Family-owned distributors of Rainier and Olympia beer sue Pabst Brewing after the business is handed over to a West Coast industry giant. Also: Diva Espresso will be part of Kenmore’s downtown project. And, outbound cargo from the Seattle and Tacoma ports grew strongly last year.
A power play in Pacific Northwest beer distribution is making headlines in the industry because of its unusual abruptness, even for a rough-and-tumble sector where the big are always getting bigger.
Three family-owned distributors, including one that’s handled Rainier and Olympia beers since the 1940s, say they were dropped without warning by Pabst Brewing so it could turn their business over to one of the industry’s largest players, Columbia Distributing of Portland.
The three sued Pabst in federal court this past week, alleging its sudden switch violates their contracts and makes worthless their past investments in the distribution of Pabst products (which include a large portfolio of brands ranging from Rainier and Olympia to Pabst Blue Ribbon, Stroh’s and Colt 45).
“Prospect of Pabst terminating 3 large distribs to go to 1 giant megadistrib already sending some shockwaves,” declared the staccato-style news bulletin published by Beer Marketer’s Insights, which led with the story for three straight days.
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It’s not that consolidation is uncommon in the beer industry. Streamlining delivery is paramount for brewers and their distributors because “the beer market is not growing and is very chaotic — everything is in flux,” says Benj Steinman, president of Beer Marketer’s Insights in Suffern, New York.
Total U.S. beer consumption is flat — volume grew just 0.2 percent in 2015, with increases in craft and imported beer offset by a decline for major domestic producers, according to the Brewers Association. And this year the trendlines are worse, even for craft beer.
But distribution usually changes hands by agreement, or through an acquisition.
“You just don’t see many flat-out terminations,” says Eric Shepard, executive editor at Beer Marketer’s. “That is not common at all.”
The three Washington distributors are Odom of Spokane, Marine View Beverage of Tumwater and Stein Brewing of Vancouver; they delivered Pabst beers in much of the state, while Columbia already controlled the big Seattle-Tacoma market. Their lawsuits say that they weren’t given the 60 days’ notice required by their contracts, and that Pabst acknowledged there was no deficiency in their performance.
Their attorney, Gavin Skok of Riddell Williams in Seattle, says “the termination is painful and costly” to the companies, which “invested millions of dollars to build out the Pabst distribution network.”
Pabst did not return a call seeking comment on the lawsuits.
Industry watcher Shepard says the pressure to consolidate distribution is “particularly acute for Pabst” because it has acquired so many older beer brands carried by different, sometimes competing, distributors.
And Washington is a key market, his newsletter noted: “Pabst is a 5.5 (market) share player in Washington. Its Rainier brand is hot. Incredibly, Rainier is # 3 volume brand in Seattle/Tacoma foodstores by volume.”
Putting that surprisingly hot commodity in the hands of Columbia fits the industry pattern, he says. “Columbia’s huge, and they’re a go-to distributor” for big brewers, with a footprint that’s expanding down the West Coast into California.
Columbia, which is owned by a private equity firm, has recently pulled off some other major Northwest consolidation moves. It won regional distribution for craft brewers Full Sail and Mac & Jack’s, as well as for North American Breweries (NAB). That’s an unfamiliar name, no doubt, but NAB imports Labatt beers and also owns the company that bought the local Pyramid Brewing and Portland Brewing.
For consumers, perhaps the key question is this: If Pabst and Columbia can wring some efficiency out of their new arrangements, does that mean some cheaper beer for us?
Don’t hold your breath.
“That’s not generally the way it goes,” says Shepard. “Those efficiencies are not turned into lower prices.”
— Rami Grunbaum: email@example.com
Diva ventures out to Kenmore
Diva Espresso, a small coffee-shop chain with seven locations in the Seattle area, will play a part in helping the city of Kenmore create a downtown hub.
The Seattle-based coffee company was chosen as the sole retailer in the Hangar building, the 4,600-square-foot community gathering hall built on a 24,000-square-foot plaza, called Town Square, going up in the heart of the suburban city.
Together, the Town Square and Hangar building are expected to create a community gathering space for concerts, outdoor movies and general hanging out. The project is expected to open this summer.
The Hangar “will be a year-round living room for our community,” said Rob Karlinsey, Kenmore’s city manager. “It’s good to have an outdoor space but, in our climate, we really wanted something that’s year-round that the public could call its own.”
The building’s name comes from the city’s self-proclaimed title as the “seaplane capital of the U.S.,” Karlinsey said. It’s the headquarters and seaplane harbor for the local Kenmore Air.
City officials have long wanted to create a “downtown sense of place,” Karlinsey said.
Kenmore, incorporated in 1998, “grew up as a rural suburb of Seattle. We were a bedroom community,” he said.
About a decade ago, the city purchased 9.6 acres of land, hoping to catalyze development of a downtown core. These days that entire acreage is being referred to as Kenmore Village, a mixed-use development with residential, retail and office space.
Within Kenmore Village, the Town Square and Hangar is in “the prime corner,” at 68th Avenue Northeast and Northeast 181st Street, Karlinsey said.
City officials chose Diva Espresso for the Hangar because they wanted a local coffee company with a track record of success, he said.
Diva Espresso, which started in 1992 with one shop at Greenwood Avenue North and North 80th Street in Seattle, has since expanded in north and downtown Seattle, and has a franchise location at Seattle-Tacoma International Airport. It roasts its coffee beans at its warehouse in North Seattle.
At its Kenmore location, Diva Espresso intends to offer coffee drinks, as well as food items, ice cream and — in a first for the coffee chain — beer and wine.
The coffee company initially wasn’t sure it wanted to expand into Kenmore, said co-owner Greg Hamper. But then it saw the Hangar building coming together.
“The building is absolutely gorgeous,” Hamper said. “It’s not just a little fly-by-night corner spot. This is going to be the focus for Kenmore and we’re going to get a lot of attention there.”
The city hopes to hold its opening celebration for the Hangar and Town Square on June 24.
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Local ports show growth in exports
Despite continued sluggish world trade and the bankruptcy of Hanjin Shipping, U.S. West Coast ports saw strong containerized traffic last year, according to the Pacific Merchant Shipping Association (PMSA).
The recent PMSA Trade Report showed that the Northwest Seaport Alliance, comprising the seaports of the Port of Seattle and the Port of Tacoma, increased its inbound loaded TEUs by 13.5 percent in December and 6.4 percent for the year. TEUs, or 20-foot equivalent units, are the industry standard measure for shipping containers.
Outbound loads from Seattle and Tacoma rose 5.8 percent in December and 12.9 percent for the year. The annual total was the strongest performance by any U.S. port.
The longer picture for U.S. West Coast ports is more sobering, according to a story in the Journal of Commerce. It says, “West Coast ports last year continued a decadelong decline of market share in which they have lost about 12 percentage points of US imports from Asia since 2005, reaching a new low of nearly 67 percent, as beneficial cargo owners increased shipments through the East and Gulf coasts.”
The population in the Southeast is growing fast again (at least until climate change kicks in), making Eastern and Gulf ports more attractive — and the full effects of the wider Panama Canal didn’t kick in last year. Another big problem is that Vancouver and especially Prince Rupert, B.C., offer attractive alternatives and fast rail connections to the American heartland. U.S. railroads, struggling with the loss of coal and oil traffic, have been increasing intermodal rates.
Jon Talton: email@example.com