THE GIST
An unexpectedly chaotic start to Reyes Beverage Group’s entry into Texas has turned into a public relations headache for the nation’s largest beer wholesaler. Delayed deliveries and out of stock shelves have caused ripple effects—including lost revenue—for breweries, bars, and stores.
With its purchase of Capitol Wright Distributing late last year, Reyes added 16 million cases of beer volume to its books via the Lone Star State. But beginning in March, the company frustrated retailers and members of the public by missing or delaying deliveries around the Austin area. The problem led to the unavailability of popular brands at bars and stores such as Lone Star, Shiner Bock, and even Guinness in the leadup to St. Patrick’s Day, one of the biggest beer sales days of the year. Texas beer industry professionals say staff turnover among the company’s delivery and warehouse teams was to blame. A Reyes spokesperson did not respond to specific questions about delivery mix-ups, but did issue a statement that blamed “unexpected issues” and mentioned a “warehouse reorganization” that has since been completed. The company also added that a job fair planned for April 5 and 6 has 300 RSVPs.
Sales losses can be particularly painful right now with bars and restaurants still working to recover to pre-pandemic levels. Last month’s delivery snags were especially difficult as some retailers tried unsuccessfully to stock up for anticipated crowds for St. Patrick’s Day, South by Southwest, Rodeo Austin, the Country Music Awards, and spring break.
“This is just the ultimate hiccup,” says Matt Cox, beer buyer for Brass Tap beer bar in Round Rock, Texas. And in Texas—the country’s second-largest beer market—such issues have an outsized effect on beer brands, bars, and shops that are missing out on sales during a critically busy period. (Last year, about 13% of the beer volume sold in the U.S. was sold in Texas.)
Cox considers himself lucky: At worst, his bar’s orders through Capital Reyes came in on Saturday afternoons when they were anticipated on Friday, and sometimes he didn’t receive the full amount of beer he’d ordered. He also describes seeing empty grocery and convenience store shelves where beers distributed by Capital Reyes would normally be shelved. Some retailers publicly blamed the company for such instances.
“There were people just north of [Austin] in Georgetown and Leander who weren’t seeing any orders for multiple weeks. Nothing. We were at least getting beer,” Cox says. Meanwhile, some breweries needed sales representatives to work extra hours to try to placate exasperated retailers who couldn’t get orders filled.
Reyes’ statement acknowledges difficulties without specifying their extent.
“Capital Reyes and the entire Reyes Beverage Group organization holds itself to high standards when it comes to market service levels, and we have taken concerted action to address unexpected issues that arose last month, in addition to responding to incredibly strong demand for our suppliers’ products,” it read.
WHY IT MATTERS
While the worst of those delays appear to be in the rearview, consequences continue to reverberate. For Capital Reyes, the fact that consumers couldn’t get some of their favorite beer brands is far from starting off on the right foot in Texas.
Trackable sales figures through market research company Circana (formally IRI) weren’t available for Austin specifically, but a peek at state-wide figures show how stocking issues in Texas’ fourth-largest city (and 11th largest in the country) could have had an impact in chain retail:
Most notably during the week of March 12, there was a volume decline of -10% in grocery, convenience, and bix box stores among Mexican beers imported via Constellation Brands, the gold star of the Reyes portfolio. Brands in the Corona (-12%) and Modelo Especial (-10%) portfolios had volume losses that were far out-of-line with national trends (+1%) and a blip amongst week-to-week upward trajectories for the brands. Volumes returned to normal the following week.
Similarly, some craft brands handled by Reyes that may typically get a St. Patrick's Day beer category bump saw decreases beyond what may be expected during this time, including Yuengling Traditional Lager, New Holland Dragon's Milk, Leinenkugel’s shandies, and Revolver Blood and Honey American Ale.
These points offer clues of an impact, but it’s impossible to know the full extent of sales losses due to disruptions in Austin.
The spotlight is an unusual place for a distributor to find itself, as such companies generally operate behind the scenes to deliver beer and quietly restock shelves. Yet Reyes wields enormous influence in beer sales nationally, particularly in the country’s largest beer market: California. With its entree into Texas, it hoped to extend that reach to the country’s next most critical territory. Some see its early stumbles in Austin as nothing more than a transitory, staffing-related blip, while others read it as evidence of a deeper culture clash.
The timing for such a dust-up couldn’t be worse, as distributors broadly have been under the regulatory microscope recently for potential anti-competitive practices and antitrust violations. (Beer Business Daily characterizes all this attention as “unprecedented federal scrutiny.”) Reyes is not the subject of the antitrust probe, however, given this legal microscope, now is the time for beer distributors to show that they play a vital part in a modern, functional alcohol business. Wholesalers have long defended their role, which the National Beer Wholesalers Association says is critical to “the state-based system of alcohol regulation that works to keep communities and citizens safe while encouraging healthy competition and a robust marketplace.” What’s played out publicly in Austin—leaving angry bars and drinkers in its wake—hardly looks like this ideal, robust marketplace.
Even Austin beer drinkers who normally wouldn’t think about distributors found themselves probing one for what is likely the first time:
The issue is being discussed on the Austin subreddit.
Local news station KVUE aired a segment about Capital Reyes’ beer shipment delays in central Texas on March 14.
A photo posted to Instagram two weeks ago by the blog Craft Beer Austin appeared to be taken at Draught House bar in Austin, which had hung a sign informing the public that the bar was out of Guinness, stating: “Blame Capital Reyes & their city wide fuckery.” Comments on the post from at least one retailer and from the public expressed similar frustrations, with a characteristic comment reading: “They are severely dropping the ball all over Austin!!!! Sucks!!!!!” The account for 1844 Liquor Store in Brenham, Texas commented: “Yeah they are a fucking joke. We have gotten like 1 delivery so far.”
The furor appears to have died down some as March came to a close and delivery schedules began to normalize. At least one brewery—and no doubt Reyes itself—seems eager to put the mess in the past. The distribution company wouldn’t have become as large and successful as it has today if it weren’t capable of managing complex operations in multiple states.
“They’re making significant progress meeting orders and we have every reason to believe things are getting better,” says the brand manager for a Texas craft beer brand distributed by Capital Reyes, who asked not to be named due to the sensitivity of the situation. “We all recognize this has been a more challenging time than was anticipated but our brewery in particular, a very well-established one in the state, we have the utmost confidence in our resilience and in the track record of Reyes as well.”
But Cox says the difficulties last month have made him wary about how Capital Reyes operates. He says he’s heard from other bars’ staff that the company wants to reduce the time its drivers and representatives spend delivering inside bars and restaurants, and that Reyes would prefer for beer buyers to place orders through its online portal, which is a process Reyes uses in at least some of its other states. (Cox’s bar still gets a weekly visit from its Reyes representative.)
“I hear they’re trying to have bars and restaurants do all online ordering. If it does, I’m not ordering from them. … I don’t mind sending a text every now and then but if it’s punching things in constantly, I don’t want that,” Cox says. “Reyes is one of the biggest companies in the nation, but maybe they don’t understand how things work down here in Texas.”
Words by Kate Bernot