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Interview Exclusive, Part 2: The Southern Glazer’s Deal

January 12, 2016

In the second part of this exclusive interview with the Southern Glazer’s Wine and Spirits senior executives, Marvin R. Shanken explores the future of the wine business, the timing for full integration and the long-term future for this historic deal.

Marvin R. Shanken: Southern has been a leader in the wine category for nearly 50 years. With the creation of Southern Glazer’s how are your priorities changing in wine?

Wayne Chaplin: Mel Dick built our wine business, and it was the foundation of Southern Wine & Spirits. It helped us expand into spirits and the on-premise. We will never lose that focus. Over the years, wine has been a strong growth engine for us, and it’s still very important. Today, value is being created in the wine business as it premiumizes. The above-$15 tier is incredibly strong and accelerating. There’s still a lot of consumption under $7, and as those numbers move higher, there will be more good news for distributors and brand owners. Young people are drinking a lot of wine as well, and they’re not buying inexpensive wine. So wine is a major opportunity for us in the future.

Marvin R. Shanken: For at least 15 years, I’ve heard wine suppliers say Southern is too big—that it can’t possibly represent all suppliers fairly. How have you dealt with this issue?

Wayne Chaplin: For many years now, we’ve had dedicated sales teams, both in spirits and wine, to take away clutter or conflict. We’ve built fine wine teams, craft teams and artisanal teams, and we’ll continue to expand on that. Once Southern and Glazer’s are combined, we’ll have more people in the field to ensure we’re representing all our products in the right way. Eliminating conflict is a very, very important priority.

Marvin R. Shanken: I think of myself as being in the education business more than the publishing business, and I’ve felt that way for 40 years. What are you doing to educate your sales people?

Wayne Chaplin: We want our people to have far more knowledge than our customers. We’ve put huge numbers of them through the WSET Certified Wine Educator program. We now have 11 Master Sommeliers around the country, more than any other wholesaler in the United States. To date, nearly 1,000 Southern team members have received at least Level 2 certification from the Wines and Spirits Education Trust (WSET). And more than 1,000 have passed the Court of Master Sommeliers (CMS) introductory course. We’ve also opened an incredible tasting and education center in Nevada called the Academy of Beverage and Fine Service’s New Learning Center. It’s an industry-leading service center for our customers and suppliers. We’re also using it as a resource for our employees across the country.

Shelly Stein: Glazer’s has a Master Sommelier as well, and four mixologists, as well as 1,000 team members with advanced wine and spirits certifications.

Marvin R. Shanken: The Glazer’s beer operation is not included in this deal. How big is it, and what was the thinking on that?

Shelly Stein: The Glazer’s beer side does about $500 million in annual sales, and we’re among the top five MillerCoors distributors in the United States. But it’s really separate, and not at all integrated into the wine and spirits piece. It will continue to be owned by the Glazer family, and I will be CEO. I’ll be spending most of my time on this, but the beer side has a full management team.

Marvin R. Shanken: How active is Southern in beer?

Wayne Chaplin: We’re very active in the craft and import business, and as Southern Glazer’s we’ll continue to be so. We’re a major imported beer distributor in Nevada and South Carolina, as well as some Glazer’s markets where we won’t have the MillerCoors overlap.

Marvin R. Shanken: What’s the time frame for completing the integration?

Wayne Chaplin: The agreement is done, but we’ll have to wait for our licensing before we can close. That will be some time in the second quarter of this year. As for full integration, it depends on what areas we’re talking about. Regarding IT, bringing our systems together will take time, somewhere between one and three years. But the integration for our team members and suppliers needs to happen on day-one, and we’re ready to do that.

Marvin R. Shanken: Warren Buffett is the end-game to many. (Buffett’s Berkshire Hathaway company owns food distribution giant McLane Co. which operates spirits and wine distributorships in Tennessee, Georgia and North Carolina through its Kahn Ventures arm.) One day, he might even become a buyer of Southern Glazer’s. But with this deal, you might also block him from taking leadership of the second tier. Any comments?

Wayne Chaplin: We’re doing this because we want to continue building a multigenerational business. What others do is up to them, but we’re creating something that will be very strong for the long term.

Harvey Chaplin: I would just add that it’s not impossible to become a public company.

Marvin R. Shanken: That was my next question, so you beat me to it. Harvey, what’s going through your mind? This must be very emotional for you.

Harvey Chaplin: It is. Since the launch of Southern in 1968, what I’ve enjoyed most is the expansion. When we entered our 35th market a few years ago, it was a great feeling. And whenever Southern came into a new state, it was always great. Our people, most of whom are still around, did much of that work.

Wayne Chaplin: I’ve spent my entire life in this industry, and Shelly’s experience from the outside really helped us do this deal. I also think about Southern’s humble beginnings in 1968, when we faced so many competitors who had been around since Prohibition. To reach this point, based upon my dad’s vision to build out this business, to roll the dice every single time, and to invest the farm every single step of the way, is really an incredible story. And now, the opportunity to partner with the Glazer family and develop this North American footprint is like a dream come true. The benefits to both families, as well as our suppliers, customers and employees, will be felt for years to come.

Click here to read Part 1.

The complete version of this interview will appear in the January issue of Impact, including the revised U.S. wholesaler rankings, supplier charts and other data. To subscribe to Impact newsletter,click here.

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