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“Black Swan” Events Changing Landscape For Distributor Acquisition, Says Anderson

Beer Business Daily:

We are “seeing new capital enter the industry and new players” which is bringing a “public company mentality” to the industry versus a “family business mentality,” said First Beverage Capital chief Bill Anderson in an NBWA seminar. It’s becoming “less about relationships” with a “greater emphasis on financial metrics and performance.”

“Times are changing radically…it is more about numbers than it ever has been,” says Bill. Pointing out three deals that are unusual, “black swan” type transactions:

  1. Merchant banker Byron Trott of BDT Capital buying the 70% stake in City Beverage [first reported by BBD 09-17-10]
  2. Sioux City Iowa Coca-Cola bottler Chesterman Co.’s pending deal to buy two Iowa A-B distributors, Chuck Whittenburg Distributors in Spenser IA and Kabrick Distributing of Britt IA. [first reported BBD 08-24-10].
  3. Warren Buffett’s McLane buying wine and spirits house Empire Distributing in Georgia. [first reported WSD 03-04-10]

These are “game changing events,” says Bill, because each brings fresh new types of capital to beer distribution.

Bill notes that black swan events “have a higher impact because they were never expected” He points out that ten years ago nobody would have thought the Busch family would leave the US beer business, and now distributors in Chicago are competing against Byron Trott, who will “bring a different mentality to the business.”

The Trott deal is a “gateway” to how the mentality will be in the future. Suppliers still want consolidation, so “there will have to be new financial capital” in the future. Private equity firms will give a 10-15 year window “that will make suppliers breath easier,” rather than a short 3-5 year flip. Another wrinkle: Bill thinks there could be public ownership in the distributor tier in the future

So in these times where big money capital is entering the business, what to do? “We’re not telling people to sell,” adds Bill, “but keep your eyes open to game changing events.” In these more complicated times, bringing in an outside manager “can be very effective mediator on your family business” and help mentor the second and third generations. They’re “not that expensive” and can work with the new generations “better than anyone in your organization.” “Prove you are the next generation wholesaler.”