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Stroh Sells Brands To Pabst, Miller

February 8, 1999 GMT

DETROIT (AP) _ Stroh Brewery Co., ending a 149-year U.S. brewing tradition, is selling its beer brands to Pabst and Miller in a move that continues the consolidation of the industry.

Miller Brewing Co., the nation’s second-largest brewer behind Anheuser-Busch Inc., is purchasing Stroh’s Henry Weinhard’s and Mickeys brands. Fifth-ranked Pabst Brewing Co. is buying the rest of Stroh’s brands _ including Stroh’s, Old Milwaukee and Schlitz _ and its brewery in Lehigh Valley, Pa.

Under the deals announced Monday, fourth-ranked Stroh will continue operating its five other breweries until production can be shifted to a Pabst or a Miller brewery. The transition is expected to last about nine months. Afterward, Stroh will seek buyers for the breweries.

Terms were not disclosed. The Milwaukee Journal Sentinel had said the sales could be worth $400 million.

The move is the latest in a shrinking beer industry as it becomes harder to compete with the leaders.

Analyst Frank Walters of M. Shanken Communications in New York said the move gives Miller and Anheuser-Busch 70 percent of the beer market.

``It’s very tough to compete with the wherewithal of a Miller or Anheuser-Busch,″ Walters said.

Because the industry’s growth is sluggish, ``The middle-tier brewers (like Stroh) are the ones that have suffered the most,″ said Gary Hemphill, vice president of Beverage Marketing Corp. of New York.

Stroh’s market share shrank from 7.9 percent to 6.7 percent last year, and Pabst’s from 2.4 percent to 2 percent. Anheuser-Busch represented 46.7 percent, Miller had 21.2 percent and No. 3 Coors had 10.5 percent. Analysts says Miller will likely increase a couple of points with the move.

The agreements to sell the brands are expected to be completed in early April, and are subject to antitrust review by the U.S. Justice Department.

``My family and I struggled with this decision,″ said John Stroh III, the company’s president and chief executive officer and a fifth-generation member of the Stroh family.

``However, in light of this attractive offer, and the long-term competitive outlook of the brewing industry, we concluded that it is the appropriate time to exit the beer business and focus on the family’s other ventures,″ he said. Stroh, which will keep its headquarters in Detroit, will be left with its real estate investments.

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Stroh has about 2,800 employees. How many of those will be affected is uncertain, said Stroh spokeswoman Lacey Logan. Pabst and Miller could offer to employ Stroh’s full-time workers, she said.

Stroh began brewing in Detroit in 1850, after the family had already been brewing for two generations in Germany. During Prohibition, the company converted facilities into making a variety of products, from ice cream and soda to the ingredients necessary for home brewing, and had no layoffs.

Once back in the beer business, Stroh enjoyed regional dominance, and by the early 1980s, it became the nation’s third-largest brewer after buying the F&M Schaefer Brewing Co. and the Jos. Schlitz Brewing Co.

But it soon started losing ground, leaving it with too much capacity. It closed its Detroit brewery in 1985. Four years later, Peter Stroh announced the company was looking for a partner or a buyer to help pay debts.

Stroh itself later fed the consolidation trend, pursuing the G. Heileman Brewing Co. for several years until it bought it in 1996. But the company continued to lose market share, dropping to fourth.

The privately held company reported a loss of $3.9 million on sales of more than $243 million in the third quarter of 1998.

The companies also announced that Pabst has reached an agreement to transfer its Hamm’s and Old English 800 brands to Miller. And Pabst has agreed to expand its contract brewing agreement with Miller.

Analysts say the move will intensify Miller’s share of the malt liquor category.