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Reorganization at Stroh means cuts, 'brokering.' (The Stroh Brewery Co.)

Reorganization at Stroh means cuts, `brokering'

After weeks of widespread rumors of impending doom and guessing among beer industry members, The Stroh Brewery Co. recently revealed its plan for marketing beer in the 1990s. The nation's third-largest brewer, which has suffered sales and marketshare losses in recent years, has indicated that it will supplement traditional use of beer wholesalers with broker-type representatives in some markets and a severely-reduced corporate staff.

Approximately 300 Stroh employees--200 at the company's Detroit headquarters and 100 field staff members--have been terminated. As a result, several top positions at the brewery have changed hands. Namely, Peter Cline has been promoted to senior vice president, sales and marketing; George Kuehn has been promoted to senior vice president, general counsel and secretary; Dan Brooking has been named national sales director; and William Henry is Stroh's new senior vice president of finance. These changes follow the previously-reported resignation of both Art Tonna, senior vice president of operations, and Ralph Camponigro, chief financial officer (See MBA Tab, September 11, 1989).

The cuts, which follow the dismissal of some 900 workers in 1985 when Stroh closed its flagship brewery in Detroit, will save the brewer millions of dollars in overhead, sources say. But the move also leaves hundreds of well-qualified and experienced industry veterans, many of whom are in their fifties and sixties, unemployed.

Effective Sept. 1st

The overhaul, while kept a near secret to much of the industry, was effective September 1st. Stroh field sales layoffs were announced September 5th, according to one source, as the salesmen and saleswomen were called to Detroit following word that changes would be made. Stroh wholesalers were informed of the cutbacks and changes a short time later, through a series of letters.

In a statement released by the company, Peter Stroh, chairman, indicated that the recent move was the result of the company's inability to find a partner or buyer for its struggling brewing operation.

Strained financial situation

"Several companies have expressed an interest in joining with us," Stroh said. "However, we have been unable to conclude a satisfactory arrangement. At this time, the process is continuing, but there is no way to judge when, or if, we will bring these discussions to a satisfactory conclusion. Since our efforts to compete aggressively have left our financial situation severely strained, we must take decisive measures if our company is to proceed."

Stroh continued that in addition to the restructuring, the company was forced to "eliminate all but the most essential business functions" and has "initiated a rigorous program of cost control." As a result, community-support programs have been suspended, as well as Stroh's membership in The Beer Institute.

Use of `brokers'

Specifically, the brewer will now employ "broker-type" representatives in markets where sales lag--such as the East and West Coasts--to augment Stroh-wholesaler selling. The "brokers" will sell only to chain-store operations and are employed at the brewery, rather than wholesaler, level.

"Use of the term `broker' is not right," one Stroh wholesaler, who asked not to be identified, said. "They are actually representatives of the brewery as they will call on the chain stores and do some work in the chain-store network." Beer wholesalers, he maintained, will still be used.

The reorganization does not sit as well with all industry members, however. "How can you maintain the three-tier system with the use of brokers," Mark Rodman, former general counsel, National Beer Wholesalers Association, and wholesalerconsultant, asked. "The margins will not be maintained at the wholesale level," he said, "but will be moved either up to the supplier or down to cost reductions for retailers."

According to Rodman, the move should not have come as a total surprise to beer wholesalers as Stroh stated in 1986 that it needed to utilize "a network of wholesalers that are organized in a contemporary mode," while also referring to "dual market systems and food brokers."

Calling the movement toward broker-type representatives "premeditated," Rodman added that the recent development was intended to make Stroh's network of over 1,000 wholesalers "feel insecure."
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Publication:Modern Brewery Age
Date:Sep 18, 1989
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