Beer Industry Veteran Questions Franchise Reform Efforts

Last week’s Beer Marketer’s Insights spring conference saw plenty of personalities offering their points of view on franchise law reform, with one well-respected speaker who said he hoped to upset enough people to drive both wholesalers and suppliers to the negotiating table.

Longtime beer industry veteran Mike Mazzoni offered up his remarks on what has proven to be a polarizing topic and told attendees to chuckles that “I’m probably going to piss a few people off and I hope so.”

His underlying point: the three-tier system has benefitted craft beer and franchise reform could benefit both brewers and distributors alike, but at the expense of brand equity.

It’s a view that Mazzoni has had a long time to develop. For the past 40 years, he has had a front row seat to changing consumer preferences and has observed the evolution of beer drinkers’ tastes and buying habits. He joined Anheuser-Busch in 1973 and in 1983 became the general manager of Barton Beers, one of two original importers of the Corona brand. Mazzoni sold his interest in Barton in 1991 and, for the past 22 years, has consulted for domestic and international brewers and advised on a number of distributor mergers.

Facing an audience of hundreds of brewers and distributors, Mazzoni presented his “10 Rhetorical Questions and Not-So-Random Thoughts on ‘So-Called’ Franchise Reform.”

Among the highlights of his presentation were thoughts about successful craft companies, sobering remarks about the relationship between brewers and distributors, and questions about brand health, longevity, and the Brewers Association’s attempts to create carve-outs for craft brewers.

Admitting the three-tier system isn’t “perfect,” Mazzoni said he believes it is “pretty damn good when you look at the wealth that has been created.”

“Why is it that Boston Beer, Sierra Nevada, New Belgium, Shiner, the early pioneers and more recently Lagunitas, Brooklyn, Bell’s, and so many other new brewers have been wildly successful under the current system,” he asked. “Maybe the underlying issues is that some brands are simply better than other and some brands simply sell better than others.”

Mazzoni suggested that the current three-tier system has provided new category entrants an extraordinary retail opportunity, if not a preordained route to immediate success for all new brands.

“If the route to market is limited, explain to me, somebody, how the craft category has had growth of 100 million cases since 2008,” he said. “The system today is selling 2 million CE’s per week and thousands of more brands than five years ago. What am I missing here?”

And while craft brewers might groan about “share of mind” — the concept that their distributors might not pay enough attention to smaller brands — Mazzoni maintained that wholesaler access is a privilege.

“When did access to a distributor’s organization and relationships become a right rather than an opportunity?” he asked.

That’s why he feels that carve-out laws for craft brewers — a path favored by the BA — are not the answer.

“I understand the theory but I can’t endorse them,” he said. “It is simply not fair to potentially penalize the suppliers whose brands are paying for the basic distributor infrastructure used to support those smaller brands.”

Additionally, Mazzoni said, that extreme franchise law reform would put the value of some brands at risk.

Nonetheless, he does believe there is some kind of compromise to be reached and quoted BA president Charlie Papazian saying, “There’s beer at the table, why aren’t we both sitting around that table?”

Mazzoni urged brewers and distributors, in every state, to get together and work out a solution to franchise reform that benefits both groups.

“Everyone in the industry knows what is needed,” he said. “We just got to get off our high horses and sit at Charlie’s table.”

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