Keg Shrinkage Problem Goes Viral

FILED MAY 11, 2012

May 11, 2012

Keg Shrinkage Problem Goes Viral

Dear Client:

I have a question for you. Who owns this keg?

http://www.facebook.com/photo.php?fbid=436590093035343&set=a.192035420824146.52865.189913234369698&type=3&theater

If you think it's a silly question, you haven't been in the trade lately. Or at least you haven't been behind the bar or in the coolers. The used keg issue, which BBD first profiled last summer when MillerCoors sent a memo to their distributors encouraging them to watch out for their kegs being used by other brewers, hasn't hit the big wires lately. Both MillerCoors and A-B do not sell their used kegs in the open market, only for destruction and scrap metal when their useful life is spent. Many regional and craft brewers also do not re-sell their kegs. Sierra Nevada, in fact, puts a serial number on each keg as do many other breweries. And yet you find them with other brewers' logos painted on them, often with the original owners' embossed logos obscured or welded over. In the above case, they didn't bother to obscure the original owner.

The reason they didn't bother to obscure A-B's name is because they probably genuinely thought they had bought the keg used from a legit vendor. That's what they thought. In fact, A-B and MillerCoors and many other brewers never, ever, sell their kegs to third parties (except for scrap) and so, necessarily, they were stolen somewhere along the supply chain.

The problem is, of course, that some of these vendors acquire their kegs by unscrupulous means (sometimes with the connivance of the on-premise retailer). So in essence, many craft brewers are unwittingly buying stolen hot kegs, hurting their fellow brewers and distributors, who pay a hefty deposit on the kegs.

One such battle has erupted in Tennessee. One little brewery there, Calfkiller Brewery, is making a splash on Facebook which has been taken up by local blogs about how the local A-B distributor is "stealing" their kegs. Says Calfkiller on their Facebook page:

"Over the years the little guy has purchased used kegs from all across the country. A few examples would be unclaimed freight auctions, breweries that have closed, or keg companies that sell new, used, and refurbished kegs. Anyone can purchase these, and Calfkiller has done it as well. Everything from website sales to store fronts in public with huge signs by the road for everyone to see. LEGIT businesses!"

Well, as we said, A-B doesn't sell their kegs. So A-B's legal team sent them a letter asking for their kegs back, and the local A-B distributor has been trying to pick them up. That has caused a ruckus. Calfkiller took to their Facebook page, saying:

"That's when the 'Budweiser keg police' began trying to strong arm the little guy. Now no one is sure really why. Maybe they simply want the entire market. Maybe they simply don't like the little guys. Maybe they got their first quarter reports for 2012, and noticed the little guy had taken a piece of their pie."

Or maybe they just saw stolen assets at a competing company and are attempting to get them back. Regardless, A-B has expressed that they don't want craft brewers or their consumers to hate them, and Calfkiller's kegs are small beer to them, but when you add up all of the keg shrinkage out there, it turns quickly into millions of dollars and something's got to be done. It's not just A-B: A source says they've seen Calfkiller beer in MillerCoors, Yuengling, and others' kegs as well.

And this is where you can see that this small brewer needs to grow up and become a businessman:

"FLIRTING WITH SLANDER they have told business owners that Calfkiller had stole the kegs. WRONG WAY TO PLAY BALL BUDWEISER!! Calfkiller is pissed, and is sharing their side of the story. THE TRUTH of the story to the public. The little guy tried to be civil about the matter. They contacted distribution to try and resolve the issue, but were lied to, ignored, and simply not dealt with. Budweiser has said they have never sold a keg. Really??? How can they be purchased from places by the truck load then???"

Well, because people have stolen them from the supply chain. This is where the naivete comes in. Let's turn it around. Let's say Calfkiller bought new kegs, and they saw that A-B was spray painting their logo on them and putting Bud Light Platinum in them. They'd be pissed.

But it's the small guy against the big guy. Well, this isn't Russia: In the U.S. the law is the law, and it doesn't make distinctions on size (Diageo and BrewDog notwithstanding).

Here's the thing: If you buy a stolen car from a used car lot, you still have to give it back if the real owner discovers it on the street. But that hasn't stopped the outrage in cyberspace against A-B. There are currently 142 comments on Calfkiller's FB page, almost universally against A-B, and 425 likes. A-B has to deal with that PR however they can.

Giving Calfkiller the benefit of the doubt, I don't believe they think they bought stolen kegs. They believe they bought them fair and square from a third-party vendor. But that's irrelevant: They likely did buy stolen kegs.

And it's not just MillerCoors and A-B that is harping on this issue. Prominent craft brewers are fed up with losing their valuable kegs. Sierra Nevada founder Ken Grossman, arguably the grandfather of the craft industry, said this to BBD yesterday:

"Keg theft has been a major thorn in my side for years. I have been on a warpath over this issue on behalf of our brewery and the industry. It's bad enough seeing our kegs stolen and misappropriated for use as furniture in frat houses, homebrew kettles, or just plain scrapped for a few dollars. Ebay and CraigsList often have stolen kegs listed for sale for a $15-$20 that might have been left over from a party or stolen from behind a bar or restaurant. It's a real issue for our industry, with new kegs costing over $100.

"Recently, I have been outraged at seeing our kegs being used by other breweries. In some cases there is no way they were mistakenly filled. They had obviously known the kegs had been stolen since they had attempted to cover up our embossed name and our identification colors had been painted over. In one case, they took the effort to grind off our name and use "Bondo" to try and obfuscate the evidence. There are even YouTube videos showing how to remove keg valves on illegally obtained kegs (some are mine), so they can be used for all sorts of other purposes. We have never sold any Sankey style half barrel kegs, so I know they weren't obtained legally. When I can track them down, I have personally called and unloaded on these brewers. Stealing from anyone is not OK." Bam!

And you'll remember this quote from a prominent craft brewer in a former issue of BBD.

"I was surprised that breweries think it's ok to show up at events with kegs from other attending breweries. Come on!.... It's not okay to use another brewer's keg float to help fund your own brewery. When another brewery uses it for their beer and their profits, to me, that is stealing." When this brewer tried to recover their kegs at a recent festival, they were surprised "that the other breweries tried to fight me on why they felt like it was ok for them to use our kegs. I am urging all breweries craft or other to return kegs to the breweries they belong to. For us craft guys, it's not going to help us grow as a unit and get that 10% share we're looking for if we're stealing each other's property." Double Bam!

Another craft brewer told BBD:

"There's a certain preciousness with a few upstart breweries -- not all mind you -- where they think that just because they're small, against the man, and use cool local ingredients farmed at a co-op, that they are somehow exempt from common standards of law and morality. The fact is, you buy a keg with another brewer's name on it, the chances are it was probably stolen at some point in the supply chain, usually at retail. If brewers quit buying these kegs, there would be no market for them and the theft would diminish. If you as a 'small cool brewer' are comfortable with stealing cooperage from another brewer, then I don't think you're as cool as you think you are." Bam-a-lama-ding-dong!

For its part, the Brewers Association is in the process of creating a keg repatriation system on its website which will encourage brewers, retailers, wholesalers, and yes even enthusiast consumers to get the keg back to the brewer or distributor. BA director Paul Gatza tells me that there's "lots of details still to go, but work progresses."


IMPORTS HAVE ROBUST MARCH

Then again, everybody had a robust March. Great weather, Easter timing, and of course better marketing, all contributed to a strong finish for the month for import shipments, up 4.3%. That brings year-to-date imported beer shipments up the same, 4.2%, according to figures from the Beer Institute's Lester Jones. Mexico, Netherlands, and Belgium were up big: 7.1%, 16.7%, and 29% respectively. Netherlands (Heineken, Grolsch) shipments are now back in positive territory for the year, up 2.1%. Fantastiche! as they say in Dutch. Irish imports were up 2.4% for the month and 7% for the year, reflecting Guinness' and Black Lager's strong numbers this year. Canada is perpetually down as 'imports' move to the US, down 17.3% for the month and year. German imports down 51% (Beck's now a'brewing in Newark) and UK down 26% (Bass also).


BEER BRIEFS:

DIAGEO RESPONDS TO PARROT BAY POUCH LAWSUIT. Yesterday we covered a lawsuit in which American Beverage Corporation, maker of Daily's Cocktails, is suing Diageo North America over intellectual property rights. BBD reached out to Diageo for a comment in which they said: "Diageo is confident it will prevail in this matter." and "will vigorously defend its rights against any allegations of infringement." I'm glad we cleared that up.

MILLER HIGH LIFE GETS PATRIOTIC. Budweiser isn't the only brand getting a patriotic makeover. In honor of military veterans Miller High Life has announced new red, white and blue packaging as well as renewing the program where customers can help support veterans. The "Welcome Veterans Back to the High Life," program asks consumers to return specially marked bottle caps or tabs between May and September and Miller High Life will donate ten cents per cap to provide veterans with "High Life" experiences.

Until tomorrow, Harry

"The future isn't a place you're going to go, it's something you get to create." - Nancy Duarte.

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