Apr 242018
 

Schlitz died when senior management decided to maximize profits by using chemical additives that changed the flavor and look of the beer.  Schlitz’s white knight was Stroh’s but the heavy debt, along with the lack of senior management leadership, led that venture to also close and sell out.

Heileman Brewing Co., under the leadership of Russell Cleary, grew to be the fourth largest brewery in the U.S. in the early 1980s.  Heileman went public on the New York stock exchange, a move which eventually ended in a hostile leveraged buyout by Alan Bond.  Bond-financed the buyout with junk bonds at the time.

Bond’s financial collapse led to G. Heileman filing bankruptcy in 1991.  Hicks and Muse bought the firm in 1994 and then sold it to Stroh two years later.  This story ends when Stroh sold part of the company to Pabst and the other part to Miller.  Once again, another story of how the lack of leadership combined with heavy debt undid several very successful breweries and basically killed some previously great beer brands.

One would think that given the history in this industry, others would be aware of and learn from these obvious pitfalls. Sadly, this has not been the case.  A number of small breweries have closed over the past 12 months.  This is not surprising as the pundits and others have predicted this fall out for some time as these closings are not focused on just one market or state, but in all 50 states.

The recent closing and foreclosure of Green Flash Brewing Co. is the first closing that has caught many by surprise.  GF was a brewery that was selling almost 100K bbls. per year.  They closed two breweries, laid off 75 people, pulled out of 42 states and are now being sold off!

Many industry pubs have written about what went wrong with GF through yearly timelines.  All indicate very poor senior management decisions from package sizes, flavors, and pricing.  Through rapid, and what appears to be the uncontrollable expansion eastward, the brewery imploded.  Management did not provide the products and packaging the consumer was looking for simply because they, management, did not listen to their people.  In other words, GF was telling the consumer what to drink, not listening to what the consumers were telling them.

Is it possible that GF had another agenda?   Was that other agenda to create a national growth trend and expansion to catch the eye of a potential buyer?  Grow the volume and pad the numbers so that a major brewer would take notice and make an attempt to acquire GF?  Why not?  It has happened before!

Perhaps GF’s timing was off by five years on either side.  In 2013, the craft segment was on fire, while major breweries and PE firms were kicking tires everywhere.  In 2023, by focusing on their own backyard and not aggressively expanding, GF, with five more years of solid financial and volume growth, might have been in a stronger position to sell out.

Whatever GF had designed it did not work which all comes back to leadership.  As they say, “you don’t lose with the same team twice.”

Most brands start with a strong base and kept a strong belief…

 

 

 Posted by at 6:00 am

  2 Responses to “Most brands started from a strong base and kept a strong belief.”

  1. The Heileman piece brought back memories. GF story is the same with many other craft breweries; they need the proper plan and leadership.

    Elvis

  2. G, you brought back some fond memories.we had G Heileman brands during the heyday. What fun going to lacrosse Wisconsin each October for their national convention and October feast. Along with Russ was John Pedace and Ron Kowolski . The guy who had their brands in Chicago was Jerry Campagnia who sold something like 6-7 million cases. All gone

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