Beer Marketer's Insights - Walmart Steps Up Pressure on Bevcos to Direct-Ship, with Poppi Acquiescing but Lemon Perfect Saying No; Spotty Performance of Beer Networks Seems to Be the Issue

It's a tough world out there at retail. At a time Congo Brands is struggling to appease national network of wholesalers who're indignant about its direct shipping of some items to Walmart chain, the gigaretailer has been stepping up pressure on other bevcos to drop DSD in favor of direct shipments. Poppi gut pop soda brand seems to be among latest to acquiesce, accepting big expansion offer with hope of returning customer to DSD in future, even as Lemon Perfect has declined at cost of having to exit retailer for now. From what we hear, other brands are feelin' the heat too. Tho Walmart has history of being skeptical about DSD, issue seems to have gained more prominence under its pantry chief of past year and a half, Melody Richard, ironically a former Coca-Cola exec who once ran the Walmart/Sam's Club acct. Speaking at Beverage Digest's Future Smarts conference last Dec, she professed to have open mind about DSD distribution, saying, "We don't have a specific preference one way or the other, whatever is best. I grew up in the DSD environment" (BBI, Dec 27). Of course, it continues to rely on red, blue and white systems for most classes of NA bevs, even tho DSD absorbs margin that might be used to lower shelf price to consumers. But, said one bev exec who's been in recent Walmart meetings, retailer's patience seems to be running out with spotty performance of the beer networks in NAs. "What Walmart has trouble with is that, outside the Coke, Pepsi, KDP and Nestle networks, you have some great distributors and some really poor ones. The poor ones with low service rates have really ruined the day for the good ones. So Walmart just said enough, and they're not going to split distribution." By migrating away from DSD, they also get benefit of having fewer trucks stopping at stores, even as chain's mgrs feel they can get inventory to shelves and coolers on their own.For bevcos that have worked hard to assemble and incent national DSD networks, it puts them between a rock and a hard place. At Poppi, the lure was to move from functional set to higher-velocity main aisle, while also expanding from about 800 stores to 2,100, from what we hear. So it's accepted direct-ship offer while communicating move to wholesalers and abiding by contract terms to compensate them, in hope of returning to DSD at future date when brand is national within chain and demonstrating success. The fear is that "if we said no, people have long memories," a Poppi exec told us. While Walmart doesn't like to "Swiss cheese" its network with mix of DSD and direct service, it does appear to have retained tie to one of Poppi's strongest DSD partners, Big Geyser in NY.From what we've heard, Lemon Perfect was offered similar prospect of move from functional to water aisle, along with increase in footprint, but decided to pass on opportunity as not worth undermining wholesalers' commitment and loyalty. "We decided not to take the opportunity," per one Lemon Perfect exec. So it's exiting chain for now.Tho some wholesalers are frustrated at Poppi decision, several gave it credit for at least being upfront about it. One of the issues simmering with Congo, as reported here in recent months, is that marketer of Alani, Prime and 3D Energy hasn't always acknowledged these activities, tho it's lately saying it's working at improving communications with the network.

Walmart Steps Up Pressure on Bevcos to Direct-Ship, with Poppi Acquiescing but Lemon Perfect Saying No; Spotty Performance of Beer Networks Seems to Be the Issue

Publishing Info