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Are alcoholic and non-alc bevs converging at distribution tier? It's debate that's been happening for past coupla decades, tho few houses have moved to having a relatively even mix of sales from the 2 segments, let alone begun carrying them on the same trucks. At recent Future Smarts conference in NY, key exec from 11-state bottler/distributor Admiral Beverage argued that debate should be over by now. Asked by host Duane Stanford, editor/owner of Beverage Digest newsletter, whether joint beer and soft drink operations are an industry inevitability, evp/genl counsel Bob Callan didn't mince words. "I don't think it's a future model, it's the present model," he replied. "If you want to be in the next decade in this business, you've got to diversify." As noted, Admiral takes a spot as one of few major distribs to play significantly on both sides, with Columbia in Pac NW often cited as another (BBI, May 14). Megadistributor Reyes also plays on both sides, but via beer operations that are completely separate from franchised Coca-Cola bottling footprint.At Admiral, some of that integration has occurred on ad hoc basis as deals have happened. For instance, this past Mar Admiral acquired 1-mil-case Pepsi bottler Fisher Bev in Rapid City, SD, and it's been hard at work integrating that with its Molson Coors biz in area. Separate DCs are being integrated in Jun, with pickers placing beer and soft drinks on same trucks, tho Admiral is maintaining separate sales forces for each category. "For us it's a model that works," said Callan, who stepped in at last minute for announced speaker Kelly Clay, prexy/CEO who'd come down with flu. Callan has been with Admiral for 11 yrs now, following 7 years on supplier side at Dr Pepper Snapple Group.Similar convergence is occurring in other territories. In NM, where Admiral is "blessed" to have Molson Coors for entire state, serviced out of 4 DCs, the co picked up NA biz of Kalil bottling for two-thirds of the state as Kalil got ready to exit to Keurig Dr Pepper in its core Ariz territory. Admiral also maintains a sizable Red Bull biz there, Bob noted.Diversified Territories, Products, Consumers By Callan's description, Admiral is highly diversified, with overall mix that tilts to 60% NAs, 40% beer, and a leadership team that's "firmly convinced success hinges on" maintaining that diverse base. Its territory sprawls across Alaska and 10 inland western states, from Mont south to NM and a corner of Texas. It includes 9 corporate shareholders, 3 owned by Clay, the rest PepsiCo bottlers in states like Mont and ND. With "everything focused on service and execution," Admiral maintains a brisk investment program, having remodeled or built 7 distribution centers in just the past 4 yrs. For all the sprawl of its map, Admiral relies heavily on its local leadership to forge community ties and guide individual operations. The prior weekend, for example, local mgrs. orchestrated 9 Xmas parades in 9 cities. Each GM understands his market deeply and has skin in the game, Callan said.For Admiral, diversity means not just different categories but different consumer mixes in its various territories, whose major markets are led by Salt Lake City, followed by Albuquerque, NM, and Boise, ID. Not surprisingly, its El Paso, Texas, territory tilts heavily toward Hispanics, meaning it sells a lot of Squirt and Electrolit there. But northern-tier territories also have significant Hispanic population "and we try to reflect that." Among other brands that have resonated with that crucial demo is Mexican bottled water import Penafiel, like Squirt and Electrolit part of KDP portfolio. And unaligned Jarritos Mexican CSD "is gangbusters." Callan was careful to note all those brands move thru Admiral's white system, not Pepsi blue system. For all their loyal Hispanic following, he views them as "mainstream products."On innovation side, thru its broad footprint, Admiral manages to serve as an incubator for a lot of new brands, picking up 100+ per year. Callan views protein surge as "here to stay," saying it's "part and parcel of the MAHA generation," but is taking a more tempered view of gut pops. As "a health & wellness guy," he personally likes them, but is undecided on whether segment will be here in a decade. "Whether it does or not, it will be a precursor to the next thing."One segment where Admiral won't be going any time soon is THC. "No sir," was speaker's response on that. "I think THC probably has a future but right now it has to figure out the science and consistency of manufacturing" before "the industry dives in and starts distributing THC." (He noted that his son wrote the bill in Texas banning THC, presumably referring to Rob Callan, legislative dir to bill's author, State Sen Charles Perry.) "I'm very cautious about it but down the road I think there's an opportunity," he said.Pepsi Refranchising? 'We'll Take Salt Lake Tomorrow' Exec was probed about another topic of debate: whether PepsiCo should refranchise, a move that activist investor Elliott argued should at least receive serious consideration in view of the greater success rival Coca-Cola has achieved since undertaking arduous process a decade ago. So, Stanford asked, would you be interested in more territory? And does PEP need to undertake a wholesale refranchising? "We'll take Salt Lake tomorrow," Callan replied to broad laughter in room.More philosophically, referring to his long tenure on supply side at Dr Pepper Snapple Group before his move to Admiral, Callan noted that in his 50 years on both the parent and bottler sides, he's learned that "it's very difficult to do both sides well," particularly when you're publicly traded. But he allowed that refranchising is "a big thing to unravel." Still, it boils down to question of "are you a long-term player and what's best for the brands?" Asked what his reaction would be if PepsiCo offered him half the country, Callan lost no time in responding: "They should call me today." That's consistent with his broader view that "there's always a door that needs to be opened."Sounding tactful note, Callan indicated that whether or not any PEP refranchising opportunities present themselves, Admiral will continue to expand and diversify. "We would enjoy expanding our footprint and it's part of our 5-year plan," he said. "We're diversified and will continue to diversify. We value our partnership with Pepsico and KDP and Molson Coors and Constellation."As for Admiral's relationship with PepsiCo, he said, "I think it's improving every day." That there have been "some bumps in the road" has been "the worst-kept secret in America." But both cos "have brands in common that we have committed blood, sweat and tears to grow. I can tell you this, Kelly bleeds blue."KDP Kudos on Dr Pepper, COBO Speaking of another key NA supplier, Keurig Dr Pepper, Callan expressed nothing but admiration for its stewardship of flagship Dr Pepper CSD. Admiral has grown marque for 15 years straight "and there's no end in sight . . . That brand is on fire, it's a cult." Tho bottlers sometimes cast a mordant eye on brand owners' marketing efforts, Callan had no hesitation in crediting the innovation of brand team at KDP hq in Texas. "What keeps it going is the innovation. The folks in Plano have found the sweet spot with innovation and LTOs the consumer wants." He later added, "I don&#39;t often disagree with KDP" on brand's direction. "They know when to get in and out of LTOs."One watch point will be KDP's recently unveiled plan to acquire JDE Peet's coffee empire, then split merged entity into its coffee and bev components. "I hope they succeed after the split and are not too encumbered by debt service," Callan worried.As for KDP's quiet but consistent efforts to expand the footprint of its company-owned bottling operations (COBO), mainly via small bolt-on deals but with a few big transactions like Kalil, Callan said he has no problem with that. "Difficult to blame them," he said. "It's an opportunity to get the brand back and it just makes sense." As an indie bottler, he unusually offered high praise for how the COBO is staffed, saying those folks "have that entrepreneurial spirit."That stands in contrast with broadly held view that Pepsi's owned bottling operations are more sluggish and bureaucratic, prompting the calls for refranchising. Callan agreed that the DSD of PEP and KDP are "distinctly different." He looked back to his years working alongside DPSG leader Larry Young to offer context. The PepsiCo ops are much more mature, with higher cost structure and higher overhead. By contrast, Young and his successors purchased many of the bottlers that comprise the COBO with urgency "to insure we had places to sell the brands. Over the years those operations have grown and strengthened." Larry and then KDP "maintained that street, entrepreneurial spirit. In some respects, that's a significant differentiator."BBI readers, we'll be taking a break tomorrow but expect to be back Fri to commence our usual round of features looking back at 2025 and offering experts' anticipations for 2026. We've greatly appreciated your interest and friendship over this past turbulent year and hope we can do our small bit to guide you thru a new year that could prove no less unpredictable. As for tonight's New Year's Eve celebrations, many of you can take credit for offering American consumers a simply unprecedented bounty of festive but non-alcoholic options. Whether you go wet or go dry or "zebra-stripe" among both options, have a great time!

FUTURE SMARTS: Alcohol/NA Convergence? That Future Is Now, Reports Admiral Bev's Callan; Sprawling Western Operator Ready to Start Putting Both on Same Trucks as Diversity Rules in Bevs

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