Anyone who knows the history of Bronx, NY-based Manhattan Beer Distributors knows that the distributor not only perseveres in the face of tough times, but seems to thrive on challenges. Simon Bergson, Manhattan Beer’s CEO and president, started the distributorship with only two brands in 1978 and his sales team grew the business in the absence of major brands by executing against small, specialty brews in New York City, one of the country’s most competitive beer markets.

It was 10 years later that the company acquired Corona, a virtual unknown at that time, and in 1998 the eight-million-case house took on the Coors business, jumping to an 18-million-case distributorship virtually overnight.

Photography by Bruce Katz

Operating in one of the toughest markets in the world is challenging enough, but in late February, the 1,200 employees at Manhattan Beer were faced with a new complication. Following a deal A-B struck with InBev to be the exclusive US importer of its European brands, Manhattan Beer senior management announced at an annual company business review that the distributor was losing its InBev portfolio. The announcement confirmed months of speculation and created an emotional evening for many Manhattan Beer employees, recalls Bill Deluca, senior vice president of sales and marketing.

“We were a very large InBev distributor at the time, roughly 2.5 million cases with a growth pattern of about 20 to 25 percent, so we’re talking close to three million cases projected for 2007,” Deluca says. “The news made a lot of people uneasy, especially if you’re a route salesperson and one that works in Manhattan who recognizes that 25 to 30 percent of your business is in the InBev portfolio.”

Besides the financial concerns, there was an emotional connection to the InBev brands as well—Manhattan Beer played an instrumental role in building brands like Stella Artois, Hoegaarden and Leffe into top-selling on-premise brands in the New York City area.

Rather than play defense, Manhattan’s senior management, including Bergson, Deluca and chief operating officer Bill Bessette, decided to put in its offensive team. At the February business review, Bergson and Deluca outlined an aggressive plan of attack for its sales and marketing staff.

“We said ‘this is where we are today, here’s what we’re going to look like on March 1 and these are your marching orders,” says Deluca, recalling the February business review. “I was very clear that our marching orders were to go out and dismantle what we had built.”

But before senior management could sound the advance, the company addressed concerns about the potential loss of experienced salespeople—many of whom had been selling InBev brands for eight years—to A-B. Senior management made the decision to raise every route salesperson’s base pay by 75 percent based on what they made selling the InBev portfolio last year.

“That was a huge undertaking for us as a company, but it was the prudent thing to do. It relieved a lot of people’s mindset about their week-to-week salary and I think our employees recognized that the company had their best interests at heart,” Deluca says.

With the goal of gaining back the volume and draft accounts that Manhattan lost with the departure of the InBev brands, senior management developed an aggressive, two-month incentive program for new draft business (about 75 percent of the InBev portfolio had been draft business). In that two-month period, Manhattan scored 2,200 new draft lines and paid out $260,000 in incentives to its route salespeople. The company also plans to hire 15 to 20 more sales and marketing positions this year, despite the depature of the InBev brands.

“This is a company that firmly believes that if you invest ahead of time in manpower and resources, then you’re going to be successful,” remarks Rob Mitchell, Manhattan general sales manager, specialty division.

So far, the strategy has worked. Year-to-date sales are down only 1 percent, Deluca reports, while the company had projected sales to be down by 3.5 percent with the loss of the InBev portfolio.

Manhattan Beer was able to leverage the departure of the InBev portfolio as an opportunity to re-establish itself as the on-premise distributor of choice, Deluca says, while boosting volume for many of its specialty brands, such as Newcastle Brown Ale, Blue Moon Belgian White and Kronenbourg 1664.

In an enterprising move and in recognition of the phenomenal growth of specialty beer, Manhattan Beer recently established a specialty beer division to focus specifically on growing smaller, niche brands in the distributor’s portfolio. Mitchell, who is heading the specialty division, says one of the goals is to elevate the overall education and awareness of better beer among the entire sales staff as well as to better meet the needs of its specialty beer accounts.

“To be a full-service distributor to those accounts, you have to talk, walk and act like one. I think that by creating this specialty division and raising the knowledge of our route salespeople, that’s how we’ll provide better service,” he says.

Six specialty beer supervisors will work closely with sales staff who have accounts or territories that are fertile ground for specialty, niche beers, such as the East Village of New York City. In addition, Manhattan Beer is focused on helping retailers and bar owners better understand specialty beer so they can more effectively market and sell craft and import brands, Mitchell says.

Within the specialty division, Manhattan Beer is focusing on a number of regional craft brands within its portfolio, such as New York craft brands Keegan Ales and Southampton, Black Dog Ale from Montana and Sierra Nevada from California as well as niche imports like Belgian brand Grimbergen, Fraziskaner from Germany, Barons from Australia and Pacifico from Mexico.

Besides the focus that a specialty division can offer smaller brands Mitchell points out that Manhattan Beer has the market penetration, infrastructure and financial investment to help take smaller brands to the next level. Manhattan Beer also is looking to recruit new products to fill out its portfolio.

And, Deluca foresees the day when many of these brands graduate out of the specialty division and become more mainstream, similar to the growth pattern Stella experienced in New York City thanks to Manhattan Beer.
“That specialty division is going to be instrumental in our future growth,” he says.

Manhattan Beer also is in the midst of developing an affiliation with World Class Beverages, a craft and specialty beer division of Indianapolis, IN-based Monarch Beverage Co. Created in 2000, World Class Beverage partners with distributors across the country to promote the craft beer market, Mitchell says.

With 85 brands and about 700 SKUs in its portfolio, Manhattan Beer works hard to meet the needs of all of its suppliers, whether their brands are specialty or mainstream. The Coors and Corona portfolios are a substantial part of Manhattan Beer’s business and the distributor continues to grow volume for those brands in a competitive market.

In 2006, Manhattan Beer was honored with Coors’ Founder’s Award, an award presented to a distributor each year in recognition of both volume-based performance and a commitment to excellence. Despite a somewhat rocky relationship when the distributor first took on the Coors portfolio 10 years ago, Manhattan Beer has worked hard to build a strong partnership with the brewer and that relationship has provided a foundation for profitable growth for both companies.

It is that tenacity and desire to win that has kept Manhattan Beer ahead of the game, despite the challenges it faces. And, while there may be some tough months ahead as Manhattan Beer continues to compete against the InBev brands, the company has 30 years of New York know-how under its belt and is poised for strong growth.

“We’re in a good place right now,” says Deluca. “Our distribution is growing, our multiple distribution is growing, we have an average SKU count of 18 per account, which is up 1.5 SKUs per account and I think our suppliers today are more willing to invest with us because of the opportunities that the departure of the InBev brands created.”

VITAL STATS
MANHATTAN BEER DISTRIBUTORS, LLC
PRESIDENT & CEO: Simon Bergson
HEADQUARTERS: Bronx, NY
’06 SALES: $577 million
EMPLOYEES: 1,200
GOALS: With a passion to win, Manhattan Beer is committed to growing its brands and
its business in a competitive market, while providing excellent service to its suppliers. 

From Beverage World August 15, 2007