More on the Distribution Merger

Based on the heavy flow of comments on my distribution pieces, I can tell you're all as hot to trot on this issue as I am. So let's have another!

As expected, John Foyston has a piece in today's Oregonian that's worth a look. It voices the same themes I expressed as assumptions earlier, and also confirms the piece about diesel prices.

Now the companies will consolidate warehouse space, trucks, sales routes and staff for improved customer service and significant savings in the time of $4-plus diesel. "The merger is an opportunity to realize business synergies, and fuel costs are a big part of this," said Lindy Bartell, a spokeswoman for Mt. Hood Beverage Co.

"We're all going to the same places," Hodge said, "and nine times out of 10 there's room on that truck for more product."

But more is at stake here than efficiency because beer distributors are not just warehousemen and truckers: Their salesmen are the boots on the ground in the battle of the beers. They push one brand over another in the escalating struggle for shelf space at the grocery and tap handles at the pub. That battle is especially pitched in Oregon, with its more than 75 breweries, many of which are small enough to get lost in the shuffle as the distributors get bigger.

"This puts the smaller brewers so far down the ladder that they're not going to get any play at all," said Ron Gansberg, head brewer at Raccoon Lodge's Cascade Brewing. The brewery produces about 1,500 barrels -- 46,500 gallons -- annually and sells more than half of that to outside accounts. "This vastly reduces the ability of the small brewer to get to the marketplace."

And it offers the usual talking points from the mergees:

"The craft brewers will not get lost in the portfolio," [Chris Hodge, Columbia's director of sales and marketing] said. "Consumers know what they want, but the missing link has been that army of passionate beer geeks to go out and work with stores and pubs and educate them about the different beers available.

Of course you don't really expect him to say, "Yeah, it'll screw the little brewers, but what can you do? It's all about our bottom line"--even if it were the obvious truth. One more interesting tidbit, though--consolidation has begotten more consolidation:

He notes the wave of consolidation taking place in the beer world, specifically the all-but-complete merger of SABMiller and Molson Coors and the much discussed $46 billion purchase of Anheuser-Busch (Budweiser, Bud Light) by InBev, the world's largest brewer.

The Miller-Coors merger made CoHo possible because Columbia distributes Miller and Mt. Hood and Gold River distribute beers made by Molson Coors Inc., and the twain never meets in the world of beer distribution. "Until the Coors-Miller merger, we were competitors," Hodge said.

Even in Portland, CoHo will be focused a lot more on its clients from Milwaukee and Golden, CO than it will those in town. Further reason to regard the sunny predictions about service to craft breweries with suspicion.b