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The Value of Business Integrity: A Call for Enhanced Ethics, Respectfulness and Law Abiding Behavior

So, it’s been awhile – and even before the last update, posts had been sporadic at best.  Don’t stop me if you’ve heard this one before - but I’m going to make a real effort to update at least once a week. Some updates will attempt to be poignant and tackle serious issues, other might be about the daily in-and-out of running a small brewery and teaching economics while finding time for soccer and mountain biking. In any event, content will be more frequent if not necessarily more meaningful.

Today I want to discuss something that’s been bugging me for a while, a certain lack of business integrity by not only by big business (the rumored targeting of start-up No Label Brewing taps by mega-distributor Silver Eagle for example), but by fellow craft brewers and non-beer industry small businesses in my community. (Note, I’ve always adhered by the long-standing prison code of “Snitches Get Stitches”, so I’m not here to rat anyone out. If you’re reading this and any of the things I’m describing sound like you, then they may very be you. It’s up to you to correct your behavior.)

Pay-to-play is a fairly common practice in the beer business, independent of how illegal and unethical it is. Stories like this one out of Chicago are just telling us what we already know: where the incentive exists, businesses will try their hardest to circumvent fair trade in order to gain the upper-hand. When products don’t have incremental intrinsic value to offer the consumers, they can hang onto, or gain, market share in a number of ways (this list not intended to be comprehensive):

  1. Increase the real value the product provides consumers (make your product better)
  2. Increase the perceived value it offers consumers even if it offers no more real value (in economics, we call this advertising)
  3. Become the more attractive option for consumers from a price perspective (make your product more affordable)
  4. Cheat

The first three options on this list are all okay, because they all require a two-way match of wants, preferences and needs for a consumer to choose one product over another. Like it or not, some people make purchasing decisions based on who has the best ads. Fair enough, but an ad in and of itself does not take a competing product off the shelf and limit consumer choice. The same with making a product better or less expensive. Sales of that product will still depend on how much consumers value that product relative to all other options.

It’s fairly self-evident why “cheating” in business is bad for consumers (not to mention our nation’s continuously bleak economic picture). We generally have little problem calling out big, faceless, corporations when they “cheat” – but it seems like we lose our ferocious intolerance for cheating when someone we have an emotional attachment to is doing it. We have no problem blasting AB and their brands – but there is nary a whisper when it’s a beloved craft brewer openly and proudly engaging and promoting blatantly illegal activity. We may not like the Texas Alcohol Beverage Code, but until it changes we are still bound to follow it. Those who ignore the law, even if out of a sense of rebelliousness, are no better than a big distributor illegally targeting a small brewers taps.

Beyond the obvious ethical hypocrisy, I wonder about the potential backlash from this kind of activity in a legislative session. We all remember The Wholesale Beer Distributors of Texas Keith Strama’s bumbling, incoherent diatribe in front of the Licensing and Administrative Procedures Committee (chronicled here) where he stammered on how allowing brewpubs to distribute would somehow lead to babies drinking barley wine on street corners in dry counties. It may not be too hard to picture him standing before the LAP Committee again rambling on about how we can’t even obey the existing laws and we want the state to give us more freedom? It would be like handing the car keys to a teenager who you just grounded for getting excessive speeding tickets. (This would be the argument used against us, not one I actually believe in). It is imperative, for the success of any future legislative efforts (which there will be for years to come, even after breweries and brewpubs are allowed the freedom we seek - there are many other issues to tackle) that we be model citizens.

So here I present you with a proposed Code of Small Business Ethics. Please comment to add to, disagree with, or give a tip o’ the hat.

  1. Be a Law Abiding Corporate Citizen. Regardless of your opinion of the law, you chose to open and operate a business under the jurisdiction of said laws and they must be obeyed.
  2. Commit to Product Excellence. Let the sales of your product be dictated by the real value of your product, not by increasing your relative value by putting down your competitors. Your competitors making a better product should drive you to make a better product, not drive you to find ways to tell consumers a competitors’ products are garbage.
  3. Make Honesty a Core Value. Be open, honest and transparent about your business, even your shortcomings. As a small business, your customers have an emotional connection with you. They knew you weren’t perfect long before you admitted it to yourself. Be truthful when you fail and never be ashamed to say sorry.
  4. Be Direct and Discreet With Those You Disagree With. The growth of social media has made for entertaining battles when two figures (either business or personal) clash, but when you have beef with a competitor or partner, take your beef directly to them – not to twitter.
  5. Give Credit Where It Is Due. Give props to the people who made things happen. If someone gives you credit that you don’t deserve, be the first to stand up and distribute it where it truly belongs – don’t let others do it for you.
  6. Always be Customer Focused. This is obvious and cliché, but seemingly oft forgotten. Never forget, that without your customers, your business has no reason to exist.
  7. Commit to Fairness Throughout the Supply Chain. Treat your suppliers, creditors, employees and downstream customers with the same respect and fairness you would expect from them. Your supplier has bills to pay too, and squeezing every drop of margin out of him threatens his viability and your ability to benefit from him in the future.
  8. Be Passion-driven, not Profit-driven. Let your business decisions be driven by what you believe, not by what would be most profitable in the short-run. Your passion will best support you in the long-run. The craft beer industry is a great example of small businesses driven by passion, not by capturing economies of scale and seeking the greatest profit. As a result, it’s the only segment of the beer industry that is growing.

What should we add to the Small Business Code of Ethics? Chime in!

Next Post: I’ll have La Muerta details on my next post, which I’ll aim to have out this weekend at the latest. Cheers.