With volume tracking down for 2d-straight year and unresolved tensions between NBWA and suppliers over CARE Act, plus Costco-driven attempt to privatize/deregulate in Wash, not exactly a celebratory mood in Chi at this yr's NBWA convention. Once again, NBWA leaders focused many remarks from big stage on threats to state-based regulation, assn's response via CARE Act and saddling up to battle Costco. Warnings about threats to status quo also marked several education seminars and even Jim Koch's talk to his distribs where he suggested possibility of "Armageddon" down road for current 3-tier system. We heard plenty of comments reflecting sense of anxiety/distrust between distribs and suppliers. One big exception: love affair with craft brews continues to blossom, at least on sales front. Every distrib we talked to rockin' with craft. And even while no big brewer or importer spoke at mtg, craft took center stage for 1 panel and subject of well-attended seminar.

Challenges "escalated" in 2010, prexy Craig Purser said, with tuff biz environment and "significant threats" to 3-tier and state regulation via litigation, ballot initiative and attempts to de-fund state ABCs. NBWA is "last line of defense" and "making a difference" against these threats, said Craig. CARE Act provides oppy to educate Congress (and others) about state-based regulation, 3-tier system and why separation of tiers "works for the public interest." (See more on CARE below.) That's also reflected in "strange bedfellows" that joined Protect Communities coalition to fight Costco, including distribs, brewers, law enforcement, teachers, local govts, labor, alcohol control advocates and health groups. Incoming chairman Larry Del Papa called current threats "the most serious since the pre-Prohibition" era. If deregulators prevail, he warned, "it could be devastating." Regarding NBWA-BI/BA relations, Larry by turns combative and conciliatory. Tho some charged NBWA's portrayal of challenges "unfounded, contrived" or even "manufactured to energize the membership," Wash initiative shows "NBWA'a analysis" was "spot on." Larry made no apologies for NBWA advancing a "distributor-focused agenda," and noted NBWA "did not seek permission to advance distributor interests." At same time, Larry said "strengthening relationships with brewers" one of his 2 key goals for 2011. (Other is expanding advocacy.) "Significant trust gap" between the 2 "must be narrowed." Even while many dwell on "poor state of relations," Larry thinks NBWA, BI and BA have "better knowledge of each other than ever" and know each others' "strength and resolve." Distribs can be loyal to NBWA and to brewers, and he vowed that in Wash, "the industry will prevail together."

Elsewhere, Boston Beer's Jim Koch made some provocative comments to his distribs that fanned flames of tension between big brewers and distribs. More likely than not, Jim believes, AB InBev will buy/merge with either Pepsi or Coke down road, which will provide alternative route to market and threaten 3-tier system of independent beer wholesalers so important to Boston and other craft brewers. In fact, Jim advised distribs to pass state laws to bar big brewer branches in 50% of US where they're allowed -- while carving out exception so small brewers can self-distribute -- and do it as soon as they can. From much different angle, consultant Joe Thompson warned that "status quo will be impossible to maintain much longer" as distribs gotta decide whether they want to be "logistics systems, brand builders or something in between." Joe believes biz "gravitating too much to logistics" and too far away from brand building. In another seminar, First Beverage Capital's Bill Anderson cited "game-changing" distrib transactions that alter status quo, including emergence of private equity financing (BDT Capital recent buy of 70% of City Bev in Chi) and McLane's (a subsidiary of Warren Buffett's Berkshire Hathaway) as significant new sources of financing deals. Suppliers can't get consolidation they want with "existing capital structure," said Bill, so "new waves of capital" coming in. With new routes to mkt, new "waves of capital," soft sales, deregulation, and brewer/supplier disagreements, no wonder Larry said beer biz execs seem these days to be a "very bitchy bunch of unhappy people." Craig said too that beer distribs "feel like they've been going through hell" lately. Yet as both acknowledged, beer biz still a great place to be.