ROBERT BRADFORD
One such role model in the Beverage Alcohol industry is born-and-bred New Englander, 58-year-old David J. Roberts, both the current President of WSWA and the recently-installed Chief Executive Officer of The United Group, A. Raymond Tye's expansive new, one-year-old West Bridgewater, Massachusetts-based umbrella holding and management company for all United's affiliated businesses, including the flagship giant wholesale distributorship, United Liquors, Ltd..
Ask any of the players up and down the United ladder about Dave Roberts and the reaction is invariably an immediate and spontaneous response of respect and undisguised affection.
"Well, I certainly appreciate hearing that nice things are said about me," Roberts observes off-handedly, "but, the fact is, I'm a lucky guy in that this is a company that breeds goodwill. It's a place that allows you to do that. You can have the greatest intentions, yet a lot of companies don't let you get this personally involved. But Ray Tye and the working force here have always believed that this business is all about people. And it is. Of course, a lot of people can say this and talk about it, but don't really live it or believe it. Someone once told me a long time ago that in this business your reputation is the one thing that only you will earn or not earn. And it's something that's all about the way you deal with people."
Roberts has been earning his own exemplary reputation with a resume of impressive credentials and teamwork, dating back to his years as an All-State Connecticut high school football star. What position? "Fullback, what else?" he responds with a laugh. "It's the player who beats his head against the wall. In fact, those were still the days where you went both ways, so I was both a fullback and middle linebacker. Those were the days, all right, and I've got some bad bones to prove it. We ran the old T-formation. You can't be a fullback and go backwards, you know. It's sort of what I've been doing all my life."
Dave's football continued at the University of Connecticut where he was a "Go Huskies!" collegiate football standout and earned a diploma from the School of Business in 1964.
The two years following, '64 to '66, he served as a US Army First Lieutenant, thankfully missing any action in the escalating Viet Nam conflict. Back in civilian clothes, from 1966 to 1981, he climbed the ladder in various positions at Heublein, Inc., rising from trainee to Vice President/National Sales Manager, while also picking up an MBA from Columbia University's Graduate School for Executives in Business Administration.
For the next five years, through 1986, it was onward and upward as President of Standard Beverages in Kansas. Then, in 1987, he returned home to his native New England, joining United Liquors, Ltd., where he has served as President and Chief Operating Officer for over a decade.
He is also a dedicated family man, His wife, Kathy, is a professional Career Counselor in her own right, and his three adult children, David, Stephanie, and Kristen, are pursuing diverse professions in widespread parts of the country. David, whose avocation is music, and who plays guitar in a band, is a microbrewer in the beer industry in Georgia. Stephanie, along with her husband, Karl, is in a public defender legal practice in San Francisco. Kristen, who worked several years as an instructor in the rugged, character-building Outward Bound Schools program, is currently the Director of the Elan School for troubled kids in Poland Springs, Maine. But such professional diversity and geography is no problem for Roberts. The fact is, he seems to thrive on it just as much as his children.
Few jobs could more diversely challenging than his latest appointment as Chief Executive Officer of The United Group, which Roberts was handed last year. In his present leadership position, Dave becomes responsible for the General Management and performance of all operating functions of the various United Companies, including sales, finance, administration, and operations.
What's it like being this kind of top banana, you ask him? There's a burst of laughter. "At the end of the day, Mr. (Raymond) Tye is still always the top banana," he answers with a chuckle. "I don't kid myself about that. But in terms of running the business, he's given me the responsibility of making it work, and it's a very exciting challenge."
About the concept behind the new United Group, he says this: "We actually redesigned the company two years ago. Basically, we created The United Group as a holding company for all of our businesses. Before, we sort of tucked everything under United Liquors. However, it was a bit of a misnomer because United Liquors now is clear and clean as a Massachusetts distribution business run by Michael Tye. Mike is President and Chief Operating Officer both of the United Group and of United Liquors, Ltd., and has been doing a terrific job since his return to the company over four years ago.
But, separately, we have United Beverages Inc., which is our brokerage business for the northern New England states of New Hampshire, Vermont, and Maine, and is a very significant piece of business. We're the largest broker in those three control states, which is run up there by Joe LaRocca. We also have a distribution company called United Distributing of Vermont headed by Dick Horton. And there's another North Carolina-Virginia based premium spirits and wine broker, Hannah & Dunn, LLC, where we've partnered with the previous sole owner, Worth Dunn, who's the President and Chief Operating Officer of that group. In the opposite direction, we recently divested our soft-drink business, Venture, because it did not add value to the group, but had substantial value to someone else. All this new structuring addresses the fact that we're really a multi-business company that needed each element to establish itself as a free-standing profit center."
Of no less significance to Roberts has been his just-ending term as President of WSWA. To him, it's one of the most fulfilling posts in his entire career - and one of the things he feels proudest about is being the first elected non-owner president in WSWA history. "Hopefully, there will be many more coming up through the system," he says. "Not that there's anything wrong with owner leadership, but it's nice to bring in other people who are professional managers that have their lives in this business and want to participate. It's something I hope I broke some ground for."
I spent part of an intriguing afternoon, on and off the record, tapping in on many of Dave's forthright observations about the current status of WSWA and the many fast-moving challenges the Association is facing, personal evaluations of his presidential term, and critical sea changes that lie ahead for the industry at large. Not surprisingly, a winner of Dave's stature turns out to be prudently optimistic. But we'll let him tell you himself. Here are some highlights of our dialogues.
ROBERT BRADFORD Now that you're finishing your term as president of WSWA, how would you evaluate the progress the Association has made during your tenure?
DAVE ROBERTS I'll run you through a few things chronologically. Probably the first really significant thing we've done is to go through a strategic planning process that will take us out to the year 2005. The overall goal is to strengthen our position as a powerful political and policy advocate for WSWA members. We actually went through a survey process with all our membership, and, at the top of the list, this is what they wanted us to be. Based on the mission statement of our Association, there are really five objectives involved here.
The most challenging primary objective, initially, was creating a new and different infrastructure that would have the ability to influence the political and policy objectives we were looking for. Of course, we had had a wonderful leader in Doug Metz for many years. But when he retired in 1998, we were in the position of going through a critical transition. We hired Juanita Duggan to run the Association. She was the the first key step. She kind of came right into the fire. And since then, quite frankly, we've re-staffed the whole organization. As far as infrastructure is concerned, I can tell you today that we are 100% onboard.
The second objective was to develop and execute a national, legal direct shipping solution. This, in itself, is kind of a multi-part issue. Part of it was creating a relationship with someone who could really fulfill a legal system on a national basis. And after numerous interviews, we chose Wineshopper.com to affiliate with. Peter Sisson (see interview begining on page XXX), the person behind it, is obviously a guy who's taken on the challenge to resolve a couple of things critical to their positioning and ours. Part of our agreement is that, one, they will never hold a retail or wholesale license. Their main function for us is to be actually a business builder for the total system. They're never going to disintermediate, as they say in that business, either one of us, as opposed to many of the players who are, frankly, trying to disintermediate either the wholesaler or the retailer or both in the local market. Wineshopper is committed, in every state they do business with, to go through the three-tier system, even in reciprocal states. So, the first step was identifying and creating a relationship and business agreement with a trustworthy and able partner, totally committed to this project.
RB In my Juanita Duggan interview last May, one of the top WSWA priorities on her agenda was trying to get Congressional approval of revolutionary new controls, and the first meaningful federal legislation this industry has ever known.
DR Yes, this indeed is the second piece to this puzzle of a legal direct shipping solution where there has to be national law that addresses the issue of states being able to enforce their local laws. Right now, this is pending legislation, represented by the the Hatch Amendment, Senate Bill #577. Juanita has done a marvelous job with her people, including a fly-in of over 40 wholesalers who saw about 70 senators this past February. The bill has now cleared the Judiciary Committee 17 votes to 1, and we hope, by the time your article goes to press in April, we'll have passed through the Senate. It's vitally important.
Here in Massachusetts, for example, we have numerous laws that prohibit people from illegally shipping in. But the problem is that, the way the present laws work, we don't have the ability to reach out to California or other markets and address, in a legal way, those that are trans-shipping in a non-legal fashion. And there's a clear distinction here that can't be emphasized too strongly. On the one hand, we are proponents and will aggressively pursue any opportunities for legal shipping, while, on the other, we are just as committed to closing down the issue of illegal shipping.
The third objective is to solicit in whatever way we can any tax relief for our tier, and, frankly, also for the broader tier if it's appropriate and within our power. In this tax area, there's really two issues from a wholesale perspective. One is the lag time - where we pay on domestic products the federal excise tax far in advance of when we sell the product. On imports, through bonded warehouses, we're able to delay that until the products are withdrawn. So, from a practical standpoint, there's the expense of carrying that tax for all wholesalers in America which is a significant cost factor.
What it boils down to is that we're looking for potential to ease this burden, which we feel is skewed against the wholesale tier. And we believe this potential exists in getting the support of all the players, including spirits, wine and beer, to consider a federal tax rollback. Federal taxes today are repressive, and are becoming less and less of the national budget. This is one of the few tax rollbacks that truly does affect everybody from lowest to highest.
In this tax area, there really two issues: 1 float cost relief for the wholesaler, and 2 long term issue of federal excise tax in total, be it for spirits, wine, or beer. And I would clearly emphasize that this is not about one side gaining more than the other. Whatever it is, our position is that the industry is probably served best if this is equal for all categories.
Tying into this is our interest in formalizing and strengthening our relationship with all tiers of the industry - the supplier tier for both spirits and wine, and other associations within our industry, be it the beer or retail side, as well. And we've really worked hard at that. We've had a number of meetings with all the associations over the last year. We don't always agree, but, in business, this happens.
RB This past year, we've been hearing about a number of State's Rights challenges in the areas of direct shipping and the franchise issue in Illinois. What is WSWA's position?
DR Let's start with Illinois. Every state's issues are different, so I won't be specific to Illinois. But we need honestly to look for the "root causes" of such actions and reactions. For over a decade, WSWA has been actively pursuing some form of a defined Equity Agreement with suppliers that is fair to both parties. This is the best solution in my opinion. But even within our membership not everyone will agree. It will have to be driven by a few key suppliers to make it happen.
The other State Rights challenges, in Indiana, Texas, Virginia, and New York, are all challenging the 21st Amendment rights of individual states to control the importation, taxation, and distribution of all alcoholic beverages - not just wine - into their respective states. This is a fundamental building block of the three-tier system, and WSWA has, and will continue to protect aggressively, our 21st Amendment rights. In fact, we recently hired a fulltime General Counsel for just this reason. We have filed an Amicus (friend of Court legal support document) in the Indiana case, and will participate in others. And we had over 20 other associations and advocates filing with us in Indiana.
RB What seem's to be the driving force behind these challenges?
DR The main issue is the shipping of wine. And, as of right now, we're not totally to market with our nationally-positioned Wineshopper.com legal solution, which started rolling across the country in April, with full WSWA support. And there are other people that are also delivering wines legally, whom our association supports, as well. Anyone who's shipping honestly is OK. It's the people trying to do this illegally who are the ones challenging the laws. But how can anyone at our level of the industry allow this to happen? At the end of the day, there still is the need to create brands at the store and on-premise levels, and wholesalers do this, particularly in the wine business.
RB Can you see tangible progress in this area during your term as WSWA's president this past year?
DR What I've been seeing is more changes, more challenges, and more opportunities with a good economic environment in this past year than there have been in the previous 20 or 30. As a great credit to Juanita and the WSWA Executive team, we've been able to position ourselves to address each of these issues as they've come at us. And it is changing at light speed. So, in terms of seeing progress, I'll say, yes, there's been a lot of progress, but it's a moving target.
This leads directly into another of our objectives, which has been to significantly enhance the strength and infrastructure of the WSWA organization itself. In this particular area, the gains have been huge. This gives us the power to do things politically, and is the key to ensuring that this industry is one we can be proud of 10 and 20 years from now.
RB Looking specifically at the wholesale tier, what impact do you feel all these recent supplier consolidations have been having at your level of the industry?
DR You can almost talk past tense about this in most markets. It's already had its impact. I mean there are several markets now where, historically, they might have had a couple handfuls of distributors or more, but are now down to two or three. There may be a few states where this hasn't happened, but in a vast majority, this has been driven by consolidation at the supplier level, which has motivated consolidation at the wholesale level.
In the past 10 years, or maybe a little more, WSWA has moved from close to 500 members down to 200. But is this a positive trend? Up to a point, it is. Consolidations do a couple of things. In many cases, they should create some efficiencies, and allow good wholesalers to do a better job. On the other side of that, there is a point at which consolidation becomes a weakness. But we're not at that point yet, and I don't see us moving in that direction at all.
RB Approaching the consolidation question from another specific angle, do all these consolidations portend any weakening of WSWA?
DR What we've had to do is redesign the governance of WSWA to address this. Now, every member has a director position, which has created a greater reach. And if we do this right, we will be seeing more involvement, not less, from our membership. We have also created a larger member caucus, with two seats on the Executive Committee, to be more inclusive. All of this was part of our fifth strategic objective.
One of the real strengths of WSWA, relative to any of our associations, is that, not only do we have a strong national position - and with Juanita and our staff in Washington, we're the strongest that we've ever been - but we continue to have the grassroots. And this is what works. Politically, there's nothing stronger than this. And, frankly, what has been very encouraging to me, this year, is that our membership has really been stepping up and saying: 1 We need to stand together, and 2 We need to participate personally and economically in the needs of WSWA. So much has changed from the way we ran this Association a couple of years ago. We're through the transition now.
RB What kind of impact is internet commerce making at the wholesale level?
DR We're all learning every day. Right now, Wineshopper.com is part of our solution to the illegal portion of direct shipping, which, I think, not only will create a nice business opportunity, but also significantly help build future wine business. What they're projecting is around 5% of total wine sales, which is a pretty nice number. They also, by the way, intend to move into spirits and beer over the next couple of years. This, of course, is all about business-to-consumer. But the second piece, that will be changing for all of us, is the business-to-business part of it. We're just starting to get into this and don't know all the implications yet. It's a huge challenge.
The issue is not going to be whether there's the ability to have internet support of the business. The question is how to do it in a way that still allows us to protect from sales to minors, which is critical; and sales in markets with dry counties, which is of considerable concern in areas out west. So, we have to find a way to not take a position of anti-e-commerce, but e-commerce in a way that can work in our system. And to do this, we have to be flexible enough to make it work for us. It's a balancing act. We need to balance the opportunities with the realities of what our industry represents. It's an enterprise we should be proud of, an industry that goes to great pains to work within the legal system. We think our products are healthful for our consumers, if responsibly consumed at the right age and in the right environment. But, on the other hand, it still needs to have a certain control aspect to it, and we can't turn our back on that.
RB Fortune Magazine published an article last November that questioned wholesaler acceptance of the internet initiative, mentioning nearly 300 wholesalers around the country whom they described as "sluggish" in their response to this dramatically new way of doing business. What's your view?
DR I simply can't agree with that statement. I mean, what we're now looking at is over 400 wholesale licenses that have signed up for Wineshopper. And we are now in some 45 states, as of the last count. Here, in Massachusetts, I know we have all major wholesalers signed in, and almost every wholesaler in tow. This is hardly what I'd call sluggishness. But the statement that's true is one I think I can make as WSWA's President. No one is against direct shipping. They're simply opposed to illegal direct shipping practices. It's a fine point, but it's a real point. Two years ago, we didn't have any real legal solutions. And if you don't have a legal solution, you tend to kind of black out everything.
Now, we have Wineshopper, which is really doing things right. And one of the things they said so well at a recent meeting was that, although it's taking them longer than some competitors, they're utilizing our bricks and mortar to build their system brick-by-brick the right way. So, when they come to market this spring, it will be right, it will be legal, and it will be efficient. They've gone to every single state, gathering all the information, and asking for approval. For the most part, their competitors haven't been asking; they're just shipping. All to say, Wineshoppers clearly has our unequivocal support.
But this doesn't mean that there aren't other opportunities for other people to be in this business. Hopefully, there are and there will be, seeing that quality competition leads to better quality products and services for the consumer. Here, in Massachusetts, Geerlings & Wade has a very good legal system within the areas they can cover. They're a public company, and entirely legal to the best of my knowledge.
RB Another Internet worry that's talked about is the fear that e-commerce will be putting a lot of people out of work. Is this a valid concern?
DR I don't see any diminishing work force. Someone at the end of the day has to write up wine lists. Somebody has to be tasters on new potential wine products. People have to be out there training waitstaffs and implanting the detailed product knowledge that more and more consumers are looking for.
This is where brands are made. They're not made on the Internet. They're going to be made in the accounts. You can't forget that. It's especially true with the fine wine retail accounts. Someone is working and making sure that the brands are positioned right. The same is true in the spirits business, and also in today's beer business. Maybe it's different dynamics, but the basic issues are the same. And the other thing is that we're not dealing here with something that's paper. We're dealing with cases that weigh 30 and 40 pounds. They have to get there. It's still a bricks and mortar business with transportation issues, storage issues, aging issues. I mean there are so many pieces. And this is one of the things that Wineshopper.com figured out. They realized that they could never get there without having the brick and mortar involved. That's why they came to us.
In the book business, with enterprises like Amazon.com and many of the other people who've tried to do it, they discovered they needed warehouses everywhere. So they've gone all around the full cycle and gotten back to where we are already. When all is said and done, the bottom line should be that Internet is an enhancement of our existing business without anything threatening at all. This is the perception we're working on to get done.
RB Where do you foresee the wholesaler tier of the industry heading?
DR If we look down the road five or ten years, I'm inclined to make a positive assumption. First, I'm guessing that the economy will be staying relatively healthy, and I think we'll continue to see the kind of real-time growth in the spirit business we've been experiencing the last few years. There'll be excellent growth in the wine business, and malt beverages have started to turn their nose up, as well.
All three categories are now positive. You're seeing it state-to-state. You see it nationally.
And, now, you're talking about a super-premium marketplace. Walk into any on-premise account and just look at the back bar. Look at what's selling. For those of us who can remember, I challenge anybody to close their eyes and look back at what any back bar looked like 30 years ago. At least 60% of today's bar would never have been there. The whole picture is just trading up. We're looking at more and more high-end, high-dollar, premium, super-premium, and ultra-premium items.
Just take vodka. Your topshelf Smirnoff of 20 years ago is now the mainstay. Everything below it is kind of also-rans. The low end of the business is getting smaller, not larger, generally. And look at all the brands that have been created and are doing the upper-end vodka business, including flavors. Walk into any bar today and you'll see anywhere from 10, 20, maybe even 30 top shelf brands. Ketel One, Grey Goose, Skyy, Belvedere, Stoli flavors, etc. On and on. Back in the early '60s, you only could find one, because there only was one. The same is true with tequilas, with single malt scotches, and with small batch bourbons. It's just amazing high end business. There are now ultra premium gins like Tanqueray No. Ten and Bombay Saphire. It just goes on and on. So, the industry is continuing to go through its own kind of upgrading. And the good news is that not only are the total consumption numbers starting to inch up, but, within that, the average case price and unit prices have been increasing significantly.
I truly believe that we're at a new beginning threshold of our industry. The rules that we had are changing. But, yes, we're still going to have a state-by-state business, and I will also bet, unconditionally, on still having a three-tier system in the years ahead. But it will have to change. The wholesalers have to take on more responsibility, which is part of the thing we've seen happening with consolidation.
E-commerce will be a factor, but by no means the only factor. There are many things that will be precipitating the changes in this industry. But, all things considered, it's a very very healthy environment right now, and I can only see it becoming even more healthy five years from today.
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ROBERT BRADFORD Former LIFE Magazine Bureau Chief and Pulitzer Prize finalist, Bob Bradford, is an independent wine and spirits writer, critic, product reviewer, lecturer, educator, and travel photojournalist. He is a featured monthly contributor to this publication and resides in Cambridge, MA.
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