Bennett Glazer (left) is the chairman and CEO of Glazer's and Shelly Stein is the president and CEO. DMN photo by Nathan Hunsinger
Source: Dallas Morning News
Date: Dec 17, 2011
By: Brendan Case
On the floor of a Farmers Branch warehouse full of alcohol, workers in pint-size forklifts beep their horns and dodge each other in a scene that looks like a cross between a traffic jam and a ballet.
Wheeling down aisles lined with 22-foot orange and blue stacks, they pluck products from shelves holding whiskey, rum, gin, vodka and tequila. There’s also a climate-controlled area for wine.
Next stop for the merchandise: a cat’s cradle of overhead conveyor belts, all long avenues and hairpin turns, humming, rumbling and squeaking. Electronic scanners route the merchandise onto inclined conveyors, which carry the cases back to employees at ground level who load them on delivery trucks into the wee hours.
“They’ll probably be done about 3:30 or 4 o’clock in the morning,” said Derek Morrison, North Texas regional manager for the warehouse owner, Glazer’s Distributors. The warehouse — one of about 40 that Glazer’s operates — typically serves between 900 and 1,100 customers per day, moving about 250,000 bottles a night — and 500,000 during holiday season.
That might sound like a lot, and Glazer’s, which is family-owned, already ranks as one of the largest beer, wine and spirits distributors nationwide. But the company wants more — quite a lot more, in fact.
At corporate headquarters, a new team of executives headed by former investment banker Shelly Stein has been working with longtime family leader Bennett Glazer to launch an expansion strategy. Glazer’s has been buying up smaller distributors, expanding its U.S. footprint and eyeing Latin America, the Caribbean and Asia for potential international expansion.
The firm’s $3.5 billion in annual sales makes it one of the largest privately held companies in the Dallas-Fort Worth area. Additional acquisitions are likely, Stein said.
“We will look at other states,” he said. “We will look at distributors within the states we’re in. And we’re very focused on international.”
‘Matter of survival’
Any acquisition entails risks and possible downsides, from job losses to clashing corporate cultures to overly optimistic financial assumptions. But for alcoholic beverage distributors — sandwiched between global suppliers and large retail chains — bulking up is “a matter of survival,” said Jeff Cioletti, editor-in-chief of Beverage World, a trade publication.
“Increasingly the retailers are the ones with the most leverage, just by their sheer size and scale,” Cioletti said. “To make a level playing field, the distribution tier has to grow and consolidate and find greater efficiencies because their profitability per case has shrunk as retailers have put greater demands on them.”
Larger networks also help distributors woo large suppliers such as Diageo (home of Johnnie Walker, Jose Cuervo and Guinness, among others); Pernod Ricard (Chivas Regal, Absolut, Kahlúa); Beam (Maker’s Mark, Courvoisier); and Bacardi.
A wave of consolidation in recent decades has led to a distribution business that’s increasingly dominated by a handful of players, including Glazer’s.
“It’s like Pac-Man: In state after state, the big guys pick up the small guys,” said Seymour Leikind, a consultant who specializes in alcoholic beverage marketing and distribution. “I do not believe in this environment one can really stand still if they want to stay around.”
Glazer’s tried a different path just a few years ago when it explored a deal with Miami-based Southern Wine & Spirits of America, the industry leader in annual revenue, with about $9 billion.
“We were roughly one-third the size of Southern,” Bennett Glazer said. “I felt like we needed to look at our options because we were at a disadvantage.”
The two companies discussed a joint venture and a merger, Glazer said.
But “after a year and a half and millions of dollars’ worth of attorneys’ fees,” the companies parted ways in 2009 after failing to reach a deal, he said.
Harvey Chaplin, Southern’s chairman and chief executive, declined to comment about Glazer’s.
So, Glazer’s decided to go it alone, starting the latest chapter for a company that traces its roots back a century.
Louis Glazer and his wife, Bessie, moved to Dallas in 1909 and opened Jumbo Bottling Co., which distributed flavored soda from the back of horse-drawn wagons, according to company lore.
Glazer’s is currently owned by descendants of two of Louis and Bessie’s sons, Max and Nolan, who saw an opportunity in distributing alcoholic beverages in Dallas as Prohibition was repealed in 1933. They expanded statewide later that decade.
The company grew, acquired competitors and expanded into other states, reaching $100 million in sales in the 1970s. It was doing about $700 million in 1996, when Bennett Glazer, Nolan’s son, became head of the family holding company.
He embarked on an acquisition spree of his own, working with Jerry Cargill, who was president of Glazer’s from 1999 to last year.
Stein is trying to do something similar, and he’s gone shopping since taking over in July 2010 as CEO of Glazer’s Distributors.
Just last month, Glazer’s bought a Tennessee wine and spirits distributor, expanding into its 13th state.
Around the same time, Glazer’s made its largest acquisition ever, buying Halo Distributing Co. Based in San Antonio, Halo distributes for MillerCoors and other beer suppliers such as Heineken USA, Diageo Guinness USA and New Belgium. Halo’s annual volume of 6.5 million cases of beer pushed the Glazer’s beer footprint to 28 million cases a year (worth about $530 million in revenue).
So far, the company has paid for its acquisitions through its cash flow and short-term bank borrowings, Stein said. Glazer’s has an investment-grade credit rating from Fitch Ratings, according to documents provided by the company. (Fitch declined to comment, saying the rating was private.)
Stein and his team — many of them former investment bankers and private equity execs — have also sought to bring a more data-driven, quantitative approach.
“We now understand the profitability not only of all our suppliers, but we understand it by convenience store chain, by grocery store chain, by package store,” he said. “Nobody was looking at the business that way.”
Earlier this year, Glazer’s began a four-year project to install an SAP software system to manage information comprehensively within the company and with suppliers.
Stein envisions an international expansion within the next five years, using its supplier relationships and logistics capabilities as calling cards.
The company wouldn’t try to go it alone abroad but would seek a partner to work with, Stein said.
“All the suppliers we deal with, they all have products in many foreign countries, so why should I only be here?” he said. “We’ve spent a lot of time looking at Mexico. We’ll look at Latin America. We’ll look at China. We’ll look at India, and other places we believe are growth markets for our products.”
Will it all work?
The business world is littered with companies that faltered after bringing in high-profile managers from outside. Even more common are family businesses that fizzle after a generation or two.
That’s not news to 66-year-old Glazer.
Strong financial performance is the key to survival, he said, since it provides family shareholders with a good return. Also the company employs 6,000 people, including 1,000 in the Dallas-Fort Worth area.
“I think 10 years from now we will be one of the big survivors in the alcoholic beverage industry,” he said. “We’re already a major player, but we’ll be a bigger major player.”
Assuming, that is, that he and Stein can pull off their expansion strategy.
Stein said that after years as an outside adviser to companies as an investment banker with Bear Stearns and Bank of America Merrill Lynch, he’s having fun — but sleeping less.
“I definitely sleep less now than I did before,” he said. “I used to go to sleep at night no matter how difficult, how complex the deal, I could tune it out. Now I dream about the business all night.”