is evaluating expanding into wine, the high fragmentation of the wine business makes it a hard segment to enter, says Robert Hallam Jr., the company’s vice president.

“The benefit of being in the wine business is the experience that we’re getting in this part of the industry,” he says. “We wouldn’t have thought that we could have competed in this part of the craft beer segment several years ago.”

The wholesaler also offers a few non-alcohol (NA) beverages, such as energy drinks and Thomas Kemper sodas.

“We have held off on getting into NAs very deep,” says Kevin Bartholomew, Ben E. Keith Co. Beverage Distributors’ president. “We just did not want to cloud our focus on the acquisitions of the new crafts and imports. We might look a little harder at NA drinks in 2011, but we have had plenty on our plate in the last three years with all these acquisitions.”

Beer awareness

Ben E. Keith divides its beer portfolio into a traditional division, which includes the A-B InBev brands, and a specialty division, which includes the craft and import brands. The two divisions work together, but they operate with separate administrations.

“We know that some partners want to be in the traditional business, and some partners want to be in the specialty side,” Bartholomew says. “Some partners want to be in both. We don’t keep a partner from having access to whatever system they want to sell in, but we feel like it’s very advantageous to keep these divisions separate because the crafts and imports for the most part are sold differently than a larger volume domestic brewer like A-B. We just don’t want to cloud the selling effort. We want the beers to sell, where they need to sell, the best way they can sell with the best salesman that can sell it. It’s important for us to go through the extra expense to have the separate selling forces.”

Another reason the wholesaler has dedicated sales forces is because the high-volume specialty accounts are generally low-volume A-B InBev accounts, and many times high-volume A-B InBev accounts are low-volume specialty accounts, Prewitt says. “That’s why, in a lot of ways, this acquisition worked out very well for us, because it got us into places where maybe we were there but in a very small way,” he says.

A huge part of the company’s sales force success is in training, Bartholomew adds. An example of the company’s dedication to training is its new interactive training facility at its Dallas branch from which its employees, retailers, suppliers and other partners can benefit. The new room features a training bar, and podcasts and webinars also are conducted from this room as part of the education process. The wholesaler has a vice president of training in addition to having one trainer specifically focused on the traditional portfolio and one trainer focused specifically on the specialty sides of the business. The company also has training facilities at all of its branches.

Ben E. Keith is forward in marketing to consumers. For the past two years, social media has played a large role in this. The wholesaler has been able to market events and push messages out through social media, says James Hallam, Ben E. Keith’s vice president of marketing. The company blogs, tweets and has a Facebook page, which is all managed by a dedicated social media employee.

“The days of doing $10,000 and $25,000 marketing events are kind of not over, but you can do it for less and accomplish more,” he says. “You don’t necessarily need to spend all that money on radio. You can accomplish it through social media.”

Ben E. Keith markets heavily to Latino and African American consumers for its A-B InBev brands. The Latino segment makes up a large portion of the wholesaler’s Bud Light sales, James says. The company also recently rebranded its Dallas Mavericks’ basketball sponsorship to the Budweiser brand and its Dallas Stars’ hockey sponsorship to Bud Light.

In addition to several company websites, Ben E. Keith is a member of GreatBrewers.com, a social media marketing platform created by wholesalers for wholesalers. The Great Brewers community includes 28 like-minded distribution operations across the United States with similar, diverse portfolios. The goal for the website is to be primarily about the beer, supplying consumers and retailers with product knowledge about the beers the wholesalers distribute, food pairing suggestions and where the beers can be found, James says.

“On average, we have about 9,000 hits a day,” he says. “From January 1 to August 20, we’ve had 2.1 million visits.”

Great Brewers expanded its reach with an iPhone and Android application called BeerCloud that helps users find the beers they want at the retailers closest to them, offers product descriptions and provides food pairing suggestions with a quick search or scan of a barcode.

In the marketing department, the company makes sure it promotes each of its suppliers as they want to be marketed. “Our primary responsibility is our A-B business, and those consumers like to be talked to at the mass level,” James says. “Whereas, on the specialty side, this is where social media really comes into play. Craft brewers like the hands-on events.”

The obligation Ben E. Keith carries for its suppliers is great. “We strive to exceed their expectations,” Prewitt says. “It is important that we represent their brands effectively in all of our markets. Strong, healthy brands are key to our mutual success.”

Ben E. Keith also is very selective about the brewers that it brings into its portfolio, and it is focused on keeping the equity for its brands strong. “We just don’t want to take a brand on to keep it from our competition,” Bartholomew says. “We want to take a brand on to be really their lifelong partner.” BI