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| Silver Eagle Distributors: Know Thy Customer |
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| Written by Jill Rose |
| Monday, 31 December 2007 18:00 |
As a distributor, Silver Eagle has two customers: the retailer and the consumer. John Nau, president and CEO, believes both are better served by a large distributorship, provided it is well run. “The benefits to the consumer are more choices and better merchandising. The retailer benefits from individualized service and good local marketing,” said Nau. Indeed, Nau said much of the $700 million company’s success can be attributed to its exper-tise in segmenting the market. For example, the techniques that are successful in moving beer through a supermarket are completely different from those for a convenience store or a restaurant. “My emphasis has always been on segmenting the market and the various components of the market as deeply and detailed as possible, while still being able to manage that,” said Nau, who has been the majority owner of the company with his wife since 1997. “Today, we break the Houston market into more than 60 outlet classes. The classes range from large supermarkets to a small group of Asian restaurants, and our service is tailored to each group’s needs.” And Nau’s team doesn’t stop there. Each class is further broken out by demographic segments. For example, a bar that caters to Hispanics under 35 will have completely different consumption patterns from a white-tablecloth restaurant with a consumer group mainly over 40. “It’s up to us as the supplier to advise each retailer on how to maximize sales. When you segment by outlet and further break it down by demographics, that’s where you find most effective crosshairs for product availability.” Nau said he plans to use this system for the San Antonio market, where the company acquired a large distributorship in August. In some cases, Nau and his team also look at segmentation based on product margins. “For example, high-end restaurants are not going to sell the low-end beers. They’re going to sell Michelob or Corona or all the specialty beers,” he said. “If you match the products with the outlet types, that allows you to potentially dominate in each one of the margin pool categories.” Everyday IT The sophistication of Nau’s operation goes well beyond segmenting: Silver Eagle has been a leader in both technology and environmental concerns for more than a decade. Nau said in 2000, he began working with his COO on a plan to develop their own software. Although beer manufacturers like long-time Silver Eagle supplier Anheuser-Busch supply product tracking software to their distributors, Nau realized it wasn’t going to work for his much larger company. (An average distributor handles about 3 million cases of beer per year; Silver Eagle handles around 42 million.) Using inhouse software developers, the company created a unique distribution system that Nau said reduced truck mileage and increased productivity (the number of cases per man-hour coming off the truck), while ensuring service levels remained high. “I wanted this inhouse so we could address our needs on a day-to-day basis and not have to wait for an outside contractor,” said Nau. The system has been updated over the years and now supplies real-time sales data from delivery personnel who carry small handhelds. “The guys used to call them bricks,” laughed Nau, referring to portable devices used in the early part of the decade. The company has worked for many years on what Nau calls corporate citizenship targets, including moderation-in-consumption campaigns and green fuel systems. Working with International Truck and Engine, the company has converted the majority of its fleet to clean diesel technology, reprogramming the engines and installing diesel particulate filters to reduce nitrogen oxides by 25% and particulate emissions by more than 90%. Silver Eagle is the first privately owned fleet in Texas to convert to clean diesel technology, said Nau, adding that this conversion, along with several other initiatives, has resulted in reducing 34 tons of nitrogen oxide from Houston’s air each year. The technology required Silver Eagle to begin using ultra low sulfur diesel fuel long before it was mandated. “Initially, the fuel we needed was not available, but Valero Refinery in Three Rivers stepped up to the plate and began producing it,” said Nau. “We paid a premium for the fuel early on, but we felt it was important to get involved and help develop the technology.” The company is also working with Emissions Solutions, Inc., headquartered in McKinney, Texas, which has received EPA certification for a compressed natural gas engine. “Emissions Solutions designed their technology around the International DT466 engine, which is very familiar to our fleet maintenance staff,” said Nau. “These trucks have been in service for 18 months in our urban delivery system and have proven very reliable.” Multi-dimensional marketing Silver Eagle also differentiates itself through its marketing, which is more extensive than most beverage distributors. “In the past, distributors viewed themselves as receiving beer from a brewer, warehousing it, putting it on trucks, and selling it to retailers. We believe to serve a market as diverse as Houston (and now San Antonio), you cannot be one dimensional.” Although beer manufacturers do plenty of national advertising, Nau believes it’s his responsibility to market at the local level. To that end, the company has a well-staffed marketing department that combines supplied marketing materials with its own creative to produce campaigns. Nau said this approach was unheard of 20 years ago, and is still somewhat rare, but he has seen a clear benefit from it. “That 63% marketshare—you don’t get there by being a single dimensional distributor,” he said. You also don’t get there without a team that is happy and works well together. Nau said his personal philosophy is to create an environment where people win and then get out of their way. “When you help someone win, the influence goes far beyond the company,” he said. “When they become leaders in work, they become better family members and better citizens.” |