When Maria Pearman joined Los Angeles-based regional leader GHJ last December as Director and Head of Beverage Practice, she brought with her a wealth of knowledge as a 13-year veteran of an industry that knows currently in serious disruption.
Pearman was named head of the beverage component of GHJ’s largest food and beverage practice, established 30 years ago, to grow this particular vertical. In addition to attracting more beverage customers, she also established a customer accounting services firm which currently operates in the beverage business, but which GHJ intends to expand across the business. Pearman has previous experience with CAS, as well as contract review and tax services, in its public accounting work within the beverage industry, and GHJ was ready to offer this model to its range of clients from drinks.
“Historically, CAS has been a very important part of the service I’ve provided to clients, and GHJ had been looking for a CAS practice for some time and building a CAS practice,” Pearman explained. With so many new players and new product types in the beverage industry today, this model is a perfect fit for the practice’s diverse client base, ranging from companies in the growth phase of their life cycle to those with a turnover. $50 million in business.
In addition to traditional tax and insurance services, GHJ’s beverage practice offers “strategic coaching to clients for specific levels – whether a client has a target of x amount of revenue for profitability, or if they positions for sale, we support it through the practice of strategic planning and advisory with transaction advisory services and M&A support,” Pearman explained.
These customers are based across the country, with a heavy concentration on the West Coast, and are primarily in the beer and spirits sector, although some operate in more emerging markets such as hard kombucha and soft drinks. .
“Beverages and alcohol have seen diversification in the industry and so much disruption in the product catalog – we see it with what our customers are getting into,” Pearman said. “It’s a messy place; we serve many different types of manufacturers. A company has beer, spirits and cider, in all categories. In our customer base there is diversification with different products coming to market in what were once classic beer, wine and spirits. »
For all products, customers are subject to industry regulations and restrictions. Companies can only operate in one of three marketing channels: as producers, distributors or retailers. And Pearman noted that the distribution channel has seen “a ton of M&A activity over the last few years,” which GHJ specifically helps clients navigate.
The company’s strategic coaching and CAS services are also essential for these clients operating in an explosively growing market. “There’s a boom in brewery funding,” Pearman reported. “According to our research, distributor portfolios have increased the number of customers they represent tenfold compared to 10 years ago. The distributor has a catalog of products and walks into a bar to sell beer and instead of saying “I have 10 products to choose from”, he has 100 products to choose from. It’s a crowded market and, on the other hand, the number of producers has been exploding for years. Not so long ago, there were 1,000 licensed breweries in the United States, and today they are approaching 10,000. And that’s just one segment – spirits companies and the number of spirits producers, the growth trajectory, is growing very, very rapidly. There is pressure with the number of competitors, and distribution partners are shrinking. The situation is difficult; with the barriers, cutting through all the noise and stepping onto a retailer’s shelf is a lot harder than it was 10 years ago.
Prevent a hangover
Meanwhile, the pandemic has created new wrinkles in the industry that Pearman has helped clients iron out, from producers seeking government assistance to breweries threatened with closure.
“The challenges of the pandemic are different depending on the business model,” Pearman said, explaining that the two basic models are the consumer room, with a small operation all onsite, and the production side that sells offsite to the grocery store and convenience stores.
“Most breweries are a mixture of these two basic structures, but for the sake of simplicity we can assume that these two basic camps, and those focusing on taprooms were hit harder, because no one could out, so that cut off their lifeline to the world. . It was very difficult,” she said.
On the other hand, however, “most production breweries had years because everyone was stuck at home and going to grocery stores. There was a phenomenon of the pantry loading up, buying a ton of stuff, and package sales skyrocketing. But as the world emerges from the pandemic, there is a “hangover effect” across the industry, Pearman warned.
“Life is somewhat returning to normal, so comparing year-on-year numbers to such a strange and abnormal high point is difficult. Another thing I see is the fallout from the “all the extra money dried up. So now all that extra money has covered a lot of sins. The companies that were smart about it were using it to support their operations and make smart decisions. Those who weren’t smart were nurturing bad habits. As the extra money is drying up, we are now seeing all the fallout, and it could be pretty ugly. All the extra money is drying up and the market, with what appears to be an impending recession, could be a double whammy for anyone who wasn’t smart with their extra funds.
GHJ was already proactively guiding its clients to make smart decisions and could soon help them take advantage of some of the upsides of the pandemic. “Another positive effect, for those who focus on the dining room, is that by operating in this three-tier regulatory system, the producer cannot sell directly to consumers in general, but during the pandemic there is had a lot of temporary measures to relax this restriction.
These measures are being enforced state by state, but, according to Pearman, some are expected to become more permanent, providing a golden opportunity for a large segment of GHJ’s clientele. “It could be very positive for producers,” she explained. “This opens the door to the possibility of getting the product directly to consumers. The relaxed regulations would be a game-changer for the industry.
As for the broader trend of a tight labor market, Pearman is equally optimistic about GHJ and its practice in the face of the Great Resignation, as its specialization and the introduction of CAS make it particularly attractive to the modern accountant.
“CAS as a service line is a wonderful compromise between working in industry and working in public accounting,” she said. “You don’t work for a small company, but with accounting firms of all sizes, you don’t live as an employee in a startup environment, even if that’s where the client is. It’s a great way to combine the experience environment of multiple customers with the ability to make a big impact on the business. »