Theft by delivery drivers is a threat to any beverage alcohol retail business. This problem can take on many forms, and often appears as every-day procedure.
On our sister publication Beverage Wholesaler, which covers the distribution tier of the industry, we recently interviewed Barry Brandman, president of Danbee Investigations. For more than three decades his company has worked with wholesalers, uncovering more than $22 million in illegal activities committed by company insiders – many of who were long-term, “trusted” employees. This includes delivery drivers stealing product from retail stores.
For a deeper dive into how this happens, and how it affects the retailer-distributor relationship, we have reposted here a snippet of the interview from the original story:
Why is theft so common?
Barry Brandman: Why? Because you’re dealing with a highly desirable commodity. Whether beer, wine or spirits, alcoholic products keep their value better on the secondary market versus other goods. Many goods, you sell them on the secondary market for 10-to-15% of their original price. With alcohol, you can still get as much as 50-60% of their original value.
Let’s talk about driver thefts. What are the big issues there?
BB: Distributors like to see that their drivers take care of the same customers over and over along their routes. Distributors know that their retailer customers don’t want to see new guys all the time coming in with the deliveries. Customers like to develop rapport with their drivers. While most drivers are honest, unfortunately, a small percentage is not, and they take advantage of the trust placed in them by their distributor employers and their retailer customers.
Some drivers who commit theft are really slick about when they visit a customer. They will learn what times during the day that their customers are the most preoccupied. They’ll know what times they can go in when the customers cannot thoroughly check what’s going on out back.
These drivers will take back product, even sometimes cherry-picking products that have already been delivered. Or they’ll give a customer 12 cases instead of 15 they ordered and will be invoiced for. The drivers will then take these products and sell them for cash. Sometimes they’ll even sell these products to other customers, discounting by around 35% for customers who ‘love a special’.
How dangerous is this kind of theft for wholesalers and retailers?
BB: Let me tell you a story. I was describing this whole scenario to one wholesaler CEO. This wholesaler said, ‘If my people are stealing from me, then it’s my problem. But if my customer gets screwed, then it’s their problem, because they do not run a tight building’. So this wholesaler was not as worried about figuring out who his dishonest drivers were.
Three years later, this CEO got contacted by their biggest retailer, who had put a freeze on all the receivables due to that wholesaler. The retailer wanted to have a serious conversation with the wholesaler, and said that they were bringing in outside counsel, because some of the wholesaler’s staff could get indicted. The wholesaler contacted me and asked if I could attend the meeting with him.
We showed up, along with the wholesaler’s VP of Operations and head of transportation. They had had a great relationship this the retailer customer for 24 years. But when we walked into the room, there were six people on the other side of the table, and they were all dead serious. They didn’t even want to shake the wholesaler CEO’s hand.
The retailer said, ‘We know that some of your drivers are screwing us on a regular basis. Are you aware of it?’ The wholesaler said, ‘no’. The retailer said, ‘Our GP is off in a bunch of our stores for the past year and a half. So we decided to put covert cameras in our receiving areas. What we found is that your driver has been short-delivering us almost every day’.
The wholesaler CEO said he was very embarrassed. ‘You don’t even have to show me the video’, he said. ‘Tell me how much is your shortage, and I’ll cut you a check and will terminate the driver and look to have him arrested’.
The retailer said, ‘No. We figured out how much our GP is off, and that’s the reimbursement number we expect for that driver. But you have eight other drivers. We’re working on the assumption that they’re also screwing us, unless you can prove otherwise. So we expect a reimbursement for each and every one of them.’
Altogether, the number they quoted for reimbursement was over $800,000. The retailer said that unless the wholesaler paid it, they would deduct it from what they owed him, and then take him to court so everybody in the industry would know what had happened. That would ruin the wholesaler’s reputation.
On the way back, after the meeting, the CEO turned to me and said, ‘please don’t say I told you so’, which I didn’t. Considering what he was now dealing with I didn’t want him to feel worse than he already did.
The fact is, just because theft takes place at a customer’s location does not absolve [the wholesaler]. Driver theft can erode profitability, destroy trust and ruin reputations.
Kyle Swartz is editor of Beverage Dynamics magazine. Reach him at kswartz@epgmediallc.com or on Twitter @kswartzz. Read his recent piece How Can Craft Distilling Survive The Coronavirus?
