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Anheuser-Busch buys Rolling Rock brands
Fate of Latrobe Brewing's plant, workers in doubt
Saturday, May 20, 2006

The $82 million sale of Rolling Rock brands to Anheuser-Busch poses a major obstacle to the survival of Latrobe Brewing, which until yesterday was by far the strongest survivor in a region once populated with thriving locally owned breweries.

Even though the price tag includes only the Rolling Rock brands, St. Louis-based Anheuser-Busch's offer topped the bids of other parties who wanted to buy the Latrobe plant as well, said Brenda Williams, a spokeswoman for InBev, the Belgian brewer that owns Latrobe Brewing.

InBev said bidders remain interested in purchasing the plant, which employs about 200 and has a capacity of 1.2 million barrels. But citing excess industry capacity, beer officials believe buyers will be reluctant to acquire a plant as large as Latrobe without having a big-name brew to produce.

"The whole game in manufacturing is capacity utilization," said Benj Steinman, editor of Beer Marketers Insights, an industry publication.

"Anyone who buys that plant has to have a plan for filling it. Otherwise, they're not going to make any money. That's the crux of it."

A Pittsburgh attorney representing a consortium of local and national investors who were interested in buying the brands and plant from InBev said investors won't be as interested in the plant now that the labels are moving out of town.

"It is difficult to imagine that anyone who understands the beer business would voluntarily attempt to build a beer business at a million barrel facility without a workhorse brand as a foundation," said Cris Hoel, who has represented Latrobe Brewing, Labatt and InBev in the past. "That doesn't mean it can't happen."

Mr. Hoel said the plant was well run and well maintained, which makes it all the more heart breaking that the jobs are now on the line.

Anheuser-Busch intends to begin brewing Rolling Rock and Rock Green Light at its Newark, N.J., brewery in August. The nation's largest brewer has enough spare capacity to take on Rolling Rock -- it produced 101.1 million barrels at its 12 U.S. breweries last year, down from 103 million barrels in 2004.

Latrobe Brewing's uncertain future comes as Pittsburgh Brewing, the brewer of Iron City, languishes in Chapter 11 bankruptcy. The company began formal negotiations with its union this week as part of its efforts to reorganize. Yesterday, the Lawrenceville brewer unveiled cans of IC Light featuring former Pittsburgh Steeler Jerome Bettis.

A third local brewery, Jones Brewing in Smithton, shut down after filing for bankruptcy on 2000. It emerged as a "virtual" brewer by getting Pittsburgh Brewing to produce Stoney's, its brand. Duquesne Brewing on the South Side closed in 1972.

Until recently, InBev had invested in the Latrobe plant and was promoting Rolling Rock. However, it has decided to focus its resources on promoting "the high-growth import brands in our portfolio," said Doug Corbett, president of InBev USA. Those brands include Stella Artois, Bass Pale Ale, Beck's, Brahma and Labatt Blue.

Improvements at the Latrobe plant in recent years should help attract buyers, Ms. Williams said.

"There is interest in the brewery," she said. "It's a great facility with great people. It's truly a state of the art facility."

One brewer who has survived without major brands is City Brewing in La Crosse, Wis. After purchasing a former G. Heileman Brewing Co. brewery from Stroh's in 2000, it began producing its own brands and sought contracts to brew products for others.

Today, it employs about 250 to 300 and produces about 1.8 million barrels annually. City Brewing's own beers account for only about 2 percent of the volume, with contracts for brewing Smirnoff Ice, Mike's Hard Lemonade, Arizona Teas and energy drinks accounting for the bulk of production.

George Sharkey, a business agent for one of two union locals at the Latrobe plant, acknowledged it won't be easy filling the brewery without a major brand.

"But there's contract beers and other avenues to pursue," he said. "It's a nice operating plant. That's why I think it will be attractive for somebody."

Mr. Sharkey disputed Ms. Williams tally of the plant's work force. He said Latrobe employs about 180 union workers and 70 nonunion workers. Union workers at the plant ratified a six-year contract last summer. The contract includes provisions for severance pay if the plant closes, Mr. Sharkey said.

Gov. Ed Rendell, who has been in touch with officials at InBev and Anheuser-Busch, will try to find investors interested in keeping the plant open.

"The governor is fully engaged in the conversation," spokeswoman Kate Phillips said.

Anheuser-Busch President August A. Busch IV said purchasing Rolling Rock is "an ideal opportunity to grow this historic brand."

What remains to be seen is how local fans of the iconic Rolling Rock brand will react to their beer being made in New Jersey.

"It is clearly not good for local consumption," said Peter Boatwright, a Carnegie Mellon University marketing professor. "Part of the appeal of any brand is its culture and locale, and beer is an especially brand-oriented purchase."

Mr. Boatwright said sales could fall initially before rebounding to normal levels. "Over the long term, I would expect sales to slowly drop ... unless Anheuser-Busch takes extra pain to maintain loyalty in our region."

In Western Pennsylvania, the job of promoting Rolling Rock falls to Frank B. Fuhrer Wholesale.

The South Side distributor announced this month it has a tentative deal to acquire distribution rights for Rolling Rock in the region from Barkley Distributing. Fuhrer, the nation's 17th largest beer wholesaler, is also the regional distributor for Anheuser-Busch and Coors products.

First published on May 20, 2006 at 12:00 am
Len Boselovic can be reached at lboselovic@post-gazette.com or 412-263-1941.