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Stroh digging in for industry battle.

Stroh digging in for industry battle

Slumping sales and employee morale, rejection by a larger rival and discouraging words from a smaller takeover target haven't tapped out the Stroh Brewery Co.'s will to survive, its executives say.

"We've had to do a lot of radical things at Stroh," President Roger Fridholm said. "We've restored our staying power. We've gone from being buyers to sellers to, perhaps, buyers again."

Fridholm described a chain of events dating to 1988, when Detroit-based, privately-held Stroh still was the nation's No. 3 brewer behind Anheuser-Busch and Miller and had 800 more employees than today.

Swamped by the bigger brewers' advertising and marketing budgets, a five-year slide by its flagship Stroh's brand and weakening of its Old Milwaukee and Schlitz Malt Liquor brands, Stroh sales dropped 9.8 percent in 1989.

Since the Coors deal went flat late last year, Stroh's has retrenched by renegotiating its debt, closing its brewery in Van Nuys, CA, and selling off assets including its ice cream business and Sundance non-alcoholic fruit beverage.

Last week, Stroh announced interest in acquiring G. Heileman Brewing Co. of La Crosse, WI, a merger that would return the company to third place ahead of Coors.

Heileman, also debt-ridden and fighting a 1989 sales decline nearly as large as Stroh's, is trying to sell off soon-to-close breweries in St. Paul, MN, and Frankenmuth, MI. But that company has said emphatically that it isn't for sale.

"Stroh doesn't have the resources or the management for such an acquisition," Heileman President Murray Cutbush said, "and their offer may be rhetoric to divert attention away from the company's problems."

But Fridholm and other executives said Stroh's bid for survival doesn't hinge on the Heileman deal.

The key to Stroh's retrenchment might be the $300 million to $400 million the company expects to generate by selling its one-third stake in La Cruz del Campo, Spain's leading brewer.

That sale not only would erase Stroh's remaining debt but also would provide new cash for other possible acquisitions, Fridholm said.

"This is the key component of our long-term strategy," senior vice president George Kuehn said. "We strenthen ourselves financially and increase our ability to spend money on marketing and promotion."

Stroh's already has rejoined the promotional battle. The company is launching a revamped broadcast advertising campaign after shying away from the airwaves in the months since the Coors debacle.

"It was a pretty distracting time for us when we didn't go through with the Coors deal," said Peter Cline, vice president for sales. "It took some time to regroup."

An industry analyst suggested Stroh's shouldn't give up its efforts to court Heileman.

"If you combine Stroh and Heileman, you have a new vehicle that can do things that neither company can do individually -- namely, introduce new products," said St. Louis-based industry analyst Robert S. Weinberg.

Fridholm, however, admitted that his hopes of keeping Stroh's viable might be realized not by acquiring a smaller brewer but by taking exactly the opposite direction.

"We see a very rapidly emerging global industry, and Stroh's task is to--through restructuring--get itself into one of the leading companies, but not necessarily in a majority position," he said.
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Publication:Modern Brewery Age
Date:Jun 4, 1990
Previous Article:Guinness Import names new agency for Bass.
Next Article:A-B gains on Heileman in state of Wisconsin.

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