The MillerCoors LLC operational merger could have a spillover effect on the beer distribution industry in the Milwaukee area and around the country, leading to consolidation of distributors.
MillerCoors expects its merger to save about $500 million within three years because of operational efficiencies and lower distribution costs. While MillerCoors has not explicitly stated its intentions, many observers of the beer industry expect mergers and acquisitions among distributors in coming years.
“I think (the MillerCoors merger) will force consolidation amongst distributors,” said Joseph Campolo, partner with Arbor Investments, a Chicago private equity firm that has several holdings in the food and beverage industry. Arbor’s portfolio includes Sam’s Wines & Liquors Inc., a Chicago-area wine and liquor retailer.
“But here is the problem and why it will take time – the beer (distribution) system is a franchised system,” he said. “Miller can’t just say to (a distributor), ‘Hand it over.’ It’s not going to happen naturally. It will take some verbal and financial encouragement.”
Milwaukee County is the only county in southeastern Wisconsin that has separate Miller and Coors distributors.
In Milwaukee County, Miller Brands-Milwaukee LLC distributes Miller products, and Beer Capitol Distributing Co. has a contract to distribute Coors in the county.
Miller Brands is a privately held, independent distributor.
Beer Capitol is owned by the Madrigrano family, which also owns W.O.W. Distributing Co. Inc. and C.J.W. Inc.
W.O.W., located in Sussex, and C.J.W., of Racine, distribute Miller and Coors to Waukesha, Ozaukee, Washington, Dodge, Racine, Kenosha counties.
Marie Greguska, beer manager at Discount Liquor, which has locations in Waukesha and Milwaukee, agreed with Campolo’s analysis.
“I would say that long-term, there will be further consolidation,” she said. “I don’t think they (Miller Brands and Beer Capitol) will stay separate.”
Greguska said she believes that Miller Brands would lack the capital to acquire the distributing companies owned by the Madrigrano family.
However, Miller Brands might be poised to win Coors distribution in Milwaukee County, according to Tom Vaughan, on-site manager with Capital-Husting Co., a Milwaukee wine and spirit distributor.
“Up here (in Milwaukee County), you will see Miller’s distributors take back Coors distribution,” Vaughan said. “W.O.W. (and the other Madrigrano brands outside Milwaukee County) and Miller Brands will get Coors.”
Russ Klisch, president and founder of Milwaukee’s Lakefront Brewery Inc., believes that one of the distributors that serves Milwaukee County will be affected, but he is not sure which it would be.
“There probably will be some sort of shakeout in the wholesale business,” he said. “I really can’t tell who will buy who. It’s pretty much up in the air in Milwaukee and the other locations around the state.”
Neither Steve Johnson, president and chief executive officer of Miller Brands, or Aldo Madrigrano, president of W.O.W. Distributing, say they are planning for any immediate consolidation.
“We’re operating our business and dealing with what we can control, and we have every anticipation of that continuing,” Johnson said. “Would we like to have Coors? Absolutely. This comes down to, is it a priority for the suppliers?”
Madrigrano says he has not spent much time thinking about potential distributor consolidation that may occur as a result of the MillerCoors merger.
“I think both of us are companies that want to expand and want to do things,” Madrigrano said. “It will fall as it may. Both of us will continue to do business as good beer distributors. I don’t look at it as more than that at this point. I would say that it’s very much unexplored territory … no one’s thought about it very much.”
MillerCoors has not developed a national plan to streamline its distribution, said Julian Green, a spokesman for the merged company.
“All I can say is that we’re working with our distributors,” he said. “Consolidation is already occurring within the U.S. marketplace, driven by the requirements and needs of distributors. And we certainly will be looking at that. There can be synergies realized by independent houses coming together.”
Milwaukee will not be the only market around the country where distributors are affected by the MillerCoors merger, Campolo said.
“The whole distribution chain needs to be streamlined,” Campolo said. “The beer distribution business in particular is a business of scale. It’s about maximizing route density and drop sizes per location as large as possible.”
Miller Brands-Milwaukee LLC
Area served: Milwaukee County
Brands carried: Miller and Miller-owned products such as Leinenkugel’s; and imports such as Foster’s, Heineken, Pilsner Urquell, Peroni, Asahi, Bohemia and others.
Madrigrano family distributing companies
W.O.W. Distributing Co. Inc.
Area served: Waukesha, Ozaukee, Washington and Dodge Counties
Brands: Miller, Coors, Pabst, Crown Imports, Heineken, Boston Beer, Lakefront, Capitol Brewery
Area served: Kenosha, Racine and Walworth Counties
Brands: Miller, Coors, Pabst, Crown Imports, Heineken
Beer Capitol Distributing Co.
Area served: Milwaukee County
Brands: Coors, Pabst, Crown Imports, Boston Beer, Lakefront, Capitol Brewery