Yusef Jackson’s beer distributorship stocked all of the big spots. Wrigley Field. The United Center. And the River North night-life district.
But in an interview Friday, he said it wasn’t enough. He felt fenced in by the boundaries set by Anheuser-Busch decades ago, which prohibited him from selling Budweiser in the suburbs. And even though he had broadened his portfolio to include craft beers, they weren’t enough to sustain the business like he wanted.
“We attempted to get scale by selling (non-Anheuser-Busch) brands into the suburban areas,” Jackson, 43, said. “It was not effective long term. We needed to have actual scale, meaning market share in the suburbs. … The traditional boundaries cut many, many years ago are not as effective in today’s marketplace.”
That’s why he said he plans to sell his company, River North Sales & Service, to Byron Trott’s BDT Capital Partners and the Hand family, veteran Tennessee beer distributors, in a deal Jackson announced Thursday. It was not a combination Jackson thought of himself; he credited BDT with that. But he said he’s proud of the terms of the deal, which were not disclosed.
BDT declined to comment. Anheuser-Busch InBev NV and the Hand family have not returned messages seeking comment. Sources have said Anheuser-Busch still needs to approve this and a related deal.
Jackson’s likely departure from the beer business caps a journey that at first was heavily influenced by his father, famed civil rights activist the Rev. Jesse Jackson. As he emerged from his father’s shadow, Yusef Jackson proved to be a savvy businessman, adapting to changing consumer tastes by carrying more craft and imported beers, sometimes to the chagrin of Anheuser-Busch.
More than Jackson’s distributorship is in play. A related deal would involve the Hand family buying Anheuser-Busch’s 30 percent stake in City Beverage, the mega-Bud distributor whose territory surrounds Yusef Jackson’s. BDT owns the remainder of City Beverage.
The Illinois Liquor Control Commission also would need to approve the sale of Anheuser-Busch’s stake in City Beverage.
The combination of the two Bud wholesalers under the ownership of BDT and the Hand family could alter the competitive landscape in the Chicago area.
The merger would create a mega-distributorship that supplies more than 23 million cases of beer annually in northwestern Illinois. Jackson’s Budweiser territory was bounded roughly by Lake Michigan, Harlem Avenue, Roosevelt Road and Irving Park Road.
In most parts of the country, Budwesier, Bud Light and other Busch brands dominate the market. But in Chicago, MillerCoors is the historic leader, making the region one of the most competitive beer markets in the country.
Bud should be well served by a BDT-Hand family partnership. BDT has a large war chest of capital to invest in marketing and new technology. Meanwhile, the Hand family has a long history in the beer industry. Under the direction of J.R. Hand, the family owns Bud wholesalers in Tennessee and Kentucky.
“J.R.’s bright and aggressive, and they want to grow,” said Harry Schuhmacher, editor of Beer Business Daily. “It seems that they’ve been anointed by Anheuser-Busch to be a consolidator.”
The wholesale beer industry has undergone a wave of consolidation since 1980, when there were more than 5,200 distributors. That number had fallen to slightly more than 2,000 by 2006 and has continued to shrink.
Anheuser-Busch has encouraged streamlining within its distribution ranks because that lowers its shipping costs and enables wholesalers to be more efficient. But it still has more than 500 distributors, about double the number MillerCoors has, analysts said.
Anheuser-Busch’s ambition to control more of its distribution in the Chicago area ended up being the seeds of the opportunity for Jackson to cash out.
In 2010, Anheuser-Busch tried to buy out City Beverage, but the deal was blocked by the liquor commission to preserve the state’s three-tier system that separates alcohol manufacturers from distributors and retailers, such as bars and grocery stores.
The dispute eventually was left in the hands of Illinois lawmakers, who passed legislation this year that forced the brewer to sell its 30 percent stake in City Beverage by the end of 2014.
River North’s sales price has not been disclosed by any of the parties involved. Distributors typically have a profit margin of about $1 per case. Analysts said River North annually sells about 3.5 million cases.
A-B wholesalers have recently sold for about 10 times their earnings before interest, taxes, depreciation and amortization. According to the industry averages, River North is worth about $35 million. Jackson likely secured a premium to the current value, analysts said.
Jackson became the majority owner of River North through his father’s connections. One of Jesse Jackson’s friends, Ron Burkle, a Los Angeles billionaire, introduced Yusef Jackson in 1996 to August Busch IV, heir to the Budweiser empire his great-great-grandfather founded.
Three years later, Anheuser-Busch sold River North to a group headed by Yusef Jackson. Analysts estimated the sales price at the time at between $10 million and $15 million.
The deal was a measure of how things had changed since Jesse Jackson launched his 1982 boycott against Anheuser-Busch, aimed at forcing the brewer to increase its business opportunities, such as the control of beer distributorships, in African-American communities.
The Anheuser-Busch boycott was not considered as successful as others led by Jackson’s Operation PUSH. But the cumulative effect of years of mounting pressures on a wide array of companies to generate more economic opportunities for minorities seemed to have created one for his sons.
Yusef Jackson and others have long denied any link between his father’s boycott and the eventual opportunity to buy the River North distributorship.
Jackson said he had explored expanding River North through acquisitions. But the strategy didn’t pan out.
“In the last 36 months, we’ve been looking at every possible realistic combination for the business in the area,” Jackson said. “And within the last 15 months, we’ve been looking at options within the (Anheuser-Busch) network.”
Jackson said merging his company with City Beverage would create a team like the Chicago Bulls after Michael Jordan arrived.
“This transaction enables my staff to do all the things we wanted to do … but we couldn’t do effectively because of our size,” Jackson said.
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