Wednesday, July 16, 2008

Biggest American breweries? Right here in PA, baby

In a conversation on Uncle Jack's blog, he and I realized that the biggest production facilities of the two largest American-owned breweries (well, once A-B actually gets bought by InBev, that is, and as opposed to beer marketing companies, like Pabst) are right here in Pennsylvania. That would be the newly operational "Upper Macungie" brewery of Boston Beer in Fogelsville, PA, and the St. Clair brewery of D.G. Yuengling & Son -- "America's Oldest Brewery™" -- outside of Pottsville, PA. (Before we get into it...yes, there's a certain amount of interpretation here: BBC makes about 1/2 of their beer under contract. There is, however, no doubt that they are the two largest breweries, so I'll leave it up to barroom conversation to make the final call.)

As I said there, this could potentially be huge for Yuengling, if they capitalize on it. And if I were Pabst...I'd get my ass out there beating the bushes to buy a brewery post-haste and become America's largest brewery. Pabst: still an icon, still American-owned, and just one brewery short of being what their drinkers want them to be: honest. Hmmm...City Brewing, Latrobe? Wouldn't that be sweet? After all, Pabst used to own that Upper Macungie plant, their last. Time to put together a deal, gentlemen.

47 comments:

sam k said...

I was just talking with my local distributor on Monday, and he asked me what the biggest American brewer would be with the demise of A-B's independence. Impulsively, I asked "Yuengling?" to which he immediately countered with "Sam Adams?"

Kind of cool to know that we're once again the center of the true American brewing community.

Anonymous said...

Hey Sam
Those who do not learn from history are doomed to repeat it..

sam k said...

Hey Anon,


Interesting, but meaning what, exactly? (Sorry to be so thick.)

Rich said...

PBR baby!

Steven said...

I think Mr. or Ms. Anon is suggesting that Yeung or Sam could get "too" successful (can that really happen?) and make themselves targets for bigger companies -- perhaps even >gasp< foreign companies!!

Bill said...

Sam Adams (Boston Beer) is public and could be bought out, but Yuengling is private and could more easily resist offers. Is Pabst public?

Lew Bryson said...

Actually, Jim Koch owns all the voting shares of BBC, so it's just as resistant to takeover as Yuengling is. Pabst is owned by a trust, which supposedly "had" to sell it by 2005, but hasn't. So that's up for grabs.

Al Luccioni said...

Actually, didn't BBC just purchase brewing capacity here in PA. ? Scranton I think?

Anonymous said...

Just a thought but Pabst is brewed at Miller plants and is really just a brewery 'on paper'. Don't you think by default they're relying on non-US owned breweries for thier production that they would be skirting the system in a way.

No physical plant of your own and being brewed by a non-us owned facility means your non-us brewed??? Curious but I can see the point of being brewed on US soil as a big factor...

Anon

Lew Bryson said...

Al,
That's what I'm talking about: BBC bought the old Diageo/Pabst/Stroh/Schaeffer brewery outside Allentown. They're here in a big way.

Lew Bryson said...

Pabst as largest American brewery all comes down to how you define "brewer" or "brewery." They have no physical plant that they own or lease, correct. There's no solid definitive answer, so I'm not going to bother getting into it.

sam k said...

AL LUCCIONI? this isn't really THE Al Luccioni of Iron City draft beer fame from back in the 70s, is it?
He was a legend in the Pittsburgh area, inflated in part by a very creative TV ad campaign. Boy, that name really brings back some memories!

Anonymous said...

Pabst has contract with Miller till the end of 2010 at that time who knows what will happen to the brand.
Steven you are correct in saying that it is only a brewery on paper but would much rather have miller brew Pabst than Mr Brysons favorite brewery the great and mighty Lion brewery.Be care for what you wish for if the lion is involved the brand will tank in know time...
But if Miller is currently brewing Pabst and they say nothing is in the works about letting the brand ride into the sunset...Iron City just like they said their headquarters will stay in Milwaukee when they merge with Coors new headquarters Chicago now so long PBR....

Lew Bryson said...

Love o' God, ya wingnut, The Lion couldn't even brew a quarter of what Pabst needs. You may think you're sounding like Benj Steinman with this stream of conciousness delivery, but Benj has substance...and he can spell. Pabst's contract with Miller is just a contract, not a law: contracts can be broken and altered, just like the hops brokers did with numerous small brewers this year. Boeing's not in Seattle any more, Rohm & Haas got bought, things change. Yes, it's hard on workers -- we had to uproot and move to follow a job 17 years ago, I lost a job when my company collapsed three years later -- but expecting nothing to ever change is psychotic.

Just as an aside; what the hell do you have against commas?

Anonymous said...

Professor
No one is against change lost my job three times myself,what we should not tolerate is total control from a few breweries or for that matter a few wholesalers.My god you no what is going to happen in a year or so you are on the right side of the fence with the craft brew movement..These large breweries and wholesalers will not give them the time of day.Yes now they will carry small micros to build their own value when they sell their business the minute they will not sell fifty thoundsand cases their gone..
Just my point when Pabsts loses its contract with Millercoors their not going to brew that beer thats competition thats a dirty word in the beer business..

Anonymous said...

Pabst, as a brand-name gifted to a charitable trust, may not actually be allowed to own a business. I'm no CPA or tax attorney but this would make sense...

JessKidden said...

Lew,

re: your comments (here and over on BA) about having City buy Pabst and their need for a sizable loan for the deal - been thinking about it, and I recall that a couple of guys (father and son, III and IV) out in the mid-West have recently come into some cash, and from the sound of it, they might not have much to do at their new employer's.

How 'bout havin' the Busch boys buy Pabst and City. Altho', from some of the interviews, the two don't really get along, so maybe one of them should buy High Falls (every time I read one of those BBC Annual Reports, I get annoyed when they mention "financial problems" in Rochester. "Gee, Jim, throw 'em some money, will ya?")

Speaking of those BBC reports, (available online at the corporate website), I see that they now say Cincinnati is only producing about 1/3 of total sales. Like you, I recall a couple of years ago, when they were claiming 2/3 in-house. I have heard of some difficulties there, even with recent capacity expansion.

Oh, and The Lion does do some brewing for Pabst (McSorley's and Haffenreffer ML are the one's I've noticed- not that I look at a whole lot of other Pabst's products) and I read that some of the Southampton beers moved there after their deal with Pabst. I keep hopin' that Pabst'll give The Lion a shot at Ballantine XXX Ale 'cause they couldn't do any WORSE than Miller.

One of my oft' quoted articles on Pabst (from a 2007 Beverage World) in finally on-line, I see. That's the one where Pabst president and CEO Kotecki says, "“I can’t see any reason why I would want to own a brewery.”

http://www.beverageworld.com/content/view/33036/154/

Anyway, I found it amusing that in the "hard copy" of the mag, The Lion has an ad in the middle of the Pabst interview "congratulating" Pabst.

Steven said...

Not that I have any concern for Miller-Coors or Pabst (or A-B), one way or another -- I imagine they'll both survive over the years, but I can't help but have a chuckle every time I read "Miller plant" by some poster around the 'net.

I've never equated a brewery with a "plant." Plants make motors and cars, house print shops and machine shops. I get my beer from breweries where the product is a little less industrialized than an outboard motor.

Lew Bryson said...

Yeah. I try to use "facility" at least. "Plant" does have...a connotation.

sam k said...

As regards the Lion and their contracts; the Lion brewed Pabst in 16 oz. returnables for a while (maybe still do, for all I know) and in a discussion at a Master Brewers Association of America (Philadelphia chapter) meeting a while back, some old timers who had worked for Pabst related that the Pabst coming from Wilkes-Barre tasted more like the Pabst they remembered than from any other brewery currently producing the brand.

Yeah, that Lion brewery, it's the kiss of death, and also the most in-demand contract brewer in the country. Go figure.

Lew Bryson said...

Oh, Sam, now you done it. You're on his list.

JP said...

Wow, how many years of public school did that anonymous cat sleep through?

The Lion has only been around 100 years, what do they know? He probably tried to get a job there once and was told he was too incoherent.

mybeerbuzz said...

Am I alone in wishing PA had the most (or at least more) small breweries?

Lew Bryson said...

Oh, now don't be that way. Is there something wrong with celebrating Yuengling and Boston Beer? Of course we like small breweries, we'd love to see a lot more in PA! What the hell kind of question is that? We like breweries. Period. Be happy with us!

JP said...

PA has a tremendous brewing history and representation. Some of us "old timers" remember not so long ago when we DID have the largest amount of SMALL breweries:

yuengling, horlacher, stoney's, reading, the lion, stegmaier, du bois, straub, ortliebs, duquesne... unmatched by any other state!

sam k said...

...and Koehler, Iron City, Neuweiler, Mount Carbon, Altoona, Rolling Rock, Schmidt's...and we're only looking back as far as the 1970s!

jp said...

Thanks Sam K although if you are keeping it to the 70's you cant count neuweiler but can throw in Sunshine of Reading.

All were "small" breweries at the time. I didnt include schmidts b/c that was borderline "small" but oh, what a wonderful beer.

sam k said...

Oops, my bad. By the way, Duquesne was a bigger brewery that Schmidt's, at least at the time Duquesne closed (1972?). They were our two biggest, with Stegmaier, I think, ranking third.

JP said...

yeah, I know Duke was real big at least in capacity but I'm not sure they were cranking at capacity (or even more than PBC) at the time of their closing.

Schmidt's numbers are generally inflated at that time b/c they included the Cleveland and Norristown plants.

Which, technically, you could include the old Scheidt plant in this list.

Al Luccioni said...

Did BCC bid on Old Latrobe Bottling when it came up on the block? I wonder if they would of preferred that capcity over Allentown. Probably not given ALlentown's location and capacity. I remember when BBC contracted out to PBC. I thought we did a great job with their product.

Lew Bryson said...

BBC was mentioned in the Latrobe bidding, but I don't think they ever actually put in a formal bid. Koch's pretty damned happy with Allentown, I think.

Al Luccioni said...

Koch's ?!? You mean Fred Koch up in Dunkirk? That guy doesn't have anyhing to Sam Adams, why he's been dead for years!

JP said...

Just to clarify Al's comment that Lew is speaking about Koch's Golden Anniversary originally from up in Dunkirk, once a big brand but I just doubt there is the demand for that anymore to warrant purchasing the Latrobe or Allentown plant.

Maybe if you combined Godlen Anny with Black Horse Ale you could pull it off

Lew Bryson said...

You guys...are goofing on me! I'm talking about Jim Koch, the Sam Adams man. You know dat...

Al Luccioni said...

Sam Koch ohhhh! Sorry about that. Say, does he still preform, or is he just involved in the brewery business? I used to love that tune he sang "twistin the night away"

sam k said...

Al, it IS you, isn't it? You retired? You made a helluva commercial, buddy!

Al Luccioni said...

Baby I'm Back!

sam k said...

Hey Al, NICE!!!!! Glad to hear you're up and running! My dad worked for Jones for 35 years, and I would love to buy you an Iron sometime. Where you livin' these days?

Lew Bryson said...

Sam! No stalking on the blog!

Al Lucccioni said...

On a serious note, I have to disagree with Lew, I think in the short-medium term, Pabst would be dumb to buy fixed plant. Here is my rationale: first, there is no huge need to worry about consistency/quality issues like BBC, as legacy adjunct lagers get more wiggle room from their consumer base, that is not really looking for the same beer over and over as much as they are a cheaper alternative to the majors. Or it’s the nostalgia crowd who is not really concerned about consistency but the brand itself, like those hipsters who quaff PBR . Secondly, although, I concede consolidation is in-play in this sector, there is still a large amount of capacity out there. All of these old regional breweries by definition have a ton capacity. Look when they were initially constructed or when the last major capital improvements were made. Now compare their annual production numbers from that period vs. what they are putting out today. To give an example I think in the case of F.X. Matt brewing their numbers have dropped by over 60% over the last 25 years or so. It is not like they were constructed as flexible production, that is fixed plant, that is not going anywhere. Thus, they have a massive fixed-cost base which they can only cover with volume if they hope to make profit on their own production. The only way they can get that volume is through contracting. They need Pabst as much or even more than Pabst needs them. At the same time, that plant is old. I am sure maintenance capital expenditure sucks up any available cash that could be used for capital improvements. Why on earth would Pabst want to buy old plant and burn that kind of cash to run it. Yes I know, Latrobe is fairly new relative to say other regionals, but even so it is in the neighborhood of 20 years or so. Pabst can run that capacity into the ground and walk away. We could also get into labor issues, but we all know Pabst’s history there, so I think its enough to say no union is going to back a sale to Pabst and any such sale would rife with battles, that management feels in does not need to fight. On that basis I think Pabst is playing it smart in the medium term. Now eventually, this capacity will disappear by attrition and/ or consolidation. Pabst runs the risk of getting squeezed down the line somewhere, or really having to pay up to buy plant. But at that point they could always just build green field, probably a lot more efficient in the long-run. Plus with AB in-play there is a lot of potential for addition new modern capacity becoming available. Just my opinion of course

Lew Bryson said...

Good points, Al, on a manufacturing side; only one I'd argue with is Latrobe, where most of the equipment only dates from about 1994, and highly automated. Labatt put a lot of bucks into the place.

I'm just looking at marketing -- "American-owned" is resonating really well right now, and Pabst could make it ring -- and legal: they really have to get out of the trust, why not do it big?

Not a simple issue. Thanks for the solid stuff in the midst of all this speculation.

sam k said...

It's amazing the perspective you can get from an industry veteran!

Al Lucioni said...

Lew is spot on about the upside @ Pabst though, man those guys are positioned well in the short-term. Have you seen where they are vs. the majors? I am not saying they are going to take away shelf space but they will compete quite nicely, in their small little niche I think. I imagine anything they lose on the manufacturing side in terms of margin they are making up on the marketing side as their ad budget is a mere fraction of ABs. What I am wondering recently, is how this input squeeze is affecting regionals like Yuengling vs the craft segment. For instance, I noticed that chesterfields 12oz are 22.99 which is starting to bump up with local craft prices. These craft guys are getting more efficient all the time and pretty soon they are going to be able to compete head to head with more traditional segments, they have a huge advantage of flexible production. Although for the record, I think it would be pretty cool if Pabst bought a brewery in PA, treated their employees & retirees fairly and brought a little honor back to their name. Then I could drink Ballantine's guilt-free. But at the end of the day, this is a business and a brutal one at that

Anonymous said...

Pabst may be American owned but they don't brew beer. All of its beers are brewed by MillerCoors which is only 25% American owned, there fore PBR is no longer an American brewer

Lew Bryson said...

I believe that point's already been raised, several times. I even suggested that Pabst buy itself a brewery in the original post.

Generik420 said...

Some great discussion here and interesting that I just stumbled on this the same day someone else commented on it. I know most of the discussion on this is a year stale now but I think it's a weak technicality to exclude Pabst from discussions of largest American owned brewer. Regardless, I think some recognition of the efforts Pabst is putting into some of their aging brands is deserved. The re-introduced Schlitz going back to the 60's recipe is seriously probably the best industrial lager sold in America now. Gorgeous packaging, and a beer that has some heft to the mouthfeel and definite flavor. Now if they would only do that with Ballantine and bring back the IPA while they are at it, I would be really happy.

rico luccioni said...

al luccioni is my grandpap what is this