A Talk with NBWA's Craig Purser

FILED SEPTEMBER 2, 2011

A Conversation With NBWA's Craig Purser

Dear Client:

This week we caught up with the chief of the National Beer Wholesaler's Association to get a rundown on the latest. Here is an excerpt of our conversation. Yes, you are a fly on the wall:

Harry Schuhmacher: What's been going on with NBWA lately?

Craig A. Purser: Well Harry, we've been busy. In the past week alone we've had an earthquake and a hurricane. I'd hate to use that as a metaphor to describe the American economy or the beer industry but it's not a huge stretch.

HS: Is everybody ok?

CAP: Oh, sure. I lost two pilsner glasses and a couple of beer steins from the tremor but Irene was more than an inconvenience with lots of power outages, downed trees and a hell of a lot of rain. I hope that the beer buy-in before the storm was strong and the chainsaws and hammers start swinging as the industry could use a late summer shot in the arm from construction jobs.

HS: Well, what are you hearing from distributors these days?

CAP: Probably some of the same things you've been hearing. Volumes are tough. The economy, fuel prices and unemployment are top of mind. There are some bright spots, however, including craft. We're looking forward the Great American Beer Festival next month and seeing a number of distributors there as we join the BA in recognizing some of country's best craft beer distributors.

HS: What's going on in DC and what can we expect when Congress returns?

CAP: The run up to the August congressional recess was unreal as the House, Senate and White House narrowly avoided default as they wrestled with the extension of the debt ceiling. NBWA worked to advocate for a solution that addressed the spending issue while holding the line on taxes. I guess you could say that was what Congress did. But the stock market sure didn't like it.

NBWA has been keeping a real close watch on two pay-fors that have been on the "list" for potential revenue for some time -- LIFO [Ed. Note: last-in, first out accounting practice] and changes to the estate tax. Our team really has been working hard to communicate with key congressional leaders on why both of those issues could have serious impacts on independent businesses like beer distributors. We are pleased that LIFO and estate taxes were not included in the round before Congressional recess.

But of course when Congress returns to Washington in a couple of weeks, we will have a new dimension created with 12 members of the House and Senate named to the "Super Committee" charged with identifying and cutting or raising $1.2 trillion in about 90 days.

Harry, I have been in Washington. DC for over 20 years and I have never seen anything like this. The political atmosphere is toxic. The disagreement between the parties and the various factions of the parties is real. The challenges to the economy and to the government at all levels regarding revenue and spending are monumental. I sure hope they can check their differences at the door and get some real work done.

HS: Dang, that bad? When you talk about governments and revenue, that always makes me think of excise taxes... Is there any chance that those could be on the menu when Congress returns?

CAP: I was talking to some of the brewers recently about that very thing. Anytime you have a situation where spending cuts and revenue needs are dire under the auspices of deficit reduction there will be talk of taxes. If you recall, that was the scenario in 1990-91. That having been said, the fact that excise taxes are regressive and hit working people the hardest is something that won't be lost on this Congress. Whether a seasoned incumbent or a newly elected freshman, these folks know that excise taxes are paid by working men and women.

But the real concern during this intense time is to ensure that the federal budget isn't balanced on the backs of privately owned and operated, Main Street businesses...The same businesses, including beer distributors, that are providing good jobs with good wages and benefits, during this difficult time.

HS: Does the much talked about beer price increase play into the hands of those advocating for higher excise taxes?

CAP: You know fall means three things: back to school, college football and talk about beer price increases...we will see.

HS: Washington State is heating up again this year. Will NBWA be getting involved this time?

CAP: I believe we will. The Washington state wholesaler association is opposing the new ballot initiative, I-1183, and WSWA has just put $3.6 million (editor's note: we understand that was just an opening contribution) in to the Protect Our Communities Coalition to oppose it. The fact is I-1183 would cause many of the same deregulatory effects as I-1100 last year. Remember the state legislature voted in Washington to begin looking at privatization. But that wasn't enough for Costco as they are seeking to circumvent the legislative process for their own economic gain. You know, Harry, it's interesting to look back on quotes Costco executives have given in the press. Each time they haven't gotten all of what they want, they have promised to wage a new battle, and they have. Well, here they are once again, as promised.

HS: Well I thought this year they were sidelining beer by focusing the initiative on wine and spirits?

CAP: It isn't that simple. This latest initiative removes laws that level the playing field between giant retailers and independents and that would weaken the system for everyone. In an effort to address the outlet and access argument under question 1100 from last year, I-1183 says that only retail outlets with 10,000 square feet can sell spirits, meaning only the big boxes will be able to sell liquor. The proposal allows retail-to-retail sales, further disadvantaging independent retailers. And though the proposal attempts to address the huge holes in state and local budgets, it does so with big excise tax increases. Is there anyone who doesn't think that a spirits tax increase today won't be met with a beer tax increase tomorrow, especially in a revenue-starved state like Washington? Bottom line is that this is a terrible policy proposal. That's exactly why the same groups that united to defeat Costco's initiative last year - including law enforcement, public safety, control advocates and distributors are getting back together to beat it again this year.

HS: BBD's sister publication, Wine & Spirits Daily, wrote in May that perhaps the CARE Act is having a dampening effect on litigation. What is the latest on the bill?

CAP: You are absolutely right on the fact that the litigation against the states isn't being filed as rapidly as we saw a few short years ago. And, who knows, perhaps the legislation is serving to deter plaintiffs from filing new lawsuits. Remember that the legislation was introduced after 27 states were sued and 40 state AGs wrote Congress concerned about lawsuits that were seeking to limit their state's ability to effectively regulate alcohol. Since the bill was first introduced in April of 2010, no new meaningful litigation against the states under the dormant commerce clause has been filed.

HS: That's interesting that there's no new lawsuits...

CAP: Now Harry, these plaintiffs have said they would keep suing and we take them at their word. But because of the pursuit of federal legislation and the good work of NBWA's legal team there have been many things that have furthered our agenda. For one thing we have educated an unprecedented number of policymakers at all levels of government about the state based alcohol regulation and the three tier system. Policymakers are more aware than ever about reasons for and the differences between the tiers. New relationships and coalitions have been formed with non-traditional allies that have been helpful in courthouses and state houses. And believe it or not, we are having better quality dialogue with many of our trading partners on both the supplier and retailer side.

HS: Better quality dialogue....what do you mean by that?

CAP: Well I mean our discussions are of a more substantive nature and we are continuing to move forward together. It appears that the notion of empathy and putting yourself in the position of the other guy is on the rise. I attended the BI annual meeting earlier this year and there seems to be an improvement in folks understanding of each other's position. I had a number of great conversations with many brewers. Whether it is distributors and small brewers, distributors and big brewers, big brewers and small brewers or any other combination, there seems to be a series of conversations occurring that are honest, candid and may be moving us forward.

HS: What else are you working on?

CAP: Well for one thing, we are getting ready for a great convention and trade show. I certainly hope you are registered my friend. It's easy to do - just go to our website [www.nbwa.org]...

HS: Shameless promotion...

CAP: Well I am a shameless guy.

HS: Yeah, I saw you have Walmart's Lee Scott speaking. Couldn't get a larger retailer?

CAP: We are thrilled with this year's speaker line-up. Lee Scott is someone I am really looking forward to visiting with. He was CEO of Walmart from 2000-2009, a period of massive growth and expansion for the world's largest retailer and, by the way, America's biggest beer retailer. Interestingly, Walmart is a company that has been very public about their thoughts regarding DSD. Their initiatives in a wide variety of areas, but especially inventory reduction, help highlight the value that the three tier system provides.

But we are also thrilled to hear from Tom Long. While Tom is the new CEO of MillerCoors, he is not new to NBWA members. I am looking forward to hearing Tom's thoughts about supplier distributor relations particularly following the release of MC's three-tier doctrine. And Eric Grietens, a former Navy SEAL, White House Fellow and Rhoades Scholar is someone I got to meet and hear speak at a US Chamber meeting this summer. He is a real motivational leader and will provide some great perspective especially as we pass the tenth year Anniversary of 9/11, an event that changed our lives forever.

HS: Aren't you forgetting another convention speaker?

CAP: My boss, NBWA Chair Larry Del Papa...

HS: Nope.

CAP: Incoming Chair Steve Lytle?

[Awkward pause]

CAP: Oh, of course. The highly recognized and critically acclaimed seminar presenter and industry newsletter publisher magnate...yes, Harry, we have a very big room for your seminar. You always do a great job of telling the rest of the story.

HS: And subscribers will be able to meet in the bar and have several beers on the unlimited BBD platinum American Express Card. See you then.

I HOPE YOU all have a safe, fun, and profitable Labor Day weekend, and may the sun shine and the rain stay away and the beer flow.

Until Tuesday, Harry

"Father, in spite of all this spending of money in learning Latin, I will be a painter."
-William Allan

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