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Coors bid for Stroh signifies fiercer competition in the 1990's.

Coors bid for Stroh signifies fiercer competition in the 1990s

U.S. brewery consolidation, the means to growth and survival for many companies in the 1980s, appears to have reached its greatest pinnacle with the announcement last week that number-four Coors Brewing Co. has agreed to purchase the beer-related assets of the third largest brewer, The Stroh Brewery Co. The $425 million purchase, if approved by the Justice Department, signals the advent of an even more competitive industry in the 1990s.

Under terms of the deal, Golden, CO-based Coors said it will assume certain long-term debt and other selected liabilities, with the balance to be paid in cash. Coors will use both internally-generated funds and external borrowings to finance the cash portion of the purchase price, the brewer stated.

In return, Coors will acquire a number of Stroh brands, five breweries and two can-making plants. The acquired brands include Stroh's and Stroh's Light, Schlitz and Schlitz Malt Liquor, and Old Milwaukee and Old Milwaukee Light. The brewing facilities affected are Stroh's plants in St. Paul, MN; Tampa, FL; Winston-Salem, NC; Longview, TX; and Allentown, PA. Additionally, Stroh's can plants in Winston-Salem and Longview would become Coors owned.

Two other Stroh breweries, however, in Memphis, TN, and Van Nuys, CA, will remain with Stroh. The Detroit-based company will also continue its non-beer beverage business, which includes Sundance sparkling juices, White Mountain and California Coolers, and Primo beer.

19 percent market share

Combined Stroh/Coors market share, based on 1988 sales, is approximately 19 percent. Last year, Anheuser-Busch, Inc. had market share of 41 percent while the Miller Brewing Co. controlled 21-percent of total beer sales.

"The brewing industry is highly competitive," Peter Coors, chief executive officer and president, Coors Brewing, stated in making the announcement. "We believe that this acquisition provides us with a real opportunity to achieve our vision of becoming a major, long-term factor in the U.S. brewing industry."

Added Rob Klugman, Coors vice president of development, "The acquisition of these brands and facilities will make us a strong competitive number three in the brewing industry. As a more competitive force, we will be in a better position to supply and support our current and new wholesaler networks."

The new wholesaler network, Peter Coors told MBA, will remain intact unless individual market conditions warrant consolidation scenarios. When that becomes the case, he added, Coors will encourage buyouts which are the result of the wholesalers' "businessdecisions." Contactwith Stroh wholesalers at this point, however, is limited, Coors continued, because of antitrust regulations.

S&P suit

But before any beer wholesaling changes can take place, the deal itself, of course, must be approved. On Tuesday, S&P Co., parent of Pabst, Falstaff, Pearl and General Breweries, said that it would try to block the acquisition on the grounds that such a merger would violate antitrust law. The suit is in addition to the Justice Department investigation.

Coors' argument to foes, Peter Coors explained, is that the merger "is pro-competitive. For the last several years," he stated, "there has been a movement toward a two-brewery industry. A strong third brewer, however, enhances competition.

"Therefore," Coors continued, the deal would be "good for our business and good for consumers." He said that he is hopeful judicial officials will agree.

A G. Heileman Brewing Co. executive, meanwhile, has expressed doubt that the proposed merger will pass "rigorous antitrust guidelines." According to Murray S. Cutbush, president and chief operating officer, Heileman, "given the concentration in the brewing industry, the proposed Coors/Stroh combination raises obvious antitrust issues."

Heileman "is reviewing the issues raised by the combination with its antitrust counsel and will advance its position in the appropriate form at the appropriate time," Cutbush stated.

Uncertainties remain

Coors was unable to comment on the future of the Stroh workforce or particular Stroh brands and marketing, noting that such speculation "would be premature." He did say, however, that Coors would continue "full blast" with its recent popular-priced beer entries, Keystone and Keystone Light. The new line competes with Strohs' Old Milwaukee popular-priced beers.

"Although it was a difficult decision, I believe that of any of America's brewers, Coors is the most appropriate brewer to continue the legacy of Stroh's," Peter Stroh, chairman and chief executive officer, Stroh, stated. "Coors, which is still run by the founding family, shares my conviction that when your name is on the bottle, the product inside must be of the highest quality."

Other brands Coors will acquire include Signature, Schaefer, Goebel, Red Bull, and Silver Thunder. In addition, Coors intends to assume the licensing rights to Piels, Piels Light and Augsburger, the brewer said.
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Title Annotation:Coors Brewing Co., Stroh Brewery Co.
Publication:Modern Brewery Age
Date:Oct 2, 1989
Previous Article:Budget control.
Next Article:Wholesalers can breath easier after Coors sale.

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