How to kill 20 American beer brands
Steve’s breakdown: That’s what MillerCoors will do if they no longer brew, package and ship Pabst Brewing Company’s beers. We’re talking PBR, Old Milwaukee, Colt 45, Rainier, Schlitz, Schmidt’s, Schaefer and Stroh’s to name a few.
Where’s the lead? Maybe it’s a corporate campaign telling America what’s happening with this lawsuit. Whatever happens, it’s coming to a head this fall. Read on . . .
LOS ANGELES, CA: A lawsuit filed in 2016 by Pabst Brewing against MillerCoors could end up in court this fall, according to CNBC. MillerCoors, which is owned by Molson Coors, said it may no longer have the production capacity to brew, package and ship Pabst Blue Ribbon and the company’s other brands and therefore may not continue with the arrangement.
In response, Pabst filed a $400-million lawsuit charging MillerCoors with breach of contract and anti-competition laws, plus fraud and misrepresentation, according to the Milwaukee Business Journal. MillerCoors disputed those accusations and said the agreement gives it the right to decide whether it is able to renew the arrangement.
MillerCoors has tried to stop the lawsuit several times, the Milwaukee Business Journal reported. A motion to dismiss the case was denied in January, and the company’s motion for summary judgment was rejected in April. A pre-trial hearing is set for Sept. 27, with arguments scheduled to begin Nov. 12.
Pabst could be in a real bind if its arrangement with MillerCoors is canceled. The Los Angeles-based brewer — with its well-known PBR brand, along with Old Milwaukee, Colt 45, Rainier and Olympia beers — would have trouble finding another company with sufficient production capacity. And, as Food & Wine pointed out, building its own would be tough and expensive, potentially resulting in a PBR shortage.
Should the supply of Pabst brands decline, or disappear altogether, MillerCoors — and its Coors, Miller, Blue Moon and Keystone brands — would likely benefit, which may be why the brewer isn’t keen to renew its arrangement with Pabst. MillerCoors has publicly said it wants to end the deal because, after closing a North Carolina brewery in 2016, industry pressures may force it to close another one in California. But the Milwaukee Circuit Court judge hearing the case said this argument is contrary to the company’s projection that it will achieve growth next year. A company spokesman told CNBC MillerCoors wasn’t planning to close any other breweries at this time.
U.S. beer companies have been suffering from falling demand as consumers turn to craft beer, Mexican imports, wine and cocktails. Some drinkers are favoring low-alcohol or even no-alcohol beers in order to enjoy the flavor of beer but avoid the calories. Total U.S. beer shipments fell 1.3% last year, with some big names feeling the pinch as Budweiser shipments dropped 6.8%, Bud Light slumped 5.7%, Coors Light was down 4.1% and Miller Lite saw a 2.5% decline.
While Pabst is a private company and doesn’t report earnings, a MarketWatch columnist reported last year that the company had only 5.5 million gallons of production and a 2.2% market share in 2015. As for MillerCoors, its market share fell 5% to 25% last year, according to the Beverage Marketing Corporation, and its U.S. shipments have fallen just about every year since 2009.
It remains to be seen whether this lawsuit will make it to court. While MillerCoors wants out of the contract, it can’t relish the thought of paying Pabst $400 million in damages to do so. Given the judge’s dim view of MillerCoors’ arguments, it may be smarter to continue the arrangement with Pabst, perhaps for a shorter period and at a higher rate. Then, like other U.S. beer companies, it can continue to innovate with new products — such as its recent debut of the light, fruity Two Hats beer targeted to millennials — to boost sales.