Having the Beer Gene

A clear beverage distribution leader in the Pacific Northwest, Coho Distributing Co. (dba Columbia Distributing) has recently grown into one of the top 10 leading beer distributors in the country (ranking No. 4 on BE’s Distribution 20) through strategic mergers and acquisitions.

In 2008, Columbia merged with Mt. Hood Distributing and Gold River Distributing and also acquired Alaskan Distributing, which made the company the behemoth it is today covering more than 100,000 square miles of territory stretching from the southern boarder of Oregon to the northern border of Washington and capturing beer market share in both Oregon (65 percent) and Washington (55 percent).

Operating out of two main facilities in Portland, Ore., and Kent, Wash., with seven other warehouses throughout both states, this distributor handles some 1,600 SKUs of beer and non-alcohol brands in Washington and Oregon and thousands of wine SKUs through a shared service agreement with Young’s Market. Columbia operates on a four-legged stool business model, which is its four divisions: beer, soft drinks, Red Bull and wine. “Even if one category is in trouble, the other three are able to hold it up,” says Gregg Christiansen, CEO of Columbia Distributing.

Reporting sales of more than $700 million in 2010 (beer sales are at more than $560 million), it’s because of the company’s size, scale, sales and strategic business practices that Beverage Executive has named Columbia Distributing as its inaugural Distributor of the Year for 2011.

The challenges of merging four substantial companies into one also presented its benefits for the distributor. With roughly 2,600 employees, Columbia has a large talent pool of professionals with best practices from which to source when making decisions on how to best grow its business.

“The ability to take so many talented people and create one dynamic organization has been really powerful,” notes Mark Walen, president of the Oregon business unit. “Any time you merge a variety of cultures and legacy family cultures like we did, it can bring challenges, but our people have really worked beautifully through it and I think now we have scale and some outstanding people who are all trying to make this new Columbia a really fantastic company.”

One of the main growth drivers for the company over the past year has been its craft beer and import business.

“What differentiates us is the craft DNA that’s been inside of our organization for the past 20 to 25 years, and the ability to bring that knowledge and that skill and those insights to the market,” says Walen. “I think we are quite different than other distributors in that respect.”

Following the trend that’s been reported on in the rest of the country, the craft beer segment saw increases of 11 percent in volume and 12 percent in sales in 2010 in the U.S. while overall beer sales were down an estimated 1 percent by volume, according to the Brewers Association.

Christiansen says, “We are seeing some positive turnaround on the import category, but the biggest positives are still in the craft. We are still in that roughly 10 percent growth rate in the craft category and with an economy that is down, that is something that you wouldn’t expect. That tells me that people are drinking less, but they are experimenting more. So our craft category continues to grow at significant rates.”

In the Pacific Northwest, the craft beer culture is thriving, significantly more so than the national average. Specifically, Oregon and Washington are among the nation’s leading craft markets. SymphonyIRI recently reported that craft has reached 30 percent share of Oregon’s beer market, versus the mid-single-digit market share craft claims in the overall U.S. beer market.

Columbia tapped into the craft beer trend early on and today prides itself on being the leading craft beer distributor in the country by volume.

Christiansen describes the company’s hold on the craft beer market in the Pacific Northwest as an “evolution” that began in the ’90s when the company identified that the craft beer segment was one that warranted attention and called for investment.

Today this leading craft distributor delivers 70 percent of the craft beer sold in the Northwest, it says.

A MillerCoors distributor, Columbia also commands a majority of the domestic beer market in its territory. MillerCoors accounts for 51 percent of Columbia’s beer sales and Coors Light outsells Bud and Bud Light in Portland and Seattle, based on Nielsen and SymphonyIRI data.

MillerCoors, says Christiansen, has been supportive of Columbia’s efforts in the craft beer segment. “MillerCoors definitely understands the development of the craft category and the importance of the craft category and that’s evident by their new Tenth and Blake Company,” he says. “They are working with us closely in both markets in developing the craft category.”

Tenth and Blake opened for business last year and will focus on craft and import beers with the goal of building on the growth of the segments in the U.S.

“This is a unique and exciting period in the beer business,” says Tom Cardella, Tenth & Blake Co.’s CEO and president, in a statement. “With the added focus on our craft and import brands and the talent within our brewing network, Tenth and Blake Beer Company has the opportunity to make an impact and continue to help grow this segment.”

Columbia also is doing its part in helping grow the segment. Taking on a brand only when it feels it can give it the attention it needs, Columbia has worked with small, local craft breweries to help them get to market and become successful brands.

Scott DeMartine, EVP sales for the Washington business unit, points to two local breweries in particular with which the company has worked in the past that have now grown to become leading local craft breweries: Georgetown Brewery, based in Seattle, Wash., and Mack & Jack’s Brewing Co., based in Redmond, Wash. Brands from these two breweries, which can’t be purchased in the off-premise, now have nearly as many draft handles in Seattle as a major domestic brand, says DeMartine.

“There was a niche in that there wasn’t really a craft Washington brand out here,” he says of Manny’s, a brand from Georgetown Brewery, when Columbia took it on about nine years ago, for example. Today, the two breweries have combined draft sales of more than 750,000 case equivalents annually.

With brand building at the local level also comes education, which has played a central role in the success of the company’s craft beer business, and those efforts continue to evolve as the industry does. With a knowledgeable and sophisticated craft beer consumer in Oregon and Washington, an educated sales staff has become a valuable part of the Columbia structure.

Among the many educational tools the distributor uses, one is the Cicerone training program (cicerone.org) that is required by all of the company’s on-premise salespeople as well as its management.

Another tool is what Columbia calls its “Beer Guide,” a dictionary of craft beer that includes the flavor profile for every item in the distributor’s catalog, a beer terminology index with definitions for more than 150 common beer terms, a beer style grid with 30-plus recognized beer styles and a list of every beer from the Columbia portfolio that fits into a particular category in addition to a seasonal beer tab that changes with each seasonal release.

For its retail customers and suppliers, every fall the company puts on a holiday craft beer trade show where all of its craft beer suppliers are invited as well as its retailers—about 2,000 people—to participate in tastings and seminars and meet face-to-face with one another for a unique networking opportunity.

Working to maintain its market share and grow dollar sales, Columbia has invested time and money in initiatives that offer its customers more value, building on already established relationships. The economic downturn has, of course, extended to Washington and Oregon. While the beer business does contribute to the Oregon economy, that state’s timber industry for example, on which it also relies heavily to bring in revenue, has been impacted by the housing crisis.

“Everybody is encouraged about the beer business because of what it contributes to the Oregon economy and we are too, but I think you have to realize that you have to bring more value and create stronger bonds with your customers and suppliers more now than ever,” says Walen.

One initiative that has helped Columbia is its category management teams. These teams work with key accounts and chain stores to provide market and category analysis so that they can better understand the trends in the marketplace, missed opportunities and space-to-yield issues. Columbia works with the retailer’s sales information to provide insight and fact-based data to assist them in growing their business. With C-stores and grocery chains representing 60 percent of the company’s volume, this tool has given Columbia “a seat at the table,” says DeMartine. It’s an opportunity that many distributors don’t have, but Columbia does because of its size and the geography it covers.

Coming up on the three-year anniversary of the merger this month, Columbia continues to work on keeping its operations running efficiently, building the brands it has in-house, growing within its MillerCoors territory and looking for additional growth opportunities. “We always field any opportunity that comes before us,” says Christiansen. “If an opportunity presents itself for continuous growth we are going to be ready for it.”

Keeping it Green

“When you are working in one of the greenest markets around—Oregon—you are very conscious of it,” says Gregg Christiansen, CEO of Columbia Distributing. In addition to investing in alternative fuel vehicles and hybrids, using compressed natural gas where possible and making recycling a part of the daily practices of the workday—an estimated 12 tons of shrink wrap, cardboard, glass and plastic are recycled each month—Columbia makes an active effort to lead by example. The company has what it calls an Environmental Coordination Outreach (ECO) team, a panel of employees who promote and educate others within the company using the three R’s (reduce, reuse and recycle).

The company also encourages volunteerism within the community, compensating employees for up to 12 hours of volunteer time per calendar year. And if an employee makes a donation to a charity, the company will match that donation, up to $250 annually, Christiansen adds. In 2010, Columbia and its employees gave more than $100,000 to local and national non-profit organizations. “It’s definitely a high priority for us,” Christiansen says of the company’s community outreach effort. J. Cirillo

Building Beer Careers

Last year, Columbia implemented the Beer Career Leadership Development program, Beer Career. Developed by industry-leading distributors, brewers and importers, the program focuses on discovering and developing future leadership talent. Columbia recruits graduates from the University of Oregon, and soon Washington State University, who go through a 14-week rotational training period at the company learning the ins and outs of the distribution business.

“It’s a good program and it helps bring talent into our company,” says Gregg Christiansen, CEO of Columbia Distributing. New hires through the program also have the opportunity to work for suppliers once they’ve completed their training. Participating suppliers in the program include MillerCoors, Boston Beer Co., Crown Imports, Sierra Nevada Brewing Co., New Belgium Brewing, Heineken and Diageo. – J. Cirillo