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A MillerCoors consultant once had a strategy for how to “eliminate Pabst altogether”

Tim Nelson
November 13, 2018

As the legend goes, Pabst Blue Ribbon got its name after earning the distinction of “Top Beer” at the World’s Columbian Exhibition in Chicago way back in 1893. Its fortunes have risen and fallen in the years since, and now comfortably enjoys a reputation as the ubiquitous cheap beer of choice in hipster enclaves across the country.

But despite PBR’s cultural caché, Pabst’s stability these days is more precarious than you’d think. They’ve had to rely on the outside help of MillerCoors to handle production, and now that is under threat. In fact, the Associated Press reports that a trial currently before Milwaukee County Circuit Court finds PBR fighting for its life.

The contentious partnership between Pabst and MillerCoors dates back to 1999. The two brands struck up an agreement that sees MillerCoors (which enjoyed a 24.3% market share for beer in the US last year ) produce between 4 and 4.5 million barrels of the beers under the Pabst umbrella: Pabst Blue Ribbon, Old Milwaukee, Lone Star, and National Bohemian.

That was all well and good for a while, but the two sides aren’t seeing eye to eye when it comes to how the two possible five-year extensions to the deal (currently set to expire in 2020) are to be negotiated. It’s MillerCoors’ belief that because they brew the beer they have sole discretion over the future of the arrangement. Pabst, on the other hand, believes that the extensions should be argued in good faith if a situation were to arise where Pabst wanted to keep the deal going but MillerCoors lacked the capacity to keep up production in full.

The lawsuit was initiated because MillerCoors insists the “lack of capacity” scenario has come into play, but Pabst disputes the validity of those claims. During negotiations in 2015, MillerCoors announced its plans to shutter an Eden, North Carolina, production facility, and intimated that the same would have to be done for another in Irwindale, California. Pabst felt it was not given a sufficient reason as to why such moves had to be made, while MillerCoors thinks Pabst’s proposed efforts to keep the Eden brewing facility open are “commercially unreasonable.”
 

Subsequently, Pabst feels that MillerCoors hasn’t made an effort to negotiate in good faith. As evidence, Pabst’s attorneys cite a damning report prepared by a consultant MillerCoors hired in 2013. It included a strategy for how to “eliminate Pabst altogether,” concluding that closing two breweries would be necessary “to be sure they don’t have excess capacity for contract manufacturing” that Pabst relies on. MillerCoors also refused to agree to an extension unless Pabst agreed to pay $45 per barrell, which the latter described as a “commercially devastating, near-triple price increase.”
 

Pabst is seeking in excess of $400 million in damages, plus an injunction requiring MillerCoors to honor the contract. MillerCoors court filings characterize Pabst as seeking “a windfall through litigation."
 

With the market share for bigger beer brands eroding over time, neither side really feels it can afford to lose. If Pabst wins, it’s a drain on Millercoors’ resources in a tightening marketplace. If Pabst loses, it may light outs for the iconic brand. Anheuser-Busch, the only other brewery with the production capacity to meet their needs, doesn’t do contract brewing.
 

So is it time to start stockpiling PBR? Maybe not just yet. After all, the current contract isn’t up until 2020, and it’s entirely possible this legal battle will drag for months (if not years) beyond the scheduled November 30 end date for the trial. Still, you may want to savor any future Pabst beers a little bit more than normal: You never know which one might be your last.  

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