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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 46824  
Subject: Beer Date: 8/10/2008 5:41 PM
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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 success, but they too are private with numbers not available for inspection.

The only other surviving brewer I know of, of any size is Yuengling of Pottsville, PA, which claims to be the oldest brewery in the US, and ranked sixth in the US at 1.2MM bbl in ‘05. It has a second brewery in Tampa, FL. Its products are sold in PA, DE, and NJ. Yuengling is private and family owned.

After that I think we have the microbreweries.

Anyone know of any major brewers I missed?

The US Industry seems to be consolidating quickly and shutting down idle capacity. After Busch and Miller, Boston Beer looks like the major US brewer and the only domestic stock investment.
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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 44562 of 46824
Subject: Re: Beer Date: 8/10/2008 6:04 PM
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Some say Rheingold beer of NYC is being revived. It is owned by Drinks Anmerica.

Drinks America has a website and does mention Rheingold beer.

http://www.drinksamericas.com/ir.cfm

Ticker symbol DKAM.ob, looks like a penny stock.

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Author: CSOakes Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 44563 of 46824
Subject: Re: Beer Date: 8/10/2008 10:07 PM
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gambrinus. national distribution but privately owned. may not be major in your book. brews Pete's, Shiner, Bridgeport, Trumer. used to be the US distributer of Modelo and Corona.

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 44564 of 46824
Subject: Re: Beer Date: 8/10/2008 11:47 PM
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Thanks, CSOakes. Gambrinus has a web page.

http://www.gambrinus.com/company_overview.html

They are privately held, own breweries in Oregon, California and Italy.

According to Wikipedia, eight breweries use the Gambrinus name/logo--

http://en.wikipedia.org/wiki/Gambrinus

Three of them are in the US. The one in San Antonio is the one of interest to you. The one in Wisconsin is out of business. The others have no Wikipedia entry.

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Author: NorthCarolinaKen Big red star, 1000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 44565 of 46824
Subject: Re: Beer Date: 8/11/2008 4:57 AM
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Very nice job Paul.

Ken

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Author: PaulEngr Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 44570 of 46824
Subject: Re: Beer Date: 8/11/2008 10:03 PM
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One thing to consider as far as Pabst goes...be careful when evaluating private (especially family) owned companies. As long as the owner(s) continue to make enough money to make them filthy rich, the company does not have to make significant profits. Earnings of $0.0001 per share may be considered more than enough for the equity owners. In fact, it is even easily conceivable (and often the case) that they can rob equity out of the company for a significant period of time before negative growth destroys the company.

I have seen these scenarios play them out so many countless times that complaints about the fickleness of investors and analysts in publicly traded companies pales by comparison.

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 44573 of 46824
Subject: Re: Beer Date: 8/12/2008 12:38 AM
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Thanks for the input, PaulEngr.

Of course market leaders essentially control prices and they can set them anywhere they want. They can quite easily crush a small player if they want to by setting prices below small players costs or by cutting prices at key customers.

This is what John D. Rockefeller liked to call giving the opposition a "good sweating" to soften them up to get them to sell out to him. And he used various devices to do this including paying rebates to cooperative competitors, rebates from railroads, etc, etc.

Of course now days this must be done in a way that does not offend the antitrust people. And in fact, majors might be coddling Pabst to keep them in business and divert antitrust charges. (Recall that for years GM was said to be holding back in crushing the competition to avoid antitrust charges.)

Yes privately held companies can work the books all kinds of ways. Fortunately only their bankers and owners must worry about it.

Boston Beer is still the best investment, but Yuengling looks interesting if it ever became available.

Any bets on who will buy who next? InBev/AB must be too big to buy much else. AB did buy Rolling Rock last year. But can Miller buy more? And if so who will be next?

Some think most acquistions from here will be directed at developing global market share. Hence, international acquisitions are most likely.

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 44589 of 46824
Subject: Re: Beer Date: 8/12/2008 11:17 PM
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One that I missed is High Falls Brewing of Rochester, NY. In '05 they ranked 7th in the US--

http://en.wikipedia.org/wiki/High_Falls_Brewing

The company was purchased by employees in 2000 and continues to brew Genessee and Dundee brands. They also contract brew for Sam Adams and others.

The company has a website (and several for its products). History is given here--

http://www.referenceforbusiness.com/history/He-Ja/High-Falls...

After the founder died, Pabst tried to buy Genessee, but the deal fell through. A management buyout followed.

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 44596 of 46824
Subject: Re: Beer Date: 8/13/2008 9:35 PM
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We probably have enough data to reproduce the '05 rankings of beer companies--

1. Anheuser Busch (being acquired by InBev pending)
2. SAB/Miller
3. Molson/Coors (now in a pending jv with SAB/Miller)
4. Pabst
5. Yuengling
6. Probably Iron City
7. Genessee/High Falls brewing
8. Heineken
9. Corona
10. Boston Beer/Sam Adams
11. City Brewing?

No 5 and below all have under 1% market share, but Boston Beer is the one that seems to be growing.

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 44599 of 46824
Subject: Re: Beer Date: 8/14/2008 11:12 PM
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Today I noticed Lemp Beer at the local beer emporium. Lemp is a tradional St. Louis beer brand, said to have been the largest brewer in St. Louis around 1900.

Lemp in non returnable long neck bottles is a product of Lion Brewery of Wilks-Barre, PA. Lion was once NASD listed, but now is private. They make Pocono brand beers, Stegmaier, and Olde Philadelphia.

http://beeradvocate.com/beer/profile/150/15890

But their website does not mention Lemp.

http://www.lionbrewery.com/products.html

Lion is said to be one of the oldest breweries in Pennsylvania. No info on size.

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 45387 of 46824
Subject: Re: Beer Date: 6/13/2009 2:04 PM
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In St. Louis you can get AB beer that is so fresh you can still taste the yeast.

Yes, declining market share makes everything about Schlitz worse. Cheaper raw materials are the norm. Stale brew, improperly stored. It all ads up. No wonder the market share is so low.

As to skunked beer, its an old story that AB managed to become national by perfecting methods to ship beer (in iced rail cars) further than other brewers. That is why most beer was local or regional. There was even an antitrust case requiring AB to charge premium prices for its beer due to higher costs.

So they ended up with a very efficient brewery organization with breweries spread across the country positioned to supply the nation efficiently. That set up is still a major asset and one that Inbev is unlikely to change.

Contrast that with what Pabst or Miller Coors has to deal with. Miller Coors has lots of brewery duplication that has to be consolidated. They will be busy for quite a while. Pabst has to figure out how to get its beer distributed all over the country at a reasonable cost and while retaining flavor. And with little money to develop new brews.

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Author: TurkeyBreath Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 45388 of 46824
Subject: Re: Beer Date: 6/15/2009 7:20 PM
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... Miller Coors has lots of brewery duplication...

IMO this merger of a $iss poor beer + a premium beer = a mediocre beer.

TB

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 45389 of 46824
Subject: Re: Beer Date: 6/15/2009 11:52 PM
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OK, but with market share almost 2:1 in favor of Anheuser-Busch, their gaining market share would take a miracle. And AB probably is lower cost, has more money to spend in any competitive venture. Can make better deals for packaging, ingredients, advertizing, etc, etc.

AB can go toe to toe with any competitor all the way down the line, spend more than the competitor, and use their clout with distributors to make life uncomfortable for anyone who tries to gain share.

So Miller Coors is about trying to survive against a giant. Its not about beer so much. AB makes dozens of specialty brews in addition to the big label ones they advertize.

So Miller Coors has to sell the "magic" like mountain water. Miller Lite is probably their most recent success. And when was that? 30 years ago.

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 45560 of 46824
Subject: Re: Beer Date: 12/20/2009 5:20 PM
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See the most recent Beer update here--

http://boards.fool.com/Message.asp?mid=28175894

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 45561 of 46824
Subject: Re: Beer Date: 12/20/2009 5:30 PM
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Here's an update on Labatt from '08--

http://boards.fool.com/Message.asp?mid=27193853&sort=use...

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