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|Subject: Beer||Date: 8/10/2008 5:41 PM|
|Author: pauleckler||Number: 44561 of 46877|
Over the weekend news releases have been published indicating that Pabst is reviving Schlitz beer for sale in selected markets. It is reportedly selling well. With Anheuser-Busch/Budweiser going to InBev and Miller/Molsen/Coors in the hands of SAB, Pabst calls itself the “last” American beer company.
When you dig into it you find out a few things.
Pabst products are brewed under contract by others, primarily by SAB/Miller (under an agreement put together when Stroh’s was divided between Pabst and Miller in 1999).
Pabst markets 85 brands including: Ballantine, Colt 45, Lone Star, Old Milwaukee, Old Style, Olympia, Ranier, Pabst, Schaefer, Schlitz, Stag, and Stroh’s. (See Wikipedia for the full list.)
In 1999, Pabst began shutting down its breweries. The large Heileman Brewery in LaCrosse, WI was sold to private investors under the name City Brewing. It now makes its own beer brands in addition to Arizona Iced Tea and Smirnoff Ice. The last Pabst brewery was the Lehigh Valley brewery near Allentown, PA, acquired from Stroh’s with the Schaefer’s brand. It was shut down in ‘01 and sold to Boston Beer, makers of Sam Adams, last year. (Boston Beer says the seller is Diageo, makers of Guiness and Smirnoff Ice, but details are unavailable.)
Meanwhile, the Rolling Rock Brewery in Latrobe, PA, was sold to City Brewing after InBev sold the Rolling Rock brand to Anheuser-Busch last year. Boston Beer invested to make Sam Adams there, but the contract lasted only 14 mo before they decided to buy Lehigh Valley instead. Boston Beer was also considering construction of a new brewery near Boston, but that plan is now abandoned.
Pabst’s market share in 2007 was 2.8% compared to 48.2% (128 MM bbls) for Anheuser-Busch and 29.5% for SAB/Miller including Molson/Coors. That 2.8% includes sales of several traditional urban leaders: Old Style (Chicago), Stroh’s (Detroit), and Schaefer’s (Brooklyn/NYC). Boston Beer ranks third among craft beers, behind Heineken and Corona, and appears to be approaching 2MM bbls/yr, less than 1% market share.
In beer, market share is everything. Leaders have large, efficient plants and clout with suppliers, distributors, and retailers. They have advertizing dollars to attract young, new customers, who--due to brand loyalty--may buy their products for life. Competitors are at a significant disadvantage.
Nostalgia beers like Schlitz may well be viable, but market share numbers tell the story. They will be novelties intended to attract attention to the product line. Profitability probably requires premium pricing. But why would you pay premium prices for a bland American lager, when you can have a full flavored, craft brew for the same money?
Meanwhile, Pabst appears to be on its last legs financially. It is private and numbers are not public, but it appears to have no assets other than the good will value of its brand names. And those brands continue to be chewed up by the competition. Their customers are aging and they are unable to attract younger customers with new popular brands. No one would be surprised to see Pabst acquired by Miller or to sell off its marketable brands and shut down.
In doing my reading, I learn that Iron City famous of Pittsburgh is just coming out of bankruptcy. Back in the ‘70s, Heileman, makers of Chicago’s favorite, Old Style (and many acquired regional brands) was acquired by Alan Bond (of Australia), but Wikipedia relates the story of junk bond funding that failed, being acquired by Stroh’s (of Detroit) and later joining the Pabst family. Iron City also passed through the Bond hands, but a series of financial failures followed. It too looks weak.
Miller just announced they are shutting down their brewery in Tumwater, WA. A look at their map of breweries suggests much redundancy after the Coors/Molsons deal. They are probably destined to shut down their weaker plants and perhaps expand the most efficient ones in the best locations.
City Brewing just announced layoffs at the Latrobe, PA brewery after it lost the Boston Beer contract. There is idle capacity looking for a home. City Brewing’s main operation in LaCrosse, WI could be a survivor. They are working hard at selling private label beer, contract brewing and packaging. Taking on the Latrobe operation perhaps implies some succes