Posted on | March 28, 2012
Written by | BevNetwork
The Beverage Network recently sat down with incoming WSWA Chairman Charlie Merinoff, Chairman/CEO, The Charmer Sunbelt Group, to discuss the agenda for his term, and the opportunities and threats facing our industry.
THE BEVERAGE NETWORK: What are your top priorities while serving as WSWA Chairman?
CHARLIE MERINOFF: My greatest opportunity—and greatest challenge—will be getting the three tiers to come together as an industry. In some ways, I think Washington State was a blessing in disguise: It showed us that if we are not working together, this is what the world can look like. The passage of Initiative 1183 in Washington [which privatized beverage alcohol sales] has really galvanized us as an industry; it showed us how important it is to put our differences aside and focus on things that benefit the entire industry. I have recently met with DISCUS and there is real momentum from the supplier tier to work together, and I am seeing the same cooperation from our retail partners.
TBN: Social responsibility is also something you want to emphasize. Why do you believe it’s so important?
CM: The future of our industry will be heavily influenced by how people perceive our products. I see an industry that really cares about how our products are consumed—though I’m not sure we always get a fair shake. I’m also sure there is more we can do: In many of our Charmer-Sunbelt markets, we are working with retailers to combat underage drinking and fake ID usage and asking ourselves, as an industry, can we level the playing field so that there are consequences for the accounts, as well as the kids who are using them?
TBN: How else can we improve public and government perception?
CM: Many times when things work well, you take them for granted and don’t see the potential problems. People don’t understand the way the three-tier system works or how important it is. In other countries—without our kind of regulation—there are constant problems with alcohol poisoning and counterfeit and fraudulent products harming consumers. That just doesn’t happen here. The way we go to market adds significant value to the consumer, and one of my objectives this year is to work harder to educate the government and the consumer about the three-tier system and what it brings in terms of safety—not to mention the jobs we create and the genuine pricing and variety we provide. Part of the way we do this is through our public commitment to social responsibility; it shows we are serious about these issues and that we are addressing them.
On The CARE Act
TBN: We noticed you omitted the CARE Act as one of your priorities. What is its status?
CM: The wholesalers truly believed in the CARE Act [a piece of federal legislation designed to reaffirm states’ rights to regulate beverage alcohol], but unfortunately, it created an environment of mistrust with our supplier partners—they really didn’t understand our goals. As with any piece of legislation, you can’t project out every set of consequences that were never intended, and this seemed to be a major hurdle. The CARE Act became really divisive and prevented us from getting together on other important issues.
TBN: Will you be creating new legislation in its place?
CM: We are going to talk to our suppliers and explain why we drafted the CARE Act. We were in the courts constantly fighting to protect the three-tier system—it’s time-consuming and expensive. Going forward, we want to work with DISCUS to find the best way to deal with this problem together, rather than us creating a piece of legislation in a vacuum, as was the case with the CARE Act. With transparency and communication we hope to work on legislation that seeks to reinforce the validity of the three-tier system.
On The Three-Tier System
TBN: What are some of the threats to our industry you expect we will see in the near-term?
CM: There are going to be many challenges in different states, so we are going to have to be very nimble. Because of the weak economy, increased taxation will be an issue. The explosion of social media has led people to question every business model, including government controlled beverage alcohol distribution. There are social issues like over-consumption and DWI that we need to be proactive about eliminating. Then, of course, there are access-type issues, such as grocery store and Sunday sales.
Retailers are also looking to evolve their business models. One important mind-set change I hope to accomplish in my term is that there are really no bad people: we are all looking out for ourselves and our own interests and no one is any better or any worse. I truly believe most people want to sell our products in a responsible way; we just have different visions of what that looks like. For us, it comes back to the importance of educating people on the value of beverage alcohol—the amount of taxes and costs between when a product is created and the time it reaches a retail shelf—there is enormous motivation to cheat the system. If the three-tier system breaks down, we will start to see many unintended consequences that exist in other countries: irresponsible consumption, artificially high prices, limited consumer choice and counterfeit products.
TBN: What sort of measures will ensure bills like Washington’s Initiative 1183 don’t happen in other states?
CM: We need to find the right compromises, particularly on laws that might be restrictive. If there were quantity discounts in Washington, would Costco have had the same motivation to spend the money they did to change the system? In truth, I understand their position: They have built tremendous scale, yet they had to buy at the same price as a store buying a single case. They weren’t allowed to leverage their size. If we had addressed that issue earlier on, we would likely be in a very different place today. When we are inflexible and hold onto the wrong laws, a collapse could take everything with it.
On the WSWA Convention
TBN: If the CARE Act is no longer an issue, why have DISCUS members again opted out of the Convention?
CM: I think large suppliers struggle with the value of the Convention to them. They meet with their large wholesalers constantly, and when they want to make a change, they already know who the players are. Also, the content at the show wasn’t resonating with them. I still believe there is tremendous value here. The Convention offers a cost effective way in a nice environment for big suppliers to meet with a variety of wholesalers—particularly the small distributors that they don’t normally see. I encourage large suppliers to use the Convention in a more tactical way—for example, not having an open suite all day, but rather scheduling closed door meetings and focused business reviews. If we change the business model, I believe we can get the large suppliers back.
TBN: How else can WSWA make the Convention more relevant?
CM: We found that from a supplier perspective there isn’t tremendous value in hearing other suppliers speak about their businesses, so we are going to focus on stimulating and relevant content with great speakers who can address issues like marketing, technology and multicultural trends—we believe these are the sort of topics all suppliers want to learn about.
TBN: In the meantime, it seems that a number of new industry members are participating this year.
CM: We are excited that there are many new wine and artisanal spirit suppliers who have signed-up. We are going to have one of our best Conventions ever in terms of attendance. From a revenue and viability standpoint, the Convention—and the organization for that matter—are in great shape.