MillerCoors Chief Tom Long Responds to Chesbay Ordeal
FILED SEPTEMBER 28, 2012
It was just four years ago when the newly created MillerCoors found itself in a huge controversy with its distributors over its new contract.
This fall, the brewer finds itself in another fracas as it has invoked federal trademark law to block Reyes Holdings - its largest wholesaler and a larger business than MillerCoors itself - from acquiring Chesbay in Virginia.
As you can imagine, I've received a tremendous amount of mail on this burning topic, and opinions break into two camps: One group sees this as an attack on the three-tier system. A smaller group sees this controversy as essentially boiling down to MillerCoors trying to draw a line in the sand with Reyes.
"What is MillerCoors thinking?" one distributor asked us. We thought that was a fair question so we sat down with MillerCoors chief Tom Long to get at the heart of the matter. You, my friends, are a fly on the wall.
HARRY: Tom, thanks for taking the time. We might as well tackle the elephant in the room. It's no secret that MillerCoors' relationship with your biggest distributor, Reyes Holdings, is sometimes strained. Some distributors are saying this whole fight is about you trying to prevent Reyes from getting bigger. Is that true?
TOM LONG: We have a solid relationship and an ongoing dialogue with Reyes Holdings. We disagree on some issues that both teams see as important. But it's not personal. Let me say upfront we appreciate their business and I believe we both want to prosper together. That's how both companies have become so successful. But it's really pretty simple ... they want to grow new territory with our brands and others unconstrained by performance requirements or by signing our contract and we think that's important. We know we have a shared accountability for performance, and of course it's a two-way street. And we have lots of very big distributors who we grow with, and plan to grow with, and it works fine. And Reyes has big suppliers they work fine with too. On Chesbay, things didn't come together.
HS: Can you elaborate on that a bit?
TL: I'm not going to share private conversations, but it's fair to say in these sorts of transactions we want a commitment to certain performance standards, including small-store service levels. And as a rule we want distributors to service the entire territory, not just the accounts with the best economics. We want reasonable access to our brands for all licensed accounts, which I think is a fair expectation for any DSD supplier in any DSD industry. That's fundamentally why DSD crushes warehouse. It's not just the big accounts Harry, it's up and down the street.
One of your readers summed it up very nicely yesterday saying "I strongly believe MC should be able to pick my successor. I would be gone and they have to live with whoever buys me." Doesn't that sound reasonable?
HS: Reyes has famously not signed the MillerCoors contract you rolled out several years ago. Is that a factor here?
TL: All other aligned distributors whom we support for territory growth have signed it and it's nearly 90 percent of our system. And things have gone really smoothly since then by all accounts. And distributor valuations have continued to explode, contrary to the naysayers back then.
HS: Some people say this is about MC trying to prevent Reyes from getting any larger. Is that true?
TL: Well, we are concerned about keeping the model local for all kinds of reasons. But in this case the answer is no. Because there are pretty simple conditions under which we would approve expansion. We have communicated that and the conditions are consistent with our expectations of any distributor. We need to make sure we have shared principles, are tracking the same things and are strategically aligned as we go to market.
We don't have an arbitrary cap on size. But at the same time we don't want to go from a world where we have 500 to only 15 or 20 distributors. I'm sure everyone thinks that's way too few! Our business was built by distributors with a local touch who service every account like it mattered. That local touch still matters and if we go to a world where we have 15-20 distributors I can categorically say that we will lose our industry if it goes that far.
Look no further than soft drinks.
HS: Now, your amended complaint invoking federal trademark law as superseding state franchise laws certainly got everyone's attention. Can you elaborate on your reasoning?
TL: I can tell you, unequivocally, that it was not an attack on state franchise laws. Rather, it is about us trying to protect the value of our brands by making sure we're partnering with the distributor we believe best suited to that market and our brands under current conditions.
Because at the end of the day, Harry, the beer business is about brands and its health and profitability demands that we have strong brands. As a supplier, it's our job to bring great brands and invest billions of dollars on marketing and sales initiatives to make sure those brands are as strong as they can be.
And it works great most of the time.
HS: So are you walking away from the Three-Tier System Doctrine?
TL: No, and I'd like to get real clear on what the Three-Tier System Doctrine says and does not say. The Three-Tier System Doctrine clearly states our position that MillerCoors believes the three-tier system of production, distribution and retail sale is the most powerful route to market for our brands. Additionally, the doctrine speaks out specifically about the balance needed in federal and state law as it applies to our businesses. It does not say that we would never have disagreements with our distributors. It does not say that state laws mean whatever a distributor may want them to mean. It does not say we would not protect our interests - and our system's interests - within the context of the three-tier system when we believe those interests are being undermined.
Our actions honor those principles and commitments and the facts of this case are unique to this particular transaction. Our position does not threaten the three-tier system. Rather, we seek to maintain the appropriate balance between the tiers so we can ensure that our brands continue to grow to the benefit of both us and our distributors.
HS: Some distributors fear that if you prevail on the trademark issue, you will suck a lot of value out of the system. Is that true?
TL: Actually Harry, the exact opposite is true. If we lose control of our brands, we can't build their value and ubiquity, which in turn builds the value of a distributor's business. We just want to protect our ability to match an offer from another purchaser and assign the right to someone who'll help us build brands locally. The seller has to be kept whole. We get that. That's table stakes. But we need to keep our brands whole too. Our company value depends on our brand value too. Just like distributors trade on the brand franchise and equity value, so do we.
HS: What do you say to distributors who say you've violated their trust?
TL: We have fought hard and fairly for our distributors because it's good business. And they do the same for us. Almost universally. We've given up our rights to own distributorships long term in several states and been clear that even here at Chesbay, we are temporary minority owners. It's commitment, not competition. That's not going away. But it's a two-way street.
In fact, just in the last few years we have demonstrated that commitment through actions that hurt our pocketbook short term and benefited our distributors, like moving to 70/30 on price promotion, a move aimed at building alignment and trust. To my knowledge, nobody else followed. At the urging of our National Distributor Council, we revised the freight and fuel model, taking more forward fuel risk. And, we penned the Three-Tier System Doctrine and stand by the spirit and letter of that document.
We know we need to get the focus back on selling great beers and we don't like this distraction one bit, but it's a necessary business decision to protect our rights as brand owners.
We hope to return the dialogue back to selling beer next week when we kick off our fall meetings. We're going to be previewing our sales and marketing and innovation plans for the balance of the year and 2013. We think we have a strong show and some strong work. We're very cognizant of the fact that if we ask high standards of our distributors, we must set high standards for ourselves.
HS: Thanks Tom for your time.
DISTRIBUTOR STATE ASSOCIATION COMES OUT BLASTING AGAINST LAWSUIT
Eric Criss, the president of the Beer Industry of Florida, links the lawsuit against Chesbay by MillerCoors to the general deregulation in press release issued last night. Recall that Reyes is a member of both the Beer Industry of Florida (blue-silver network) and the Florida Beer Wholesalers Association (red network).
"Beer distributors strongly support laws which preserve America's state-based system of alcohol regulation," he writes. Eric says this system is "acclaimed by public health experts worldwide" and that state franchise law a "critical component of the three-tier system in dozens of states across the nation. They are proving to be one of the few remaining protections for local, family-owned, beer distributors against the undue influence of foreign-owned, mega-brewers who control 80 percent of the world beer market." Pointing to recent press reports of minors buying alcohol in the internet, Eric encourages "companies engaged in the production and sale of alcohol to stop the endless line of lawsuits designed to tear down the system of alcohol regulation that protects our children and our communities. Specifically, we call on MillerCoors to drop its lawsuit against Chesbay Distributing and end its unwarranted attack on family-owned distributorships."
SUPPLIERS TO BREWERS SPEAK AT CONGRESSIONAL FORUM ON IMPORTANCE OF BEER
Representatives of companies that produce hops, cans and bottle caps spoke at a Congressional forum yesterday to a packed house of about 50 Hill staffers, sponsored by the BI. The major theme was how the U.S. beer industry supports more than 1.8 million American jobs in industries as diverse as farming and manufacturing.
The forum, "A Jobs Success Story: The Economic Impact of Brewing and Importing in America," included remarks by BI chief Joe McClain and others.
BEER IS BIG. Here are some facts to save on your iPhone for when you need them. An economic analysis shows that brewing and importing accounted for $223.8 billion in the economic output of the United States - with employees earning nearly $71.2 billion wages and benefits, and generating more than $44 billion taxes. In 2010, the last year tax statistics were available, 45 percent of what every beer drinker paid for a beer went to taxes of some kind. "That makes taxes the most expensive ingredient in your beer," says Joe.
Prior to the Congressional forum, the Beer Institute released a national poll of 1,000 likely voters, which found strong opposition to increasing taxes on beer. Nine out of 10 voters in the poll agreed that "raising taxes on beer will mean working class consumers will have to pay more."
BEER DRINKERS ARE POLITICAL. The poll also found that self-identified "beer drinkers" are a larger proportion of the electorate than self-identified supporters of either the Tea Party of Occupy Wall Street movement, and were evenly split between Republican and Democratic parties.
Beer drinkers are also more political than the average likely voter:
-68% of regular beer drinkers say they discuss what's going on in the presidential campaign with friends or co-workers;
-66% of regular beer drinkers say they are going to be watching the presidential debates, meaning they are more likely to watch presidential debates than watch the World Series or an NFL game;
-25% say they will likely donate or contribute money to a political party, cause, or candidate running for public office; and
-14%(or one out of seven) beer drinkers say they will likely volunteer for a political party, cause, or on the campaign for a candidate running this year.
AUGUST DOMESTIC TAXPAID shipments were up 1.2% against an easy comp, making YTD domestic shipments up 1.7%, according to estimates by Lester Jones at the Beer Institute. Including imports, the beer business is up 1.7% for the year. Not bad. Comps start getting harder now though.
AMAZON.COM IS CONSIDERING getting into the direct wine selling business again, according to Wine Industry Insight. They flirted with this idea a few years ago but pulled back after considering the regulatory hurdles. Apparently they will handle the orders but wineries must take care of fulfillment to get around the legal issues in California in particular. How long before beer is added to the mix?
HERE IS AN interesting infographic of how drinkers of beer brands vote: http://hotlineoncall.nationaljournal.com/archives/2012/09/the-politics-of-3.php
WEEKEND READING. Check out consultant Tim Coughlin's piece, "The Art of Wort", (nice title) which examines what enemies of three-tier would do if they followed the tenets of Sun Tzu: http://www.dmgfinancial.com/the-art-of-wort.html
Until tomorrow, Harry
"A good listener is usually thinking about something else." -Kin Hubbard
Make yourself heard, your opinions count. Anonymous feedback and tipster form: http://www.beernet.com/hotline.php
BEER SUMMIT, JAN 28 - 29, 2013. To get the early bird discount, you can register by clicking on this link to our secure server before October 1: https://www.beernet.com/register.php?id=7 Or call Kim at 210-805-8006 ext 1. Also, don't forget to book your hotel at the Westin Riverwalk at 210-224-6500.
--------- Sell Day Calendar ---------- Today's Sell Day: 20 Sell days this month: 20 Sell days this month last year: 22 This month ends on a: Fri This month last year ended on a: Fri YTD sell days Over/Under: +1
(c) 2012 BeerNet Communications, Inc. - All rights reserved. Please, no forwarding or copying. Individual subscriptions $480/year. Corporate rates available. Editor & Publisher: Harry Schuhmacher - email@example.com Twitter: @beerbizdaily
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michael kors Who would then attempt the difficult task of integration, artificially creates a new state of things with that already existing, should never lose sight of the all important agency. He has to wait so primarily for the complete preparation of the current in the minds of the people, he should rashly attempt to cut through the difficulties, he may be able, perhaps, in the creation of new external aspect of things, but never the inner disposition of human nature, which would certainly again manifest in everything new that was forcibly imposed on them. It should not be assumed that to the extent as is allowed to the full extent of this influence, more averse to men, any subsequent amendment. In the history of mankind, there extremes that most closely lie down together, and the condition of external things, if we collapsed on their further course, left undisturbed by any agency counter so far to strengthen and perpetuate itself bound by its ruin. This is evidenced not only by the experience of all ages, but is in strict accordance with human nature, for the active man never stays long with an object as its power is in him sufficient scope and material movement, and so he leaves them on most rapidly when he was continuously employed on most of it, and as for the passive man, although it is true that a sustained pressure on blunt and used his forces weaken, it causes him to feel, on the other hand, the strict influence sharper. Now, without directly alter the existing state of things, it is possible to work on the human mind and character, and give them a direction not correspondent with this condition, and that is exactly what who is wise will seek to to do. Only in this way it is possible to reproduce the new system, in reality, as the idea has been conceived, and in any other process (apart from the evils that result from disruption of the natural order of human development) is changed , modified, disfigured by the remaining influence of the previous systems, the actual state of the circumstances and in the minds of the people. But if this obstacle can be eliminated, if the new state of things, which is resolved in the development of its full influence of what was pre-existing and of the circumstances of the hindrance on which this has acted to succeed, it must nothing-more be allowed to stand in the way of the planned reform. The general principles of the theory of all these reforms can therefore be reduced: -
michael kors outlet These activities, which are carried out the free consent of the second party must be confined within the same (rather narrow), such as those that have just been prescribed in the case of measures relating to the agent.
michael kors bags Although contracts do actually completed by living persons, their heirs, and have them over to be fulfilled, as to change what is left behind, the state should not only prevent the further extension of this principle, but it would be useful to certain individual restrict contracts that give rise to restrictive and intimate relationship between the parties (such as the allocation of rights in a matter of several people) to the time of life only, or at least to their resolution by the heirs of a relief or the other party. For although the same reasons do not apply as in the previous case of personal relationships, nor the will of the heirs is less clear, and the continuance of the relationship indefinitely.
gucci outlet Finally differs little whether a man really gives away what belongs to him in the hour of death, or leave it by the will and the former he has an unquestionable and inalienable right.
Christian Louboutin Outlet Actions to be undertaken by mutual agreement, are exactly similar to those which lead a man of himself, without direct reference to repeat to others, and I think of it, what I have observed of the latter. There is a class of such actions, but that requires very specific rules, I mean those that are not closed at once but themselves. Within their operation in the future Under this head come promises or commitments that are perfect duties on the parties to the commitment, whether mutual or not. Of these parts of the property across from one person to another are made, and when the party transferred it moves from its exposure by trying to recover what has been transmitted, the security is impaired. It is therefore one of the most important tasks in relation to the state, to see that such commitments are binding. But the restraint that imposes any intervention is then only fair and beneficial if, first, the implied restriction extend to him alone who enter into it, and secondly, if it in general, and at the time of surgery, acted right with a capacity for reflection, and exercised a power of free decision. Wherever this is not the case, coercion is unjust in principle, as it is harmful in its effects. On the one hand, the advice concerning the future can never be completely straight and completely, and on the other hand there are many contractual obligations, of a nature to impose such restraints freedom, so prove serious obstacles to complete development of man. Therefore, a second duty is the responsibility of the state-support of the law to such exposures reject as contrary to law, and all necessary precautions to take (in accordance with the security of property) to want to avoid a moment of reflection of how BRINGS restrictions a man to delay or how to prevent its own perfect development. It comes in the province of legal theories to detail everything that is necessary for the validity of contracts or obligations. It only remains for me to watch to save in terms of their properties that a State to which (according to our previous principles) is not allowed on the care of the security may not be for any other items as extraordinary those who already be shown from such general considerations of right or by concern for safety.
Christian Louboutin shoes I also think we are wrong in assuming that the danger of immorality is either so great or so urgent, and while much that I have said, tends more or less to determine this, the following conclusions may serve to give it a additional confirmation: -
Coach Factory Of this class, we can see the following cases, as the most notable: -1. When the party promising right may not coercion, without a tool for the designs of the other-for example, in each contract, which ends in the enslavement of person contracting; 2 Where's the party promises no power to grant what is promised, by its nature, has-as is the case, for example, in all matters of feeling or belief; 3 If the promise in itself or in its implicit consequences, either not, or is dangerous to the rights of others, in this case the principles are well established in our last chapter also strictly applicable. Now the difference between these cases is this, that in the first and second, the state must only refuse the right of coercion is provided by its laws, without preventing the formation or execution of such a commitment, if this execution is mutually while, in the last instance we have, it can not only mentioned, but have the very act of engagement forbid myself.
Coach Outlet Store Online The procedure with regard to the criminals, are also so clearly prescribed by the general principles of law, as in the way we adopted before. This means that the judge is to use all lawful means for the discovery of truth, but must be to refrain from the use of any of the above the limit legitimate right. Therefore, he must draw a careful distinction between the citizen who is only suspected, and the criminal who is actually convicted, never treating the former as this, and in order, should never deprive the convicted person of the enjoyment of his rights as a man and as a citizen, because he can not lose the former, but with his life, and this only by a legislative, judicial exclusion of the political union. The use of such means as therefore imply actual fraud should be illegal for this purpose as the use of torture. Because although it might urged in excuse that the suspect or at least the criminals, entitled to such a course by the character of its own actions, it is still quite unworthy of the dignity of the state, by the illustrated judges, and In contrast to the beneficial effects of an open and straightforward behavior also against the criminals, it is not only evident of itself, but also in the experience of these countries (England, for example) that a noble and high enjoy in this respect like-minded legislators .
coach bags the care of the state for the security detail and positive defined. further development of the idea of ??security.
coach handbags outlet For the reasons which I have brought forward I would therefore conclude the following principles: -
louis vuitton on the care of the state of security in relation to measures directly only to the agents themselves. (Police laws.)
louis vuitton outlet If crimes and penalties are therefore usually split by the law, the criminal law decrees have so determined individual crimes are applied. In view of this application, the strict principles of law decide that the penalty only on the degree of guilt in the criminal design or in the action that he has committed, is implied. But if it is agreed to follow, I said the exact principle that, in all cases, the manifest disregard of the rights of others, and this only, is to be punished, it should be applied only to certain crime. Committed in respect of each crime, so the judge must endeavor to carefully inquire into the design of the criminal, and has the legal authority that still modifies the general penalty under the particular degree to have violated the criminals hurt him that right.
louis vuitton handbags The last and perhaps most important, the means for maintaining the security of citizens, is the penalty of transgression of state laws, and by virtue of the plan I proposed to myself, it will now apply myself to this, we have already agreed on the fundamental principles . Now the first question that arises here is: What are the actions to punish the state and the brand as a crime can? The answer suggests itself slightly from what we observed previously. Because the state is not allowed to beat any other end to his activity as the security of his subjects, there can be no restrictions on other activities than those that result contrary to that ultimate goal. But it follows also so clear that all these measures deserve a fair measure of punishment. For (see that they disrupt and destroy the most important of human enjoyment and development) not only their harmfulness to serious that we can not resist their influence by all means, in accordance with the end and consistent with morality, but it follows on from the principles of law that everyone must suffer the punishment so far to penetrate the province its own right as the crime he has committed, has entered into the other. But to punish actions that relate the contrary, or who are the agent only with the consent of the person who is affected by them done, is obviously of the same principles that do not allow their restriction prohibited, and therefore none of the so-called seem carnal crimes (rape excluded), the creation of whether criminal or not, suicide attempt, etc., in order to be punished, and the removal of a man's life with his own consent should be exempt from punishment unless the dangerous misuse of the exemption should requiring a criminal. In addition to these laws, to prohibit the direct violations of the rights of others, there are others of a different kind, which we have already discussed in part, and must now re-examine. However, in view of the ultimate object which we have prescribed to the State, these laws (although only indirectly) conduce to achieve this design can state penalties, these insofar as this punishment is not implicated in the transgression itself, as, for example, in which violation of the prohibition of commissa fidei, the invalidity of orders follows as a consequence. This is all the more necessary, since otherwise be a complete lack of coercive means to secure through obedience to the laws. From these considerations to the cases to be applied to the penalty, I will now proceed to be added to the measure in which to test it. I think that it would be impossible in the general argument that has no absolute reference to any particular local conditions to determine its measure by itself, should amply within limits, or to the point where it will never fix.
louis vuitton bags This therefore remains to be done, and although I do not entirely successful in trying it still seems good for me to identify the reasons for the failure, and provide the difficulties incident to the request as clear and comprehensive as possible. And in any case, I hope, close the topic in a short compass, as all principles that I need for the task have already been discussed and settled, so far would allow my skills.
It is necessary to examine, in the last place (now that we of criminal treatment) committed by the efforts of modern legislation, namely the question of how far the state entitled to a question that has achieved a high degree of importance or , prevent crimes committed. It is perhaps not a public project, which is animated by such an philanthropic design, and the sympathy it inspires in everyone a feeling is something dangerous about the impartiality of the investigation. Still, I can not help but such a study looking particularly necessary because, if we look at going the infinite variety of internal impulses that make the design of committing crimes can, it seems impossible for me to develop any method of wholly owned prevent such designs, and not only that, but actually a threat to freedom, to prevent their execution. As I have already tried the right of the state to define to limit the actions of individual people, I might seem to have already set up an answer to this question. But if I reason to determine in this part of my request that the state of these measures, the consequences of which could limit endanger the rights of others found, I understood by this, (such as the reasons why I can be advanced in support of this position represent) to consequences such as electricity exclusively from the action of, and maybe just maybe occur to a greater extent the reluctance of the drug. But when we speak of the prevention of crime, we have of course mean that the limitation of such measures is only prompted a second, and that the commission of crimes. Therefore, it is already in this important difference, that the mind of the agent has to cooperate with a new decision here, in the former case it is either could have no influence or even a negative, by sacrificing activity. This alone I trust will serve to indicate the boundaries with sufficient clarity.
A more general character of this argument (mainly directed as it is, the political concern about the spread of certain religious teachings) to enter, I cite the principle stated before that all influence of religion on morality primarily dependent if not entirely on the form in which the religious sentiment exists in the individual, and not on the particular tenour of the lessons that make it sacred in his eyes. Well, all state institutions, as well as before I maintained that act solely on the content of teaching in a more or less, while with regard to the form of their acceptance by the individual, the channels of influence on all political agency are closed. The way in which religion springs in the human heart, and the way in which it is received in each case depends entirely on the whole manner of the man's existence the whole system of his thoughts and feelings. But if the state could this according to his views (a possibility which we can hardly imagine) remodel, I must be very unhappy at the exposure of my principles, if it were necessary to restore the conclusion that meets these remote possibility viz., that the people of the state not an instrument subservient to the arbitrary designs, and to induce him to neglect his proper ends for this individual. And that there is no absolute necessity as it might alone justify an exception in this case arises from the perfect independence of morality to religion, which I already tried to determine, but get a stronger confirmation, if I show that the maintenance of a state homeland security, not necessary that a proper and clear direction to the national morality should be given in general. Well, when it calculates a thing more than the other, a fertile ground for religion in preparing the minds of citizens,-if there is something that religion lead, which was infused into the system of thought and feeling, to beneficial respond to the morality, it is the freedom which always (even if it is just to be in the least) suffers from the performance of a positive care by the state.
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