Columbia Acquiring General Distributors: Brewery and Consumer Fallout

On Jan. 30, Columbia Distributing announced its pending acquisition of Oregon City-based General Distributors, Inc. (GDI), and the move sent shockwaves through the industry. Columbia is one of the nation’s largest distributors, covering much of Oregon, Washington and California and working with large craft businesses like Deschutes and Sierra Nevada as well as national brands, including Duvel and Miller. GDI is a nearly century-old local company largely built on the distribution of MillerCoors products. However, in recent years, the company had reinvented itself by going after hot up-and-coming, out-of-state brands like Modern Times, Founders and Melvin.

But why is the acquisition arguably bad for the industry? Consolidation will offer fewer options for small brewers while giving large distributors more power and an uneven playing field. It might even result in some breweries ultimately going out of business, not to mention that the move puts around 165 GDI employees out of work with limited opportunities to apply for a job at Columbia. But Columbia CEO Chris Steffanci argued that the sale will be good for small beer makers.

“We believe this will have no negative impact at all to the Oregon beer landscape. Oregon is a top craft beer market in the U.S. with a really knowledgeable consumer base that appreciates local beer, quality and community. We will always be focused on providing consumers what they want and small breweries play an incredibly important role in delivering against this need. We believe in brand building and have a successful history of providing small breweries great access to all the markets we do business in.”

But small local breweries were quick to sound the alarm after Columbia announced it would purchase all GDI stock — a deal that was expected to close March 31. Mike Haines, co-owner of Hillsboro’s Vertigo Brewing, tweeted, “Guess who will not be getting my nomination for beer wholesaler of the year award?” If there was any question he was talking about the sale of GDI to Columbia, a follow-up tweet tagging GDI part-owner/vice president Jim Fick said this: “I am so done. @jpfwa Enjoy your money. I suspect we will be out of business in a bit. #desertiving”
Soon thereafter, Vertigo began clearing out its packaged beer in 22-ounce bottles by posting on the brewery’s Facebook page. “Our loss is your gain. We are in between distributors and have just bottled a lot of beer.”

Fick and chief operating officer Steve “Tiny” Irwin did not respond to tweets or interview requests for comment.

Without a distributor in play, many breweries will struggle or find it impossible to get their product to accounts, especially grocery stores. Entering Columbia’s book of brands is not necessarily an easy decision as there’s risk getting lost in the shuffle. And it doesn’t help that there’s speculation Columbia wanted GDI primarily for the MillerCoors products, not smaller breweries’ beer such as Vertigo.

GDI and its owners have had a rough go of it; in 2015 the distributor was nearly shut down when Teamsters Local 162 went on strike. This led General to bring on new staff in what looked like a union-busting effort. After the ashes settled, the company rebranded under the name GDI and began picking up new out-of-state breweries on the bubble. This put some small brands that had been with the distributor in an uncomfortable position, causing some to jump to other distributors before the recent acquisition.

The big question now is whether GDI’s small breweries will have the opportunity to jump ship or remain and transition to Columbia. Steffanci, Columbia’s CEO, stated that breweries “can choose any distributor that meets their needs and Columbia has no intention of holding brewers wishing to move their business.” However, GDI is reportedly demanding that any brewery that doesn’t want to stay on with the move to Columbia must purchase their distribution rights back from the company.

Dave Marliave, head brewer and co-owner of Flat Tail Brewing in Corvallis has found himself entangled in this acquisition. “Columbia and GDI have remarked on several occasions, publicly and privately, that brands will not be held hostage and can make their own choice as to whether or not they would like to transfer to Columbia, transfer to a different distributor or return to self-distribution,” said Marliave. “What they aren’t saying is that if a brand chooses any option other than signing with Columbia, they’ll have to pay for it. We are free to make our own choice in the same way a homeless man on the street is free to live in a mansion. All we have to do is come up with the money.”

One brewery owner who wished to remain anonymous added: “The valuations of multiple brands have been unreasonably high. Despite showing a sales loss in 2017, GDI has asked … for a multiplier of 3.5, AT LEAST. This makes it virtually impossible for independent brands to return to self-distribution or move to small, independent distributors, as the valuations are so high.”

Breweries have also been placed under a tight deadline. Owners had until April 1 to decide before their rights were transferred. Smaller, nimbler breweries that aren’t based in Oregon may pull out of the market for at least one year to end their distribution contracts. Some may seek to team with another distributor in purchasing back their distribution rights if they can afford it. For now, the system seems to favor large corporations and we’ll have to wait and see how that will ultimately affect both breweries and consumer choice.  •

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