Dallas-based Glazer’s Distributors has grown to be one of the country’s largest distributors of beer, malt beverages, wine and spirits with operations in 11 states. Glazer’s represents nearly every vendor of alcohol somewhere in its territory. As the family-owned and operated company closes out its centennial celebration this year, the distributor stands ready to embrace what the years ahead may bring.
Glazer’s has been through 100 years of improving its business model by adapting to change, says Bennett Glazer, the distributor’s chairman and chief executive officer. Glazer’s knows a thing or two about change, with the more than 40 acquisitions it has undergone in the past 20 years.
“Companies can’t stay the same and continue to grow,” says Jerry Cargill, Glazer’s president. “They just can’t do that. You always have to be flexible enough to deal with the conditions that you are given … Change is the only constant, so if you don’t enjoy change or adapt to change, then you aren’t going to do very well. We enjoy it. We adapt to it. We encourage it, and we try to meet the change head on. The fact that we have flexible ownership and senior management that say, ‘Change is ok; let’s embrace it and run with it,’ has allowed us to stay on top of the game. I think that separates us from everybody else. We actively work on trying to promote change.”
That willingness to invite and embrace change has led to the successful operation of 43 branch offices, distributing approximately 50 million cases annually and employing nearly 5,200 people.
“We feel that we have a solid organization, not only from a family standpoint, but from a professional management standpoint,” Glazer says. “That’s another reason we’ve been able to complement each other for 100 years.”
Glazer’s celebrated its centennial with local events in each of its states, leading up to a grand corporate fete at the new Dallas Cowboys Stadium in August.
“I think it’s meant a lot to our employees to be a part of a company that’s truly 100 years old,” Cargill says. “It’s been fun for all of us to celebrate this first 100 years.”
Economies of scale
The Glazer family business began in 1909 in Dallas when Bennett Glazer’s grandfather, Louis Glazer, started Jumbo Bottling Co., which distributed a line of flavored soda waters. It was not until 1933, when Prohibition was repealed by the 21st Amendment, that two of Louis’s sons, Max and Nolan Glazer, applied for a license to sell alcohol. When the brothers received the permit in 1934, they started Glazer’s as it is known today and kept the soft drink business as a separate company.
The family stayed in the soft drink and alcohol distribution businesses until 1966 when the Glazers sold the soda water business to focus on alcohol distribution. By 1966, Glazer’s already had expanded beyond Texas to three additional states.
Being a family-owned and operated company for its entire existence has been a benefit to Glazer’s.
“The advantage as we look at it is that we keep the same culture that we always had,” Glazer says. “We’ve put together a very solid organization, and we’ve been able to keep the family together by performing. Now that we’re in our fourth generation, we have a lot of different shareholders. The key to keeping the shareholders happy is to perform.”
Another advantage of being a family-owned company is that the company becomes a long-term player instead of a short-term player, Cargill says. “You are not waiting for quarterly returns like Fortune 500 companies with large publically traded stocks,” he explains. “We have a very long-term horizon to build the family value over time instead of the short term.”
Glazer’s model of being a total alcohol distributor also provides the company with a key benefit â€” the ability to satisfy all a customer’s alcohol needs.
“If you have a good relationship with a customer, he is going to need all of these products, so why not take advantage of the fact that you have a great relationship with him,” Glazer says. “If you could provide him with all the different needs, then you have an advantage over the guy that doesn’t have the good relationship with him. Therefore you try to have something in every category to cover your customer.”
With operations in 11 states, Glazer’s also is afforded some economies of scale. In addition to being able to purchase better, centralize training of its employees and centrally operate certain departments like information technology, it allows Glazer’s to handle large multi-state customers on a centralized basis.
“Our supplier customers can come to us and hopefully cover larger portions of their geography in the United States with their product,” Cargill says. “They have a larger voice with us.”
Glazer’s large geography also gives the company a greater awareness of what is going on in a larger portion of the United States. “The more markets that you are exposed to, you can learn new things from each of those markets,” Cargill says.
In each of its 11 states, the company operates in several different configurations, such as franchise, control and open states, and does not distribute every alcohol category in every state. Much of this depends on the states’ laws.
“The laws themselves in each of the states vary fairly significantly,” Cargill says. “The hours of being open, the ability to move product around, and the way retailers get their licenses â€” there are lots of different idiosyncrasies between the states. So it gives us an opportunity to look at all of these places and try to figure out the best way to accommodate the specific markets. That does give us not necessarily an advantage, but it puts us on a level playing field with some of the other large distributors in the United States.”
While each of the states do have different laws, Glazer’s customer base is somewhat similar, and so is Glazer’s quality of service in all of its locations, Cargill says.
Part of Glazer’s overall business strategy is to aggressively strike on acquisition opportunities to expand its footprint. The distributor expanded its beer footprint in May with the acquisition of Permian Distributing Co., the MillerCoors house in Odessa, Texas. Permian Distributing is a 2.5-million case beer and non-alcohol beverage distributor servicing more than 800 customers in a 42,000-square-mile area of West Texas. Glazer anticipates closing another distributor acquisition before the end of the year, and remains open and very bullish on opportunities, he says. He also expects more distributor consolidation in 2010.
“Everybody is trying to figure out what is the best way to move forward, and they are looking at the options,” Glazer says. “You have to ask yourself: ‘Are you better off trying to go it alone? Are you better off trying to do some type of configuration with another player that’s basically close to your size? Is there an arrangement that you could make that’s a win-win that could work?’ These are all the different options that people are trying to figure out right now.”
Strategic alliances provide another platform that Glazer’s uses to expand its business and improve its operations. In August 2008, Glazer’s announced that it was discussing one such strategic collaboration with Southern Wine & Spirits of America Inc., Miami, the nation’s largest wine and spirits distributor. In September though, Glazer’s and Southern Wine & Spirits announced that the two companies discontinued their discussion for an alliance.
“We thought that there was enough of a win-win for both parties that made sense,” Glazer says. “But once we sat down and tried to make it all work, it got very complicated. All of the things that we thought in our heads that we could try to make happen, we couldn’t pull off. We both went in there with the intent to make it work. That’s just the way it worked out. It’s very difficult to take two very, very big companies and try to put them together to make some type of an arrangement that’s a win-win for everybody.”
Glazer’s continues to be receptive to future alliances and joint ventures moving forward.
“We’re open to it if there is one that makes sense,” Glazer says. “It’s not easy to pull it off. It’s like going into a marriage. There is going to be give and take on both sides to make something like that work. So I don’t know, but I think we are open to see.”
While Glazer’s has 43 branches, the distributor grounds itself locally by keeping the home team in place. “We have 12 former owners who still work for the company,” says Louis Zweig, Glazer’s senior vice president of corporate strategy. “We like to keep these people in place because these people have a lot of equity within the market, and they have a lot to offer our company.”
Glazer’s also establishes itself in its local markets through its corporate responsibility initiatives. Each of its branches selects a charity or cause that will allow the company to be a good corporate citizen within the markets that it serves.
Glazer’s business has been affected like many other distributors around the country with the downturn in the economy.
“We are not a recession-proof industry as many people would say,” Cargill says. “We might be slightly recession resilient, but not proof.”
Geographically, certain markets in Glazer’s territories have not been hit quite as hard as others, which has been fortunate for the distributor. The consumer trend of trading down is affecting all segments of the alcohol market though, with consumers being more cautious with their disposable income.
“The premium and super-premium seems to have been affected more aggressively in this downturn than we have seen in previous downturns,” Cargill says. “Temporary downturns, which we’ve seen in the past, we really didn’t see it affected as much as this. This has sustained longer.”
Some super-premium brands in the market are bucking the trend though, Zweig says. Brands like Patron, an ultra-premium tequila; Maker’s Mark, a super-premium bourbon; and Ciroc Vodka, a super-premium vodka, are performing extremely well due to execution and branding, he says.
In general though, consumers are trading down from premium and super-premium spirits to mid-range brands. Zweig likens this to a similar consumer shift back to comfort foods.
“Brands that without the recession that maybe would have been on the wrong side of their lifecycle are actually doing extremely well right now because consumers are kind of migrating to what they know,” he says.
In past economic downturns, consumers also have moved from spirits to beer, but Glazer’s is not experiencing that with the current recession. “I believe it’s because over the last 10 years, the spirits market has done an outstanding job of branding and brand building,” Zweig says. “They are spending, for the most part, really good money in trying to build consumer franchises. Because you’ve got more good brand names in the spirits business right now, you’re not seeing that shift to beer.”
The recession also is causing a shift from on-premise consumption to at-home consumption.
“This is the habit that consumers have adopted, which is to basically say, ‘I’m going to drink a little bit less when I go out,’ and ‘I’m going to drink a little bit more at home’ for all the obvious reasons,” Zweig says.
While brands are built in the profitable on-premise channel, Glazer’s has seen a shift in sales from the on-premise channel to the mass merchandise and club store channels, and is focusing on restructuring its strategy.
“Consumers want to make fewer trips to the store, and they are certainly becoming more price conscious, so it’s important for us as a distributor to be mindful of that,” Zweig says.
While the economy begins to recover, next year still might prove to be a difficult year for distributors.
“I don’t believe we are going to be able to see a lot of pricing power within the market,” Zweig says. “There is a lot of heavy discounting and price rollbacks going on right now. I see that continuing for the foreseeable future. Our worst fear is some of the consumer habits of ‘staycations’ and in-home dining may be short-term to medium-term to permanent trends that consumers have adopted. If it does turn, we do think we will be in a pretty good spot because of the work we’ve done and continue to do against premium brands in on premise.”
Glazer’s also is cautiously optimistic about what the economy will bring in 2010.
“We believe we are in a great position to be very aggressive in the way we organically and inorganically grow our company,” Zweig says. “We’re the best-performing distributor for a lot of our major suppliers right now. We need to take advantage of that and in terms of growing the business.”
“I really try to look at the silver lining,” Cargill adds. “What these downturns can effectively do is make you a better businessperson. You really have to learn how to modify your business approach to accommodate the market conditions, and you’ve got to really be able to satisfy your customers when satisfying your customers becomes more difficult. So you have to become more efficient and more effective at getting your product to market. That challenges a management team to really put their thinking caps on and ask, ‘How can we be better in a difficult environment?’ so we don’t lose any advantage.
“I would like to think what we’ve been able to do the last couple of years is to really fine tune how we go to market with our customers, our suppliers and our people to deliver in a difficult economy. The best companies get better in a downturn economy.” BI