Tag: liquor sales

Schenley Distillers Corporation

Recently I reviewed Bourbon Justice by Brian Haara. I can’t say much about the book at this time because the Journal of American History has to publish the review first. Reading about bourbon has prompted me to post an excerpt from a paper I gave at a ADHS conference a few years ago.

The paper looked at how bourbon evolved into a distinctly American drink. One of the key players in this process was Lewis Rosenstiel, owner of Schenley Distillers Corporation.

Lewis Solon Rosenstiel was a Cincinnati native, born in 1891. His first job was working for an uncle, David L. Johnson, owner of the Susquemac Distillery, Milton, Kentucky. Prohibition ended that employment. In 1922, while on vacation on the French Riviera, Rosenstiel met Winston Churchill. The future prime minster was of the opinion that Prohibition would end. He advised Rosenstiel of this.[1]

When Rosenstiel returned to America he began to buy closed distilleries; one of these, the Schenley distillery, located north of Pittsburgh, on the Alleghany River,[2] had a license to produce medical liquor.[3]  Rosenstiel named his company, Schenley Products Company (later Schenley Distillers Corporation) after this distillery and the town it was located in. He also bought another distillery in the same area, Joseph H. Finch, Co.[4] By the time Repeal came Rosenstiel had amassed at least thirty distilleries.[5]

During Prohibition Rosenstiel also worked as a whiskey broker, dealing in and trading whiskey warehouse receipts. Between the distilleries he had purchased and his warehouse receipts, Rosentiel had a large stock of aged whiskey which would be immediately available for sale once alcohol became legal again[6]. In 1934, Schenley Distillers Corporation had sales of over $40 million; Rosenstiel earned 6.9 million that year.[7]

Rosenstiel and Schenley were not based in Kentucky but in the immediate Repeal period, his company was the leading distiller until 1937 and then, again from 1944-1947.[8] Although Schenley produced both blended and straight whiskey, Rosenstiel became the most prominent spokesperson for bourbon as a distinct product.

Rosenstiel had a colorful past. He was arrested during Prohibition for “counterfeiting whiskey bottles and labels for illegal sale to the public.” The case against Rosenstiel was dismissed but one of his associates was convicted. This man, Joe Linney later became a Schenley distributor in Boston. [9]

Schenley was one of three distillers that became major factors in the distilled spirits industry following repeal. The other two were Seagram’s, owned by Sam and Edgar Bronfman, Canadians and National Distilleries, a company formed out of the remains of several pre-Prohibition combinations.

[1] Leonard Sloane, “Lewis Rosenstiel, Founder of Schenley Empire Dies, New York Times, Jan. 22, 1976, p.37. https://www.nytimes.com/1976/01/22/archives/lewis-rosenstiel-founder-of-schenley-empire-dies.html

[2] American Whiskey: Messin’ ‘Round The Old Mawn-Nonga-HeelahButton up your Overholt, when the wind blows free… http://www.ellenjaye.com/hist_mono3overholt.htm accessed 5/30/13

[3] Sloane, “Lewis Rosenstiel”.

[4] American Whiskey

[5] Harvard Business School, Lehman Brothers, 1850-2008, “Deal Books: Schenley Distillers Corporation”, https://www.library.hbs.edu/hc/lehman/Data-Resources/Companies-Deals/Schenley-Distillers-Corporation

[6] Sloane, “Lewis Rosenstiel”.

[7] Harvard Business School, “Deal Books”.

[8] American Whiskey

[9] The Mail Archive, “Crime, Big Business and Watergate”. http://www.mail-archive.com/ctrl@listserv.aol.com/msg11476.html

Chinese Drinking

I came across this really interesting article about Asian immigrants who live in Oregon and are the only distillers of the traditional Chines liquor, baijiu. When we were in China in 2005, we were frequently served baijiu. It is very viscous and has a high alcohol content.  The baijiu we had was made from sorghum. The people in Oregon seem to use rice.

I am posting something I wrote about out trip to China. I did post in the blog I had before this WordPress  site but I can’t seem to find out if I have ever posted it here. If it is a repeat, I apologize.

Chinese Drinking

My family and I recently returned from visiting Hong Kong and mainland China. My husband is the vice president of a private undergraduate liberal arts college and the purpose of our trip was to visit several Chinese educational institutions. Because of this, the very nice, friendly, and generous Chinese people we met treated us as celebrities or in their context, dignitaries. The main consequences of this treatment were many banquets held in our honor.

I have not attended that many banquets in the United States but the few I have been at have begun with a cocktail hour then proceeded to a multi course meal with dessert and wine. Chinese banquets are completely different from this. The meal always takes place in a private room around a round table. At each place setting there are three glasses; a water glass, a wine glass, and a very small shot glass, probably one-half ounce in capacity. At the beginning of the meal, the host will ask the honored guest, my husband in our case, if they want “spirits”.

At our first banquet this request elicited amused responses from the other Chinese guests as well as some good-natured warnings about the potent “firepower” of the spirits. The Chinese woman sitting next to me who spoke English stated the spirits “were not for women.” Although this surprised me, I wished to be polite and therefore refrained.

When my husband said he would try it, his water glass probably about eight ounces-was filled with a 50 percent alcohol, clear, viscous liquid. This alcoholic beverage was baijiu, which is distilled from sorghum. All the guests drinking also had their glasses filled. As the meal proceeded the host toasted my husband, pouring from his big glass into the small shot glass, raising it high, downing it while saying Gam Bei (Bottoms Up!) and then showing the empty glass to my husband. At that first banquet there must have been at least ten toasts. Many of the guests completely emptied their large glasses and then received refills. The whole event had a competitive and masculine tone with the goal being to see who can drink the most.

All of our subsequent banquets followed this pattern. Some did not involve spirits so the drinking was much more subdued. At different banquets, various participants had a greater or lesser affinity for alcohol and the total amount of alcohol consumed varied. Women did participate although not as vociferously as the men. Some participants filled their large glasses with water and then proceeded to participate in the social aspects of the toasting ritual without running the risk of inebriation.

As a historian who has written about alcohol and the industry and has attended over twenty-five years of conferences on the general subject, the heavy drinking I observed in China came as a complete surprise. The global studies of alcohol and drugs have always focused on opium and tea as China’s chosen psychoactive substances. There is also a literature that seems to suggest that, because Chinese drinking takes place during meals, it is more moderate.

Alcohol experts define binge drinking as the consumption of five or more drinks at one time. In the United States and increasingly internationally, it is college age people who most often indulge in this behavior. Binge drinking on college campuses has led to an increase in death from alcohol poisoning and is the subject of many research projects.

At the Chinese banquets I attended many of the men present had at least eight drinks. Binge drinking in America often has a ritualistic aspect; newly “legal” drinkers in the Southwest spend their first night as a twenty-one year old seeing how much alcohol they can consume. The showing of empty glasses and the good-natured urging to continue drinking at Chinese banquets is the same kind of behavior. There is obviously a whole aspect of Chinese consumption of psychoactive substances that remains unexplored.

When I was thinking about posting the above, a front page article in the New York Times appeared. Entitled, “Got a Mint, Comrade? China Cracks Down on Liquid Lunch,” the article discussed the Chines practice of lunchtime banquets where alcohol, usually baijiu, plays a large role. The Chinese government usually foots the bill for these alcohol-laden meals and thus wants to curtail the amount of drinking.

The article also indicates that consumption of baijiu has declined as a more prosperous, younger generation has begun to drink other spirits, wine, and beer. Around the same time the Times covered this story we entertained visiting Chinese scholars in our home. They all declared that the thing they missed most from home was baijiu. The drinking habits of China, both historically and in the ever-changing global market, call out for further exploration and research.

Beer Distribution

The Craft Brewers Guild, a major beer distributor, has appealed a fine it received from the Massachusetts Alcoholic Beverages Control Commission. The Guild, based in Everett, MA, is one of nineteen craft beer distributors that Sheehan Family Companies owns. Sheehan also has an importing division, St. Killian, which sells Carlsberg and other foreign beers.

Sheehan Family Companies began in 1898 as a pushcart grocery run by Luigi Cortelli, an immigrant from Italy. In 1934, after Repeal, and now in a physical store, Luigi and his son Domero, entered into a distribution agreement with Anheuser-Busch. In 1956, Gerald Sheehan, Domero’s son-in-law started as a route salesman and eventually became company president. His son, Tim, is currently CEO. The Craft Beer Guild MA became part of the company in 2002.

In 2016 the Guild paid a $2.6 million fine to the ABCC to prevent a ninety-day suspension from going into effect. The Commission charged the Guild with undertaking a pay to play scheme that included false invoices and money laundering.  The Guild denies it did anything wrong and is pursuing its appeal at the State Supreme court level.

To read more about this case click here and here.

William K. Coors

Last month, William K. Coors died at the age of 102.He was the grandson of Adolph Coors, founder of Coors Brewing. Here is the New York Times obituary.

In acknowledgement of his passing, I am posting an excerpt from Brewing Battles (2007)about Coors.

Until the late 1970s Coors was a regional brewer; the beer was available in sixteen Western states. The Coors family sought nation-wide distribution of their beer, but faced several problems. Their appeal and brand recognition flowed from the Rocky Mountain springs that supplied the water for the beer. Building another brewery somewhere else would negate those advertising claims. Coors planned to compete in both beer types and advertising. By 1979, the company had a light beer and hoped to produce a super premium beer in the near future.[1]

Coors’ plans to diversify its products reflected the changing nature of the beer market since Repeal. Nineteenth century brewers brewed fresh lager for patrons at saloons. A few brewers persisted in brewing English ale. Although the German brewers had argued for the uniqueness of their product when confronting federal taxes in the 1860s, for much of their pre-Prohibition history they presented and promoted beer as beer. Most brewers had only a few different products and they didn’t really advertise one over the other.

During Repeal, brewers returned to a world of consumer products and brands. Slowly they began to develop different beers. Modern Brewery Age was a leader in promoting product differentiation, advertising, and marketing campaigns around specific items. Of course the brewers pushed for great latitude in production definition when producing the industry’s NRA code. They continued to resist ingredient and alcoholic content labeling.

True product differentiation began in the 1960s with malt liquor; it accelerated after Miller and Phillip Morris introduced light beer in 1975. Other categories of beer included super premium, dry, reduced alcohol, non-alcoholic, and beer coolers.[2] Anheuser–Busch has over sixty beers including Michelob, its super premium entry which the company has produced since 1896, as well as O’Douls, a non-alcoholic beer, and Bud Light.[3] Most other breweries do not have that many products; craft brewers usually have a few different beers. Boston Beer, makers of Sam Adams, produces about twenty-five different products.[4]

Coors was obviously hoping to move onto the national level and begin producing a variety of beers. The company developed a plan to move into two or three new states a year. By 1986 people in forty-five different states could buy Coors beer. The company maintained its number five position in the industry through massive advertising expenditures. Coors spent more than $10 a barrel on advertising and its total marketing expenses were $165 million in 1985. The company’s net income was $53.4 million from sales of $1.28 billion.[5]

By 1986 the fourth generation of Coors family members was running the company. Jeff Coors stated that the brewing industry “was much more of a marketing game today.” Beyond problems of market expansion, throughout the 1970s and 1980s, the company faced a series of controversies. In 1977, Local 366 of the Colorado UBW began a strike against Coors. Coors, under the leadership of Bill Coors, consistently supported conservative causes; the company attempted to change the seniority system which would have resulted in a less powerful role for the local and its influence on discipline. Claiming union busting the local was on strike for two weeks when half of the workers returned to work. The company hired replacement workers for the remaining strikers. Coors wanted an open shop despite the fact that the brewery had had union representation for forty-two years. In 1978 employees decertified the union.

The union and other interested parties including Hispanics, homosexual rights activists, and feminists undertook a national boycott. Many groups believed Coors engaged in discriminatory labor practices. By initiating a boycott the UBW was returning to its nineteenth century roots. This boycott caused California sales to diminish by fifteen percent; California represented more than forty-five percent of Coors market. The boycott was a large impediment to the company’s attempts to produce beer and market beer for the national market.[6]

Ten years later, in 1987, the union and Coors came to an understanding. Coors agreed to non-interference with union organizing and to support a union contract for a proposed building project. In response the union ended the boycott. Coors changed its hiring practices and advertising focus. Coors had also completed an agreement with the Coalition of Hispanic Organizations in 1984. Jeff Coors was determined to avoid controversy.[7]

By 1991, all fifty states sold Coors beer, and the company had risen to the number three spot in the industry. It has the largest capacity brewery in the world at its headquarters in Golden, Colorado. That same year Anheuser–Busch’s market share was forty-four percent.[8]

 

[1] Jerry Knight, “Coors Plans Expansion,” Washington Post, 79.

[2] Beatrice Trum Hunter, “More Informative Beer Labels,” Consumer Research Magazine, October 1996, vol. 79, no. 10, 10-15.

[3] http://anheuser-busch.com/ (accessed April 2, 2007).

[4] http://samueladams.com/verification/ (accessed April2, 2007).

[5] Steven Greenhouse,” Coors Boys Stick to Business,” New York Times, November 30, 1986, 162. The family had suffered a tragedy in 1960 with the kidnapping and murder of Adolph Coors the third, eldest grandson of Adolph Coors, the company’s founder.

[6] Ibid; Amy Mittelman, “Labor in the U.S. Liquor Industry” in Blocker et al., Encyclopedia, 356-358.

[7] Ibid; Ruth Hamel and Tom Schreiner, “Coors Courts Hispanics,” American Demographic, November 1988, 54.

[8] William H. Mulligan, Jr. “Coors,” in Blocker, et. al., Encyclopedia, vol. 1, 174; Rick Desloge, “Anheuser-Busch on path to 50 percent share of market,” St. Louis Business Journal, February 11, 1991 1B.-2B.

©Amy Mittelman 2018.

Are Macro Beers in Trouble?

Molson Coors experienced a drop of 4.8% in its sales for the first quarter. They still had a profit of $278.1 million but sales fell in the United States, Canada and Europe which are three of the company’s largest market. They suffered the largest losses in the United States, falling 5.8% to $1.65 billion. Molson Coors attributed this decrease to “industry softness.”

Overall in this first quarter, U.S. beer volume fell 3.8%. Poor weather and a decrease in shipments of premium light beer contributed to the decline. World-wide volume also dropped by 3.8%.

The U.S. Market is the largest segment of Molson Coors’ business, representing 71%. Since 2009 , Miller Coors, Molson Coors’ U.S. operations, has lost  market share, dropping by 5%o to 25% in 2017. Coors’ bad showing in the first quarter is symptomatic of larger problems in the beer industry.

Consumers are drinking more craft beer and imports, primarily Mexican beer. Millennials drink eclectically and are particularly fond of wine. Macro brewers had responded to these trends by diversifying into cider as well as by buying craft breweries. ABInBev and Miller Coors,Molson Coors’ U.S. operations, together, have lost 13.4% of the U.S. market share since 2009. Constellation Brands, which owns Corona has a 9.4% market share.

For a while, there have been two beer markets, one consisting of global concerns such as ABInBev and Molson Coors and the other comprised of the thousands of craft brewers. Molson Coors’ market share problems suggests some movement between markets as well as the possibility of a merger.

For more information click here

 

Alcohol and Cancer

The Irish legislature, the Oireachtas, is considering adding a warning label about drinking and cancer to alcoholic beverages. Ireland would be the first country to have such a  warning label. America has had labels that warn about drinking while pregnant and driving while intoxicated since 1988. Wine labels  also inform the consumer that the bottle contains sulfites.

In Ireland the issue is pitting Alcohol Action Ireland, public health advocates against the liquor industry represented by the Alcohol Beverage Federation of Ireland (ABFI). Alcohol Action is presenting the legislation  as necessary to protect public health and safety while the industry is concerned about the effect the legislation would have on the economy, including tourism. This is the perennial tension that has existed in America since the end of Prohibition.

A warning label that mentions cancer could be the first sign that public perception about  drinking is moving in a more negative direction. Alcohol, particularly  beer, has gained a seemingly ever increasing integration into American society. Recently both craft beer and craft distilled spirits have captured the public’s attention.

In the 19th century smoking and drinking were both considered vices. In the first few decades of the 20th century tobacco gained market share while alcohol endured Prohibition. Since the 1960’s the two industries’ fortunes reversed.  Access to tobacco became severely curtailed while alcohol gained greater cultural acceptance and societal integration.

Since the 1960s the wine industry has pushed for labels that would state the heart health benefits of drinking the product. It is possible that the tide would change again if the claim that drinking is implicated in breast and other cancers becomes more widely known.

Bud Light

A couple of days ago, USA Today, had a story about the top three beers in America. Budweiser is no longer in that category. Bud Light is still number one, Coors Light is number two and Miller Lite has supplanted Budweiser in the third spot.  It is fitting that this change has happened since Miller was the first brewery to produce a lower calorie beer.

The article also mention that people are drinking less beer. Craft beer has done well because people are spending more even if they are drinking less. However some of the bigger craft breweries such as Boston Beer have lost market share. Younger people are switching from beer to spirits. Overall consumption rates are steady .

It is interesting to me that the top three beers are all low-calorie.  Here is a post from my old blog about the calories in beer. A Jaffa Cake is  named after the Jaffa orange, has three layers; sponge cake, orange jelly and chocolate frosting.

The picture of the men shows the potential consequences of over consumption of beer.

December 4 2008

How Many Calories are in a Beer?

Alan, of A Good Beer Blog, provides a link to a British site that will calculate the number of calories in an alcoholic drink and then compare the number to equivalent amounts of food. As I mentioned  two days ago American beers do not contain ingredient or caloric information. The site, Radio 1 & 1Xtra’s Alcohol Experiment is fun and the food items that they use as comparisons are not American food so that is interesting.  I don’t know what  a jaffa cake is although the picture looks like a chocolate glazed doughnut. Beer seems to be the highest in calories with a mixed drink being a close second.

Whisky Tax Break

In 1976 Congress created tax differential for small brewers. The tax rate at that time was $9 a barrel for large brewers; small breweries that produced less than 2 million barrels paid $7 on their first 60,000 barrels.

When 1991 legislation increased the overall tax rate to $18, legislators retained the small brewer’s differential. The recent tax bill reduced taxes for both small and large brewers while maintaining a reduced rate for some brewers. The new tax bill also changed the rates for distillers, creating for the first time a differential rate for craft distillers. For a two-year period, the excise tax on distilled spirits will be only $2.70 per proof gallon for the first 100,00 gallons a year. The standard rates is $13.50 a proof gallon.

Craft distilling, modeled after craft brewing has emerged as a niche market in the past ten to fifteen years. There is a trade association for this segment of the distilling industry. The American Craft Spirits Association “is a registered non-profit trade group representing the U.S. craft spirits industry.” To be a member you must “annually produce fewer than 750,000 proof gallons removed from bond.” That is equivalent to 2.8 million liters.

Of course, most distilling is done by mega global corporations. Diageo is the world’s biggest whiskey producer with $16.8 billion dollars in sales. Their production of Johnnie Walker, just one of their brands, was 156.6 million liters in 2016.

The fact that the tax legislation represented a joint effort between large, and small brewers as well as craft distillers and the distilling industry overall is a departure from previous lobbying efforts. In the past, legislators have seen distilled spirits and beer as distinct products and have formulated tax rates separately, usually choosing to tax  distilled spirits which has a higher alcohol content at a higher rate. Localities today see both craft beer and craft distilling as engines of development and want to encourage this activity. In post- industrial America where we manufacture very little,  beer and whisky are still made in the USA.

 

 

 

 

Re-post: The Road from Repeal: The Three Tier System

As a followup to last week’s post about the impending tax legislation and it’s effect on the brewing industry, I am re-posting a blog from December 2008. At that time, in honor of the seventy-fifth anniversary of the Repeal of Prohibition, I wrote a series of posts about  Repeal and it’s aftermath. This one was about the three-tier system. It is relevant to what I wrote last week because I discussed Cindy McCain and her family’s wholesale liquor business. I wrote about that in the context of John McCain’s run for president. As I mentioned last week, you can probably draw a straight line from Hensley & Company to McCain’s support of the tax legislation.

The Road from Reform: The Three Tier System.

Prior to Prohibition distribution and sales of beer took place in variety of ways. Many brewers owned saloons which functioned as retail operations. The brewers supplied their beer to the saloon keeper.  Shipping brewers who operated on a national level maintained distribution outlets at various railroad stops. Although there were different federal fees for wholesale and retail dealers as well as excise taxes on brewers there was a lot of blurring of the lines between these different areas of the beer industry. Brewer ownership of saloons was the most problematic example.

As the federal government contemplated the return of legal liquor in 1932 and early 1933, alcohol advocates argued for a very distinct separation of production, wholesale distribution and retail sale of alcoholic beverages. Thus they established the three-tier system. Under federal law a brewer can not be the wholesale distributor of their product or the retail seller. Some aspects of this 1933 legislation had to be altered to allow the opening of brew pubs.

One outcome of this legislation was the development of a large group of beer wholesalers. Since 1938 they have had a national organization, the National Beer Wholesalers Association (NBWA). There are 2,750 wholesalers. This year the focus of the organization has been celebrating the 75th anniversary of Repeal as well as continuing to pursue permanent repeal of the estate tax, a rollback of beer excise taxes, prevent alcoholic equivalency labeling and avoid paying for public service announcement against under-age drinking. In the past leaders of the NWBA have advocated a reduction in the minimum drinking age.

Cindy McCain, wife of recent presidential candidate John McCain, is heir to one of the largest beer distributors in the country. A New York Times article in August 2008 examined the role of her family business in Arizona politics. Hensley & Company is the third largest Budweiser distributorship in the country. The mega breweries, Anheuser-Busch, Miller and Coors, have all achieved their dominance partly through creating deep and wide-spread distribution networks. Budweiser’s are the deepest of course. It is this distribution capacity and its resulting shelf space that InBev desired to purchase. It will be interesting to see if they use it to continue to sell Bud or to attempt to place some of their other beers on the same shelves.

Cindy McCain is an absentee owner and does not directly run any aspect of Hensley and Company. All of her children hold shares in the company. Her stepson, Andy McCain is a top executive and also president of the Phoenix Chamber of Commerce. Hensley & Company makes significant contributions to local politicians and contributes money to fight any potential increases in state excise taxes. The last increase was in 1984, only the third increase since Prohibition and, at sixteen cents a gallon is below the national median of nineteen cents. Hensley & Company, of course, belongs to the NBWA and supports its federal legislative agenda. Thus some observers wondered if John McCain as president would be able to be neutral on issues that related to the beer industry. Luckily we will never have to find out. As a senator he has received more money from the beer lobby than almost any other politician.

On the state level Hensley & Company have been successful in preventing taxes increase even when they have been proposed to help finance early childhood education or pediatric hospitals. The company is now supporting legislation that would make any tax increase more difficult to enact because passage would require a majority  of all registered voters not just those who vote.*

The role that Hensley and Company plays in Arizona as well as the role the NBWA plays on the national scene illustrates the changed political landscape for the brewing industry in the past seventy-five years. As the brewing industry consolidated there were fewer and fewer brewers and the larger numbers of wholesalers began to play a larger role in politics. There are many more wholesalers than there are brewers, even counting craft brewers, so they are likely to be a larger political force.

* For more information on beer and Arizona politics see the Phoenix Business Journal.

 

Shipping Wine

There was an interesting article in Wednesday’s New York Times about a crackdown on interstate shipping of wine. Since Prohibition the three-tier system has existed in the liquor industry. The tiers are wholesalers, retailers, and producers. Because of this system and prior to the explosion of craft brewery, wholesalers became the biggest segment of the liquor industry.

They have a considerable amount of power and are behind the efforts to curtail interstate shipping of alcoholic beverages. Prior to the advent of the internet some interstate shipping through catalogs went on under the radar of legal authorities. The internet changed all that and it is very easy for anyone, even a minor, to click on an image of a wine bottle and receive it in the mail in a few days.

The retail tier of the three-tier systems is also changing due to the entry of big box stores such as Costco and Trader Joe’s. Amazon’s purchase of Whole Foods further complicates the landscape. It is almost the eighty-fourth anniversary of Repeal. It is not clear if the three-tier system erected at that time will continued to exist in its present form for much longer.

 

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