Looking to Past Disruption to Prepare for Future Disruption | NBWA: America's Beer Distributors

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Blog| Jun 12, 2017

Craig PurserBy: Craig Purser, National Beer Wholesalers Association President and CEO

Disruption. It defines everything from the political environment to how we consume news, how we ride to the airport, the way we shop… and yes, disruption defines the alcohol industry, too.

Disruption was top of mind at NBWA’s Annual Legislative Conference this spring when 750 beer distributors, representing all 50 states, gathered in the nation’s capital. In the days and weeks prior to the conference, Amazon – the $460 billion online retailer – had been making news. Headlines read: “More Than Half of the Internet’s Sales Growth Now Comes From Amazon,” or “Amazon Now Worth Twice as Much as Wal-Mart” and “Amazon Opening Store That Will Eliminate Checkout — and Lines.”

As Amazon eliminates checkout lines, online sales and other technological advances are disrupting brick-and-mortar businesses. The reason is pretty simple: you don’t have to leave home to order a gallon of milk or a roll of toilet paper.

So, what happens as Amazon gets into the alcohol business? How would this impact independent alcohol retailers and beer distributors? Sure, it’s disruptive. But there will always be disruption. The real question is how will we manage the disruption? How will we prepare for change?

To prepare for disruption, we need some historical perspective. During the Legislative Conference, we looked at several examples including Kodak and Legos – two household names that had very different endings.

After Kodak was founded in 1888, it dominated film and camera sales for a century. In 1976, Kodak controlled 90 percent of film sales and 85 percent of camera sales. Although Kodak invented the digital camera, Kodak didn’t embrace the digital camera. In 2006, camera phones outsold regular cameras. And by 2012, Kodak filed for bankruptcy.

On the other hand, Lego, which started making wooden toys in 1932, embraced disruption and pivoted several times. In 1949, Lego swapped wooden toys for interlocking plastic blocks. A few decades later, the landscape was changed by new technology – such as television, electronic toys, the Internet and video games. Lego sales started slumping badly, and the company was facing bankruptcy. But then, the company asked some tough questions, made some difficult changes and got back to the basics, focusing on core products and values. By 2013, Legos had record revenue and profit and, two years later, it was named the most powerful brand in the world.

The alcohol industry also has experienced disruption. Many beer distributors remember when wine coolers were destined to destroy the beer industry. Then came flavored vodka that made suppliers, distributors and retailer take note. Retailers will remember when Wal-Mart opened the first supercenters. Sure, the industry changed, but beer distributors are still selling beer to independent retailers.

Now, technology is changing the way distributors warehouse and inventory beer. Technology is changing the way retailers run their businesses. And technology is changing how consumers purchase alcohol – from using mobile apps like Drizly to selecting their drink of choice on Amazon.

All of this change means distributors and retailers must make sure all companies in this space are operating in compliance with state alcohol laws.

And that’s already happening. Several state alcohol regulatory agencies have asked Amazon how the company will comply with laws regarding alcohol retail licenses, to ensure that the online retailer is not exempt from the requirements imposed on brick-and-mortar retailers. Because Amazon wants to be a licensed retailer selling alcohol to consumers, the company must have a physical presence in the state and be licensed only as a retailer selling to in-state consumers. All of these “disrupters” must ensure that alcohol is sold only to those over 21 and not delivered to anyone who is intoxicated. It’s by enforcing state laws – which work to level the playing field for all retailers – that all businesses, including independent retailers, can compete in the marketplace and continue to grow.

There’s no doubt that many brick-and-mortar businesses have faced disruption from new technologies and new ways of doing business. The alcohol industry is no different. However, what is different, is that the 21st Amendment and effective state regulations create a level playing field – so that established businesses and new disruptors can all compete. That’s why NBWA and state beer distributor associations look forward to working with the American Beverage Licensees and its members to “lean in” to the future. 

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National Beer Wholesalers Association President & CEO Craig Purser provides industry commentary each quarter for ABL Insider, a publication of American Beverage Licensees (ABL), a national trade association for retail alcohol beverage license holders across the United States. Each column provides insight on issues of concern to beer distributors, their retail partners and others in the alcohol beverage industry. To learn more about ABL Insider, please visit http://ablusa.org/news/abl-insider.