Thursday, August 17, 2006

World's Biggest Beer Store

For beer aficionados, it just doesn't get any better than Shangy's.

With more than 3,000 domestic and imported brands in stock, the beer retailer and wholesaler claims the largest selection of beer in the United States, and customers flock to its 35,000-square-foot store near Allentown.

Now the family-run company is fighting the world's largest brewer, InBev, in a legal battle that second-generation owner Nima Hadian says could have a wider impact on the specialty beer market in Pennsylvania.

"It's about the little guys, it's about consolidation" in the beer industry, said Hadian, 35, Shangy's ebullient general manager and a beer nut who has worked in the family business since he was 12.

Started in 1980 by Hadian's parents _ Iranian immigrants who are still heavily involved in the business _ Shangy's has become a well-known destination for beer enthusiasts. (Shangy, which means "happy" in the Farsi language, is Hadian's father's nickname.)

Shangy's employees can talk comfortably about the most obscure Trappist beer from Belgium, or recommend the latest hot domestic microbrew. Its highly committed customers include a woman who recently drove from North Carolina, spent more than $1,300 on 11 cases, and took scores of digital photos of the merchandise to show her husband back home.

Although Shangy's does sell Bud, Miller and other mass-market beers to the public, its wholesale division focuses exclusively on specialty beers, distributing hundreds of brands to restaurants, hotels, taverns and other beer retailers in eastern Pennsylvania.

The company's dispute with InBev has its roots in a 1998 legal settlement between Shangy's and Labatt USA that affirmed that Shangy's was the exclusive wholesale distributor of Labatt products in 17 Pennsylvania counties. Labatt became an InBev subsidiary in 2004.

Among the Labatt brands is Hoegaarden, a Belgian beer whose popularity Shangy's has nurtured over the past decade by persuading scores of bars and restaurants to put it on tap. Shangy's says it now is the leading wholesaler of Hoegaarden in the United States, moving 1,500 to 2,000 kegs a month, and Hoegaarden has become Shangy's most important wholesale brand.

In a lawsuit filed earlier this month in federal court in Philadelphia, Shangy's contends that InBev has violated the 1998 agreement by using another local wholesaler to distribute Stella Artois, an InBev brand. Shangy's argues that it should have been the sole distributor of Stella.

What worries Hadian more than the loss of Stella is that InBev will eventually try to cut out Shangy's entirely, using just one wholesale distributor for all of its mass-market and specialty brands _ including Hoegaarden. Losing the Hoegaarden account would be a "gigantic" blow to Shangy's, Hadian said.

"It would be like taking Bud away from a Bud wholesaler," he said.

Brenda Williams, a spokeswoman for Norwalk, Conn.-based InBev USA, said the company does not comment on pending litigation.

Shangy's attorney, Theodore Zeller, said the store is seeking monetary damages from InBev, brewer of Labatt, Beck's, Bass, Lowenbrau and many other beers. Shangy's also wants a court order compelling InBev to abide by the terms of the 1998 agreement.

Shangy's is not alone in its plight. Breweries around the nation are trying to simplify and consolidate their distribution networks as they seek ways to cut costs, according to Harry Schuhmacher, editor and publisher of Beer Business Daily.

"In any given market, they want the same wholesaler to distribute all their brands," he said. "The problem is that as the brands change hands at the brewery level, they don't always change hands at the distributor level."

Schuhmacher said wholesalers who have successfully nurtured a brand "don't want to give them up. It's not all about money, it's about pride in the brand."

Hadian, who takes glee in ridiculing the mass-market beers, warns that consolidation will ultimately reduce the number of specialty brews on the market. Why? Because wholesalers will inevitably concentrate on selling mass-market, high-volume brands and neglect the craft brews, reducing their chances of survival, he says.

"Forget Shangy's bottom line. The ultimate loser is the consumer," Hadian said.

More on beer

Michael Jackson's Great Beer Guide