On the Road | Nashua, New Hampshire: The King of Beer Distribution

Tags: Distribution

Warehouse at Bellavance Beverage Company

Inbound Logistics Senior Writer Joseph O'Reilly visits Bellavance Beverage Company, a Nashua, N.H. beer distributor.

Family and business mix about as well as conflict and resolution.

Often one is a consequence of the other. That makes exceptions to the rule all the more remarkable.

I found myself in an exceptional position when Bellavance Beverage Company, a family-owned Nashua, N.H., beer distributor, became a destination on my itinerary. No less extraordinary, my site visit was the direct result of an Inbound Logistics "kin-ection."

IL's Print/Web Production Manager Shawn Kelloway was my gatekeeper to the Bellavance family business—as well as photographer and wickedly awesome interpreter in "the 'Shua."

In ethnography, local knowledge is a powerful tool. It opens doors and closets suspicion. To get inside Bellavance's distribution facility and gather privileged insight from Sam and Joe Bellavance was truly remarkable—without exception.

When you've been in the beer distribution business for 108 years, there's no want for nostalgia. In fact, legacy is a calling card, the family name a revered brand. That's the impression you get visiting the Bellavance Beverage Company in Nashua, N.H.

In Bellavance's lobby, sepia-toned prints reach back in time to horse-drawn carriages, wooden kegs, and buzzing saloons—to when its story begins. In 1902, Joseph A. Bellavance hitched up his wagon and started a beer and liquor wholesale business in downtown Nashua. During the Prohibition era, the company survived by peddling soda and hand-rolled cigars. Then, when The Noble Experiment tanked, Bellavance turned its attention strictly to beer. By 1954, it had acquired distribution rights for Anheuser-Busch products in the Nashua area.

Just as quickly as time elapses out in the lobby, inside the office, halls decorated with Boston Red Sox and New England Patriots memorabilia bring the story immediately into the present. Over the past few decades, brothers Joe III and Sam Bellavance have been the custodians of the business their grandfather built. They still play key roles in the company as chairman and vice president, respectively. But now they, too, have passed the reins to their sons.

Today, the fourth-generation, family-owned business is one of five Anheuser-Busch InBev wholesalers operating in New Hampshire, delivering more than three million cases of beverages each year to local grocery chains, convenience stores, and restaurants.

In 2004, Bellavance relocated to a new 79,000-square-foot warehouse and office space to accommodate business growth. Approaching the facility, nestled at the end of a quiet cul-de-sac surrounded by thick groves of sweet-smelling pines and manicured lawns, you immediately know where you are. The entrance is marked by a "BBC" totem emboldened below with Anheuser-Busch's "A and Eagle" brand. In the parking lot, license plates are bolder and less subtle: BUD4YOU, BUDWISR, BUDMAN, and LOU-P.

First appearances always leave an impression. But like a bottle to its beer, the outside is merely vanity—it's the inside that really counts.

Manic Mondays

On a Monday morning, the Bellavance warehouse is a flurry of activity. Electric-powered forklifts hum in and out of racks stacked with countless brands of beer in equally variable configurations: six-packs, 12-packs, 18-packs, 30-packs, and a mix of both cans and bottles. Case-packed pallets in various stages of wrap sit in the middle of the warehouse as drivers and supervisors mill around.

The main 50,000-square-foot warehouse space is bright, airy, and cool. Monitoring climate control is important as season-to-season variances, both inside and out, can pose problems. For example, the warehouse can't be too cold in the summer or the cardboard packaging falls apart in the humidity, explains Sam Bellavance. A refrigerated draught room—filled with half barrels, quarter barrels, and "sixes"—is located in a recess off the main warehouse. It is always kept at 34 degrees.

Because Bellavance is closed on the weekend, Mondays are manic. It's the only time during the week when loads aren't built the night before, so salespeople are busy calling in orders and drivers scurry around, picking product from the racks and building pallets. When drivers finalize their loads for outbound delivery, checkers compare pallets with invoices to ensure accuracy. Complete loads are then shrink-wrapped and positioned for delivery on one of Bellavance's 21 trucks.

To help workers speed the flow of inbound and outbound inventory, the warehouse is separated into two different sections. "It's divided between holding racks, vertically categorized with different cases of canned and bottled beers, and supply stock that builds up as new product comes in from the brewery or its off-site DC," says Sam Bellavance.

Racks, too, are set up in specific patterns so drivers know where to go to build their orders. The system operates much like a soda vending machine. Pickers pull SKUs from the racks to build daily loads and the mountains of neatly stacked floor stock on the other side of the warehouse are used to replenish the racks as demand dictates.

This U-shaped distribution flow flexes with inbound and outbound shipments. Bellavance pulls about seven to 10 trailers a day from the brewery and another DC. Tractors come in, unhitch trailers to offload, pick up empties, then return to the brewery for another trailer. Because Anheuser-Busch InBev's Merrimack production facility is located nearby, the distance and time it takes to move assets and inventory is negligible.

The distributor also frequently sources product from overseas, especially after Belgian brewer InBev's acquisition of Anheuser-Busch in 2008. "The increase in import draughts makes it easier for us to compete in the trade," says Sam Bellavance.

But it brings challenges, too. A typical container holds about 300 kegs and Bellavance rarely has enough demand to command a full box. So it shares space and costs with other distributors.

"We bring in one weekly container full of Heineken from Boston. We also import Stella, Becks, and Bass, among others. We split loads with other wholesalers on low-selling beer," he adds.

Bellavance is also responsible for returning barrels to point of origin, so it stores them in the warehouse until there are enough to fill a container and ship back. "A lot of money is tied up in these empty barrels, especially if you consider they may only turn over three or four times a year," Sam Bellavance explains. "We have to account for all assets in the system because we get charged $55 a barrel for each short unit. So we keep track of them."

A True Taste Test

The wholesale beer industry is all about rotation—in the warehouse and on retail shelves. Making sure older, but still-good beer moves first is important, so Bellavance drivers and salespeople are especially vigilant when visiting customers and checking inventory.

Driving along Amherst Street, a commercial strip northwest of downtown Nashua dotted with chain restaurants and industrial parks, you have to try hard to miss a Market Basket supermarket. Within a three-mile stretch there are three stores. The full-service New England grocer is among the many local chains Bellavance delivers product to.

In store #39, aisle #18—Market Basket's imported and domestic beer section—Bellavance's presence is all around. A large banner hanging from the ceiling reads, "Welcome to Market Basket's Beer and Wine Department." The signage was designed and printed by Bellavance's in-house marketing department.

A wide assortment of floor stock is neatly stacked in a mid-aisle island, hemmed in on one side by refrigerated beer displays, and on the other by shelves of room-temperature product. Market Basket sells every type of brand, in every size, quantity, and packaging you can imagine. Six-packs and cases, and all counts in-between, are stacked horizontally and vertically. Familiar long-neck Bud Light bottles and tubby 24-ounce keg cans of Heineken compete with exotic names such as Ipswich Mix, Shoals Pale Ale, and Magic Hat.

Beer is the only product grocery stores sell where the manufacturer does not pay for shelf space. "It's a free market, and the wholesaler positions products according to supply and demand," says Sam Bellavance. The wholesaler helps by drawing up CAD-like schematics for how the store should organize product in its display cases.

In the past, chain stores employed beer managers to keep track of inventory and place replenishment orders—but that is no longer the case. In the store, Bellavance's salespeople, merchandisers, and drivers manage the inventory and work together to rotate beer so the freshest product is in back and older beer is in front.

"The whole business is built on trust. Customers establish a baseline volume of inventory they need for the week, and trust us to control it. The volume varies week-to-week, but day-to-day orders are generally standard," Sam Bellavance adds.

Mom-and-pop shops generally want more control over inventory, but larger customers leave that to Bellavance. The wholesaler restocks product twice a week, on Monday and Friday, at most of its chain customers; smaller stores take deliveries once a week. For larger accounts, salespeople visit every day to keep track of what is selling and what isn't.

"The salespeople control their own demand and inventory needs. It keeps customers lean because they aren't sitting on old stock and eating costs," he explains.

Beyond making sure customers have inventory on hand, Bellavance's greatest challenge is keeping product fresh. It's a policy that drives the industry from production to distribution to sale.

Anheuser Busch pioneered "born-on" dating in the mid 1990s as an inventory management, quality control, and marketing tool. "Beer is held to very tight standards, stricter than the codes for milk," says Sam Bellavance.

For Bellavance, the primary objective is to ensure out-of-code beer is removed from the supply chain—and that generally means product that is more than 105 days old. It's a strict rule that Anheuser-Busch InBev adheres to. Wholesalers can lose their distributorships if they fail to comply. So Bellavance carefully monitors and inspects store stocks to confirm product meets these requirements.

Customers often want to order larger quantities at volume discount, which means the wholesaler has to be particularly diligent keeping track of beer and holding customers accountable. When beer is out of date, salespeople and drivers bring it back to the facility, where a third-party service provider removes and dumps the product.

"Salespeople are responsible for their accounts," explains Sam Bellavance. "If they pick up old beer, the buyer pays for it. If buying in volume becomes a problem because customers can't sell it, we won't sell to them. We have to be vigilant. We have to protect our product and brand."

Imports have fewer restrictions because preservatives are added to ensure quality isn't compromised during transport. Their shelf life can extend up to one year. For domestic beer, Bellavance usually carries about one month's worth of inventory in the warehouse, and sticks to a first-in, first-out system for pushing product through. If beer dwells for 45 days, the distributor has to report it to the brewery before it moves.

Flexing to Demand

Tuesday mornings in the Bellavance warehouse are markedly less chaotic. Loads for the day's deliveries are built the night before and trucks leave the facility early in the morning. After the rush, a peculiar silence swallows the space.

A few employees stir about, positioning inventory and unloading a trailer that just arrived from the brewery. Blocks of floor stock that towered over the facility on Monday have eroded noticeably in 24 hours. As the week elapses, these cathedral-like aisles slowly collapse, feeding racks ready to fill the next day's orders. Then the cycle begins all over again.

Beer distribution is all about managing ebb and flow. Bellavance's distribution footprint allows it to scale up and down as seasonal demands vary or as new products come online. Still, the business is very much demand-driven. The distributor's sales force and truck drivers work in overdrive to understand the customer's preference, the retailer's need, and the brand's appeal. Then, Bellavance's warehouse flexes with, and delivers to, these demands.

The wholesale beer industry is unique because it's countercyclical and demand is generally uniform. While manufacturers such as Anheuser-Busch InBev have felt the impact of the economic downturn, wholesalers have been more insulated. Patrons may frequent establishments less often in favor of home consumption, and therefore spend less, but Bellavance reaches the end user through one channel or another. I saw this firsthand—at Applebee's and in Market Basket.

The industry is not without its challenges, however. As much as consolidation plays a key role inside the warehouse, it's changing the manufacturing and distribution landscape, too. Anheuser-Busch InBev and Molson Coors Brewing Company are among the most recent and notable mergers and acquisitions in the United States. Contraction has been equally rampant in the wholesale space.

When Sam Bellavance started in the business, 22 wholesalers operated in New Hampshire. Today there are seven—Anheuser-Busch InBev has five; Molson Coors operates the other two.

Distributors grow by winning new beer contracts and acquiring other wholesale business. It's the nature of the game. But being a local link in a global supply chain requires an understanding of customer tastes and an appreciation for the brand—the reputation and quality it stands for.

That's why for global and domestic beer manufacturers and Nashua retailers—large, small, and in between—Bellavance strikes the perfect balance.