Beer distributors may mix drinks

DENVER -- As two of the world's largest brewers prepare to marry their U.S. operations, the small independent companies that deliver cases and kegs to stores and bars may play their own version of the mating game.

Miller Brewing Co. and Molson Coors Inc. have proposed the MillerCoors joint venture to sell more Coors Light, Miller Lite and Miller Genuine Draft in the U.S. The operation would target No. 1 Anheuser-Busch Cos., which has nearly 50 percent of the market with products such as Budweiser, Michelob and Bud Light.

Now some distributors of just Miller or just Molson Coors products are looking at buying competitors as they grapple with rising costs for fuel, materials and labor.

"If you have competing distributors in the same market that carry brands like Miller and Coors that work well together, it just makes sense to consolidate," said Betty Buck, who heads a family-owned Miller distributor in Maryland.

In this age of global businesses, the beer industry has no nationwide distributors, consisting instead of family-owned and independent companies. The trend is driven by laws imposed after Prohibition giving each state authority over alcohol regulation within its borders, said Craig Purser of the National Beer Wholesalers Association.

The laws established a three-tiered system of distribution: Manufacturers and importers need federal licenses; distributors need federal and state licenses and retailers need state licenses to sell the products, Purser said.

Some states require exclusive territories for distributors by law to provide a level playing field in the marketplace. In others, distributors work with suppliers on contracts to carry a variety of products, according to the association.

With about $70 billion in gross sales, the beer distribution industry has been evolving in response to consolidation and other changes among the nation's breweries as consumer tastes expand to include craft beers, wine and liquor.

Since 1995, the number of distributors has dropped from 5,500 to about 1,600 as smaller companies have been bought out, according to industry statistics. "Now, it's a matter of bigger players getting together," said Harry Schuhmacher, editor and publisher of the online trade publication Beer Business Daily.

If the Miller-Coors venture is finalized, about 60 percent of distributors delivering both Miller and Coors may see some synergies because they will only be dealing with one company, which could streamline record keeping and other tasks, Purser said.

For the rest, Schuhmacher said, "There will probably be an incentive for those guys to get together and merge or for one to acquire the other. I would imagine that Miller and Coors would put some kind of pressure to get those deals done."

Based in Upper Marlboro, Md., Buck Distributing Co. was founded in 1946 by W. Irwin Buck. His daughter, Betty, took over shortly before her father died in 1986. Today, the 100-employee company delivers a number of products besides Miller, including Samuel Adams. Buck believes consolidation is key to remaining profitable. Fuel, benefits and health insurance keep rising, she notes.

"The more cases that you drop off at each stop, the more that goes directly to your bottom line," she said.