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What Is Pabst’s Game? Exercises Option to Buy Irwindale, CA Brewery; Natl Contract Manufacturer?

“Pabst exercised its option to purchase the Irwindale Brewery,” wrote Molson Coors in govt filing, “and such purchase is expected to close in the fourth quarter of 2020.”  Recall, Pabst option to purchase is for $150 mil, “including plant equipment and machinery and the underlying land.”   But what will Pabst do with it?  Irwindale capacity is 4.8 mil bbls.  Nationwide, Pabst only sold 4 mil bbls in 2019, INSIGHTS estimates.  And it lost 1 mil bbls, 20% of its biz in just last 2 yrs.  So far this yr, Pabst flattish, up 0.6%, in Nielsen all outlet yr-to-date thru 4/25.  That’s improvement. But still, adding so much “capacity (more than Pabst sells in in its entirety) and putting all of Pabst production on one coast would seem illogical,” as Consumer Edge’s Brett Cooper wrote.  So what gives?

“There Has to Be More to the Deal” That’s what Brett concludes. Recall, Pabst struck somewhat mysterious deal to contract brew with City Brewing in La Crosse, WI late last yr (moving all its production from Molson Coors by 2024).  So looking at Pabst purchase of Irwindale, “we believe that there is a potential plan for Pabst and City Brewing to create a national network of contract brewing services,” sez Brett.  That would be “a positive for smaller brewers and Boston Beer.”  A natl contract brewer “can lessen logistics and shipping costs for an entity like Boston Beer while offering future entrants to come into the brewing industry with an asset light model and national reach… We would not be surprised to see a more cohesive relationship between City Brewing and Pabst to assemble a nationwide contract brewing network.” 

Recent Timeline; Pabst Option to Buy City Revealed in Trial With Molson Coors  Here's quick recap of surprising recent timeline: In Oct 2019, S&P downgraded Blue Ribbon Intermediate Holdings, which owns Pabst, to list of “weakest link” companies, with “B-minus” or lower bond rating and “negative” outlook.  Yet in Nov, Pabst struck deal with City for longterm contract production.  Then in Jan, Molson Coors announced closing of Irwindale, plus Pabst option.  And on day Pabst option set to expire this week, Pabst exercised it.   

When Pabst did deal with City, ceo Eugene Kashper insisted to INSIGHTS “We’re not buying City Brewing nor planning to buy City.”  INSIGHTS not privy to final details of deal, but Eugene had negotiated to buy City way back in 2015, as revealed in trial with Molson Coors. At that time, with Not Your Father’s briefly hot, Eugene envisioned doubling to 10-11 mil bbls, and thought he would need more capacity.  Indeed, in Aug 2015, Eugene wrote City ceo George Parke that “current plan” was to exercise option to buy City “no later than” Jan 2017.  Gotta wonder whether some version of that option revealed in trial is what has now come to pass.  Will be interesting to see how Pabst/City relationship develops and what Pabst or Pabst/City will do with Irwindale.  

Publishing Info

  • Year: 2020
  • Volume: 22
  • Issue #: 100
Read 953 times Last modified on 05/12/2020