Rumors of Stroh deal put industry in a tizzy.

The industry has been all aflutter in the past week, as rumors of a possible deal to sell Stroh to Pabst and\or Miller surfaced in the Milwaukee Journal Sentinel. The Stroh Brewery Co. has strongly denied the veracity of the rumors.

The reports naturally caused alarm among Stroh wholesalers. The Associated Press, for example, reported that the terms of the alleged deal would mean that "Stroh, the nation's fourth-largest brewer, would no longer exist - [and] Pabst would likely close most of Stroh's seven breweries."

The Stroh Brewery Co. swiftly moved to scotch the story. In a letter to Stroh wholesalers, CEO Bill Henry wrote "Contrary to news reports and rumors, there is no truth to the reports that Stroh has entered into an agreement to sell the company."

Henry noted that Stroh rarely comments on rumors or speculation, but wrote "In light of the intensity of the rumors, we feel that it is necessary to discuss Stroh's current position."

Henry observed that the competitive pressures present in the beer business today create an environment conducive to rumor-mongering. "It is no secret that the pricing environment and limited growth has made operating in the beer industry difficult in recent years," he wrote. "These difficulties, shared by Stroh, unfortunately help to fuel the rumors we are all hearing. I can assure you that although Stroh has challenges ahead. the company continues to be profitable and we will continue to meet all our financial obligations."

Industry sources indicate that talks have probably taken place between Stroh and other industry players, but there does not appear to be an imminent deal in the works.

In his letter, Henry alluded to an ongoing review of Stroh's strategic options. "Over the past year, we have analyzed a wide range of strategic alternatives," he wrote. "These include, among other things, pursuing a go-it-alone strategy, partnership-type ventures with other brewers, purchase or sale of certain assets and combinations with domestic or international brewers...These alternatives are not mutually exclusive."

Henry concluded the letter by assuring wholesalers that they will be kept apprised of any developments by company management, and needn't depend on "rumor mills or the newspapers."

Analysts generally gave Stroh the benefit of the doubt. "Given the strength of the denials, a wise man will wait and see if there is fire beneath all this speculative smoke," said Mark Rodman of Beverage Distribution Consultants, Swampscott, MA. "But wholesalers get lost in this. At the very least, it should cause Stroh wholesalers to reexamine their congenital overoptimism and their overdependency. Many Stroh wholesalers are dependent on their cash flow for Stroh\Heileman brands. By the same token, there are quite a few big specialty brewers that are dependent on Stroh capacity. Remove that capacity, and their options dwindle."

Meanwhile, the congenitally puckish Robert S. Weinberg, president of the Office of R.S. Weinberg, St. Louis, MO, offered a folksy homily pertinent to the situation. "It reminds me of the story about a pig and chicken," he said. "They are arguing about the virtue of eggs versus ham, and the pig says to the chicken, 'I can understand your point of view, but to you it's a contribution - to me it's a sacrifice.' The wholesalers will be the ones sacrificed in this."