Wholesalers can’t be happy when they hear news like the recent announcement from Anheuser-Busch that sales were down last quarter, and that price increases and discount reductions are coming. After all, if the big brewers’ share of U.S. beverage alcohol business is falling, then the wholesalers must also be in a tough spot.

So it seemed appropriate that the first in our series of interviews with industry leaders took on Craig Purser, the new president of the National Beer Wholesalers Association, the voice of the business in Washington, D.C. Purser joined the NBWA ten years ago and was named vice president in 1999. He was instrumental in the strategic positioning of the group in government, public and political affairs, and has led the charge to strengthen the beer distribution system and state-based regulation.

Question #1
Adams Beverage Group (ABG): As the new leader of NBWA, what in your opinion are the most important short term issues facing the beer community?

Craig Purser: We need to continue what we’ve been doing; assuring that our members have the best representation before the government, the public and the industry they possibly can have. But legal issues and the three-tier system have taken center stage lately. This shift from the state house to the courthouse has opened up a new front and we are working harder than ever in that arena. Additionally, we’re focusing on what we can do to increase beer’s “share of stomach.” It’s no secret that spirits has had a phenomenal run, and wine has had great growth, but we are interested in increasing beer’s share of the licensed beverage pie.

Question #2
ABG: And the long-term concerns?

Purser: We’re working to recognize and address the shift in power that’s taken place in the retail sphere. Both independent and chain retailers are important, of course, but a great deal of growth most of the growth recently has occurred in off-premise, big box retailers and national chains. Of the top 50 Fortune 500 companies, twelve are beer retailers, including Wal-mart, Costco, Albertson’s, Safeway, Kroger and convenience store chains like Valero. Our customer companies are enormous.

In that same list, the largest American beer company, Anheuser-Busch, is #139. So when people talk about marketing power, they’re not talking about manufacturers or distributors. The power is in the retailers’ hands and we have to work to address the shift that is dramatically changing how we do business.

We’re also working on how to help our members describe what they do. We must point out the choice, variety and diversity of product on the retailer’s shelves is a result of the American distribution system. If you got rid of beer distributors tomorrow, there would only be a couple of brands with national distribution. Distributors provide all kinds of services, including providing access to market and capital for a lot of smaller suppliers, importers and the craft beer industry. We provide a tremendously vital service.

Question #3
ABG: Considering the current beer slump, what steps will wholesalers take to help retailers and restaurateurs sell more beer?

Purser: When you look at the number of brands that have come on the scene in the last ten years, it’s really easy to see the value-added that distributors provide. If you’re a retailer, and you understand the category you manage, it’s easy to see that the variety and diversity of products, and the margin you receive matters. Sure, volume is a tremendous bottom-line provider, but so is margin – our members recognize that and do a great job working with retail customers to remind them of that. Additionally, beer as opposed to wine and spirits provides a much quicker “turn” for the retailer.

NBWA’s board of directors formed a “share of stomach” task force of distributors that worked directly on this. One of the first things we did was decide to get the attention of our suppliers; you’ve seen a lot about the industry’s “Here’s to Beer” campaign and we’re very pleased with that. We’ve been working on generic promotional efforts for a number of years, promoting beer as an accompaniment with food and as an ingredient, promoting it generically on-premise, providing collateral material about the styles of beer. We’re in our third year of satellite media tours, and our next one, taking place in honor of Valentine’s Day, will feature the Washington, D.C. chef and owner of the bakery Cakelove. He’ll be talking about beer and chocolate in 20 to 30 of the top media markets.

Question #4
ABG: You touched on the growth in the craft beer category; the growth is there but most of the volume comes from the big U.S. and international brewers; what problems and opportunities does this split create?

Purser: For one thing, it’s created a stronger, more independent middle tier. It forces distributors to look at the vast variety of product out there and view their business in a fresher, newer light. But you can’t discount what has been almost cathartic for the major domestic suppliers. In 2005, the three largest domestic suppliers acknowledged at the highest level, publicly, the fact that things need to be done differently. A-B led the way with the “Here’s to Beer” campaign and August Busch, IV spoke about needing to bring back romanticism, fun and fellowship to beer. Norman Adami of Miller talked about “sameness” and the fact that if we’re truly going to build brands and be more competitive, we have to get away from our current advertising messages and build on the unique attributes of products. And Frits van Paasschen [president and ceo of Coors] provided a very fresh perspective as a marketer – very outspoken about the need for these products to have their own unique qualities promoted. But no one thing will deal with this; a lot of different things will be needed to return beer back to its rightful place.

Question #5
ABG: Responsible service and under-age consumption are enormous issues today for everyone in the beverage alcohol business; what are the wholesaler’s responses on these issues and how are they working?

Purser: We’ve probably been more ambitious than our counterparts in the industry. About five years ago, we started a celebrity public service campaign with sports stars, musicians and elected officials. NASCAR’s Sterling Marlin, the music group Hootie and the Blowfish and Maryland Governor Bob Ehrlich as well as numerous others have joined NBWA’s PSA effort to talk about underage drinking and drunk driving. We have also created numerous statewide spots where we’ve partnered on with law enforcement. In fact, the head of the Colorado highway patrol is the voice for our PSAs out there.

While we all watch beer consumption go up around various holidaysholiday celebrations, so too we focus our on-going responsibility print campaign around those same occasions then. For instance, for St. Patrick’s Day we provide print PSAs for our distributors to use in their markets.

Additionally, we work extra hard when we think there could be illegal consumption taking place like duringSame with prom and graduation time. It’s important for young people to make the right choices since, if they’re under 21, our products are illegal and can have devastating consequences.

Question #6
ABG: Many people are watching the Costco versus Washington State suit very carefully; what’s the position of NBWA?

Purser: We believe the plain language of the 21st amendment means something – it will be very interesting to see if Judge Pechman in Washington State agrees and understands this or succumbs to the very large and ambitious retailer headquartered in her home state. We are very supportive of the Washington’s state’s efforts to have a regulated system that makes sense and has provided an orderly marketplace for the last 70-plus years.

Every state is different and has a different set of laws, but all acknowledge that the product needs to be controlled because it is not for everyone. All in the industry have to remind each other and ourselves that this is a product that if consumed irresponsibly can have devastating consequences. Sometimes in our efforts to meet the expectations of investors or to sell more, we forget that. Costco would like, I think, to deregulate the industry to the point where they can control more of this product. I believe that would disrupt the marketplace. If you’re a retailer in Washington, you’ve made investments over time in this environment – if Costco wins and you are an independent retailer, you have cause for concern. If you’re a smaller manufacturer, you need a viable, strong three-tier system to get to market, because at least on the beer side, choice and variety doesn’t seem to be important to Costco.

Question #7
ABG: What are the big issues for beer wholesalers on Capitol Hill?

Purser: There are some individuals who would like to take this product out of our culture and we’ll continue to be a strong advocate on our industry’s behalf to point out those policies we think are misguided. We’re also advocates for small business and central to that is permanent relief from the death tax or so-called estate tax, which is essentially suspended until 2010, but comes back with a vengeance in 2011. We want to make sure out people get permanent relief so they can plan their financial futures. We also believe this system is that the alcohol industry is best regulated at the state level - that’s what the 21st amendment is all about – and we will work to maintain it.