Market Watch 2011 Beer Wholesaler of the Year - Ben E. Keith

Changing With The Times

Texas distributor Ben E. Keith Beverage has adapted its strategies
to suit today's industry - with stunning success

For Kevin Bartholomew, the more things change in the beer business, the more they remain the same. The president of Fort Worth, Texas-based Ben E. Keith Beverage ticks off the numerous transformations he has seen in nearly 30 years in the business. "First and foremost is the speed at which information is gathered by us, our suppliers and retailers and the sheer amount of information that's now available, as well as how it's used and analyzed. Added to that is the high level of sophistication and education among beer consumers today, compared to just a decade or so ago."

One aspect of the beer industry that hasn't changed, Bartholomew notes, is that it's a people business. "That's my favorite part of it," he says. "While it's not always an easy business, the people make it fun."

Ben E. Keith Beverage, the nation's fourth-largest beer wholesaler, according to Impact newsletter, has been witness to many dramatic changes in the business. A subsidiary of Ben E. Keith Co., a food service products distributor owned by the Hallam family, the wholesaler was formed in 1933 as an Anheuser-Busch house. As the population in the Dallas-Fort Worth area grew, so did the company's beer business. By the 1980s, Ben E. Keith had emerged as the largest distributor of A-B brands in the country. In fact, during the 1990s, prior to the big wholesaler consolidation wave and driven in part by the phenomenal growth of Bud Light, the company was widely considered the largest beer house in the United States.

Howard Hallam, president and COO of Ben E. Keith Co., notes that while the beer business has changed since he entered it more than 40 years ago, parts of it remain the same. "The vast preponderance of our orders are generated in a face-to-face transaction with a customer, and those orders are delivered to that customer's place of business and put into his stock by our sales and delivery force," Hallam says. "It's still very much a person-to-person business, where personal relationships are all important. That will probably never change." With trends for mainstream domestic brews sluggish in recent years, Ben E. Keith has sought growth via acquisition and by relinquishing its status as an A-B exclusive wholesaler. Three years ago, the Texas beer distributor acquired C.R. Goodman Distribution Co., a statewide wholesaler of more than 60 high-end craft and imported brews, a move that significantly widened its geographic scope and signaled its entry into the craft beer segment. In 2009, Ben E. Keith deepened its commitment to crafts and imports by acquiring the rights to more than 60 additional labels in 46 Texas counties from Glazer's Distributors.

Broad Portfolio
In addition to A-B, Ben E. Keith today represents 170 beer marketers, including Real Ale Brewing, Sierra Nevada Brewing, St. Arnold's Brewing, Stone Brewing, Full Sail Brewing, Brooklyn Brewery, Dogfish Head and Crown Imports. Volume for Ben E. Keith, Market Watch's 2011 Beer Wholesaler of the Year, is projected to rise to 39.1 million cases this year from 38.7 million cases in 2010. Sales revenue, according to Bartholomew, is expected to reach $715 million this year, a nearly 4-percent gain from $690 million in 2010. The company employs roughly 1,400 workers at 11 Texas distribution facilities - totaling 700,000 square feet of space - and five sales offices, as well as a fleet of 331 trucks.

Today, Ben E. Keith services 61 counties in northern Texas with A-B products. (Fellow Texas A-B distributor Silver Eagle bumped Ben E. Keith from its ranking as the nation's top A-B distributor in 2008 with its acquisition of Budco, another A-B wholesalership in Texas.) Keith also now has a statewide footprint for most craft and imported brews, handled under the Ben E. Keith Specialty Division unit. Flint Prewitt, vice president of sales and operations, says the company's expansion into specialty beers has had an added bonus. "Craft beer has enabled us to get into some new accounts, and it has also allowed us to broaden our offerings to existing accounts," Prewitt says, adding that the move has also brought challenges. He points to the task of managing some 2,500 SKUs, as compared to the 800 to 900 SKUs that the company handled prior to its move into specialty brews. And then there's the test of "logistically covering such a large geography as Texas," says Prewitt, who joined the company in 1992.

The Texas distributorship also expanded into the wine business a few years ago. Ben E. Keith distributes Solemar wines from Italy, as well as labels from Sonoma County's Chateau Diana, including Black Oak, La Baron Ranch and 1221. Bartholomew reports that the company is "going very slowly" with its expansion into wine. Still, he says, "We've been very happy with wine."

Pockets Of Growth
Despite the weak economy, Bartholomew says Ben E. Keith is faring better than other beer distributors. "Business is slow, but there are some pockets of growth," he says. For example, Texas hasn't been as negatively impacted by the economy as other states. "The unemployment rate here is around 8 percent, which is below the national rate," says Bartholomew, who joined the distributorship in 1984 as a management trainee and rose through the ranks to serve as general manager and then vice president of sales and operations. He was named president of the beer division in 2000.

For Ben E. Keith's big volume brands, trends have been improving. "Both Budweiser and Bud Light were up for us through the first six months of 2011," Bartholomew says. "This is the first time in about 20 years that Bud has increased in sales for us, and Bud Light is performing better than it has in the last few years." Among other A-B labels, the distributor says that Michelob Ultra has also been strong of late. Craft brews, meanwhile, are "seeing increased sampling and experimentation," Bartholomew continues, as "overall, beer consumers are becoming much more sophisticated and experimental."

Ben E. Keith services 15,000 accounts throughout the state, with about 9,000 of them comprising off-premise Customers, and the remainder consisting of bars and restaurants. "Convenience stores are a major factor for us," Prewitt says, noting that they represent nearly 60 percent of the company's business. He reports that beer sales trends in Texas c-stores are showing some improvement following a "rough couple of years" in the wake of the recession and the impact that high fuel prices have had on c-store shoppers. Among other off-premise channels, Prewitt says that supermarkets are doing well and weren't as negatively impacted by the economy as c-stores were. "Package stores are down a little, but they're improving," he adds. As for on-premise trends in beer, Prewitt says, "It's been a lot stronger this year than it has been in the last couple of years."

Expanding Customer Base
Both Prewitt and Bartholomew attribute the company's success to a growing customer base. The distributorship expects to add more than 1,200 accounts this year, due to the recent rezoning of formerly dry sections of Dallas County, as well as the addition of new retailers in existing wet territory. The company is further buttressed by a large chain customer base. "Typically, trends in retail chains outperform those of independents," Prewitt says. Ben E. Keith is also seeing the emergence of new beer channels, such as drug and dollar stores.

Robert Hallam, chairman and CEO of Ben E. Keith Co., reports that in light of the expanding customer base, the company has added manpower and equipment. "We have a long-time reputation for providing excellent retail service, and we do not intend to let that slip simply because the number of our retailers has changed," he says. "We look forward to working with a whole new group of retailers, many of which are in the alcoholic beverage business for the first time."

Ben E. Keith works closely with its retail and on-premise customers on brand promotions and events. "The most successful efforts are sampling events, where we can sample customers, along with our supplier partners," Prewitt says. In fact, this summer the distributor announced that it has begun offering cicerone certification to its employees, who gain in-depth knowledge of such topics as beer styles, storage and serving methods. Within the Texas community, Ben E. Keith is also a key supporter of local events, ranging from sports and music to charitable races, as well as alcohol awareness programs. Events are promoted via the company's website BeneKeith.com, Facebook page and Twitter feed.

by Terri Allan, a contributing editor of Market Watch