Pabst Brewing (page 2)

On December 31, 1923, Pabst Corporation acquired the business of the Sheboygan Beverage Company to continue the soft drink and Pablo operations.

With no hope of Repeal, Gustav Pabst resigned as President on December 23, 1921. Fred Pabst returned to the brewery as President to try saving the family company. In December 1923, Fred sold his cheese division of Pabst Farms with assets chiefly in the form of bulk cheese inventory, to the Pabst Corporation. The cheese was produced at the Pabst Farms, but the brewery used their cellars to age cheese. The salesmen, trained in selling beer, found it difficult to readjust to sell the new product. With the help of advertising and strong campaigns, the cheese business thrived during Prohibition. Starting with 33 employees in 1925, the brewery employed 176 by 1927. Cheese was sold in three forms, Pabst wonder process cheese, Pabst-ett and pasteurized package cheese. Pabst-ett was the most successful. By 1930, over 8 million pounds of Pabst-ett had been sold.

Kraft Foods sued Pabst claiming Pabst had infringed on a Kraft patent for process cheese. Kraft won the case in 1927. The two companies entered into a licensing agreement in which Pabst-ett, a product similar to Velveeta, continued to be produced in Wisconsin, but was sold through Kraft.

The cheese operation was disbanded with the end of Prohibition in 1933. Kraft bought out the Pabst cheese operations, and Pabst started to get back in to the beer business.

With optimistic foresight, the Pabst Corporation bought the Puritan Malt Extract Company in Chicago on January 2, 1930. Two years later, Premier Malt Products Company voted to merge with the Pabst Corporation, and the name of Premier Malt Products Company was changed to Premier-Pabst Corporation. Fred Pabst, now in his sixties, wanted his brewery to excel after Repeal. Harris Perlstein, then President of Premier Malt Products Company became the President of the new combined Company.

After Repeal, Premier-Pabst Corporation was quick to get back into the beer business. Demand for the Pabst Blue Ribbon beer was so high, the company wasted no time in modernizing the Milwaukee brewery. On March 20, 1935, metal kegs were first adopted by Premier-Pabst. Compared to the first metal kegs at the turn-of-the century, the new metal kegs were much better for beer storage and transport.

Pabst needed more volume capacity. In 1934, Pabst opened a new brewery in Peoria Heights, Illinois. In 1946, Pabst purchased the Hoffman Beverage Company in Newark, New Jersey. By expanding toward the west, in April 1948, Pabst purchased the Los Angeles Brewing Company in Los Angeles, California. Now with Pabst beers brewed throughout the country, surviving as a National brand was eminent. In July 1935, Pabst became the first major brewery to test market their beer in keglined cans. Not knowing if the idea would work, Pabst did not print their top-selling brand, "Blue Ribbon" on the can. If the idea didnít work, Pabst believe their flagship brand would receive a bad reputation; and sales would drop. Instead, the idea worked; and Blue Ribbon was added shortly thereafter.

During the next six years before World War II, with Perlstein and Pabstís leadership, Pabst kept up with competition . On December 20, 1938, Premier-Pabst Corporation changed its name back to the Pabst Brewing Company.

Advertising was important to Pabstís strong market. June 1940, the slogan "Thirty-three fine brews blended into one great beer" was first used in national advertising. In 1943, Pabst started advertising on national radio network. It wasnít until 1950 when Pabst started to sponsor boxing on CBS-TV in 1950. Production and sales soared in the early 1950s. Now with Pabst Brewing Company growing in the early 1950s, Fred Pabst retired as Chairman of the Board in May 1954.

After Fred Pabstís retirement, sales started to slip for Pabst Brewing Company. Several unsuccessful campaigns such as "Pabst Blue Ribbon Time" campaign of 1956 and "Pabst Makes it perfect" campaign of 1957 only stabilized Pabstís sales. The introduction of 16-oz cans in November 1954 didnít help sales much.

Pabst Brewing Company was having some financial and marketing problems in 1958. Pabst needed new blood to survive the years to come. Harris Perlstein, then Chairman of Pabst, was under pressure from the Pabst family, which has staged a proxy fight to try to oust him and regain control of the Company. Perlsteinís main concern was survival. Pabst familyís effort failed when Perlstein reacted by hiring Blatz Brewing Company President James Windham, who was responsible for reviving Blatzís market share in the 1950s. Windhamís reputation in the industry was respected by many breweries. Windham, at first, did not want to join Pabst as the new President unless he could bring Blatz with him. Perlstein agreed, welcoming Windhamís dowry of Blatz Brewing Company and its aging Milwaukee plant. The first campaign under Windhamís regime was on April 1958; Pabst passed the 100 million barrel spot since its beginning in 1844. A red stripe was added to blue ribbon logo to celebrate the memorable event. The red stripe is still with the logo today.

Windham wanted to bring Blatz with him because he needed to increase Pabst volume to stay on top of competition. But Windham didnít get a chance. The Justice Department brought suit almost immediately, wanting Pabst to divest itself of Blatz, Pabst fought the antitrust case for 11 years, even to the Supreme Court, but lost. Blatz was sold to G. Heileman, which was later to play its own nuclear role in Pabstís future. Windham, meantime, was never sure heíd keep Blatz, sought another way of generating substantial volume. He did it by lowering the price of the companyís flagship Pabst Blue Ribbon brand in some parts of the country.

The short term effect was successful. Pabst had instant volume. Pabst Blue Ribbon beer was known as "The Premium Beer at a Popular Price." This helped Pabst ride the 1960s boom in beer market, a market Windham predicted.

By 1961, Pabst was smashing company sales records. Revenues hit $175 million, an increase of 16 percent from the year before. Net income was averaging $5 million. From 3.9 million barrels annually in 1958, Windhamís leadership brought Pabstís volume to 10.5 million barrels by 1970 and then to its all-time high volume of 18 million barrels in 1977. From the outside, Windham appeared as a brewery industry hero, but his influence was spotty. Windham allowed a haunting fear of debt to cloud his vision from his experiences from the Great Depression. He depended only on cash to finance modernization and new facilities. This decision of cash management would come back to haunt Pabst Brewing Company in the form of skyrocketing production costs. In turn, Pabst built only one new modern and efficient brewery during the prosperous 1960-70s. (The town of Perry, Georgia changed its name to Pabst, Georgia until G. Heileman purchased the plant in 1983, and the town went back to being called Perry.)

There were other strategic errors caused by Windham. By keeping the Company substantially debt-free, he made the Pabst balance sheet attractive to the takeover artists who would come swarming around after his retirement. Management at the top was thin. He ran the company with an iron fist. When Windham made a decision, you could not challenge or disagree with him. Windham had a forceful personality. One brewery worker recalls, "You could hear him all over the building when he was upset."

In 1973, a heart attack forced Windham into semi-retirement. He ran the Company as Chairman and Chief Executive Officer from his Mississippi home. Frank DeGuire became the new President of Pabst. Still, Windham continued to control the Company until his death in 1977.

In 1977 Pabst Brewing Company had over $70 million cash in the Bank of Delaware. Immediately after Windhamís death, takeover artists from all over the country were after Pabstís assets. DeGuire did not have an easy task for the next three years. He spearheaded Pabstís defense against all takeover artists. At first, an unfriendly takeover by APL Corporation of Long Island, New York (a manufacturer of cocktail swizzle sticks). APL was heavily in debt, and if successful, was to use Pabstís assets to finance the acquisition. DeGuireís defense was so successful, the APLís two-year acquisition fight was blocked by the Commissioner of Securities.

Now that APL was out of the way, Pabstís days in the ring were far from over. The company management had little time to catch its breath before a new, and ultimately far more destructive, takeover battles were joined.

As DeGuire continued to fight off takeover artists, Pabst needed a marketing expert, someone to solve Pabstís image problem created by Windhamís "Premium beer at a popular price" strategy. Pabst Brewing Company hired Anthony Amendola, the President of DíArcy MacManus Masius Advertising Agency, as the new President of Pabst. Amendola was credited with sending Anheuser-Busch sales soaring in the 1970s. DeGuire stayed on as CEO and Chairman.

Amendola believed there was nothing wrong with the Pabst Blue Ribbon product itself. It just wasnít appealing to the young beer drinkers. The older beer drinkers, who were loyal to the brand were dying off. In turn, Amendola created the "Give that man a Blue Ribbon" campaign - arguably more memorable than the ad campaigns immediately preceding Amendolaís arrival at Pabst.

Pabst acquired the Blitz-Weinhard brewery in 1979. The acquisition got Pabst the number one selling malt liquor brand, Old English 800 and sales increased 33 percent, largely due to the malt liquor market. During 1979 and 1981, the DeGuire- Amendola relationship was a tense one. DeGuire and Amendola attempted to put together a leveraged buyout of Pabst. Both couldnít come to an agreement, and DeGuire backed out at the last minute. Amendola put together a presentation to the Pabst board as to why DeGuire should be fired.

The Board trusted DeGuire. They did not have the highest regard for his leadership, but they trusted him. Amendola was eventually fired in 1981. He was quickly hired by Schlitz, where he stayed for six months until Stroh bought out Schlitz later that year. About the same time, DeGuire resigned his position at Pabst because he saw another takeover battle, the Heileman buyout. DeGuire recruited several "action oriented" people to the Pabst Board. William Kimberly - Kimberly-Clark Corp, Frederick Stratton - Briggs & Stratton, and Milwaukee financier Sheldon Lubar, to fight off Heileman.

The Pabst Board needed a new leader. The Board took a chance and hired Bill Smith, former President of the Pittsburgh Brewing Company. At the same time, takeover battles continued. Minneapolis businessman, Irwin Jacobs, entered the ring by buying 8 percent of Pabst stock and eventually 15 percent. Speculation of Jacobs attempting to take over the whole company caused problems to the Board. Jacobs had been labeled "The Liquidator" after he bought Grain Belt Brewing Company and sold the assets to Heileman. The reputation stays with him to this day. Jacobs formed the Shareholders Committee to Revitalize Pabst and called for a proxy contest to oust the Pabst Board and replace it with his own committee. Eventually, both Heileman and Jacobs were fought off by the Board created by DeGuire, but at what cost? To stop Jacobs, Pabst paid over $11 million in legal fees.

Under Bill Smithís leadership, many changes were made to keep the Company going. To tighten Pabst corporate belt, 17 Pabst Vice Presidents were fired. $80 million was spent on advertising, and $20 million in price discounts to wholesalers. Pabst also acquired the Olympia Brewing Company in 1982. Smith and another Pabst executive tried to structure an executive buyout, but could not arrange the financing. Pabst had closed the Peoria Heights, Illinois; Los Angeles, California; Portland, Oregon; Pabst, Georgia; and Newark, New Jersey plants. Pabst traded breweries with Stroh in 1983. Pabst traded their St. Paul, Minnesota (Theodore Hamm), for Strohís Tampa, Florida plant in 1983. Stroh eventually bought the brewery back in 1987.

After seven years of battling takeovers, the board gave the decision to sell the brewery in 1984. When California millionaire Paul Kalmanovitz offered to purchase Pabst Brewing Company in 1985 for $63 million, the news was not welcome in Milwaukee. Kalmanovitz has had a reputation of purchasing breweries and running them into the ground, only to profit on past reputation. Paul Kalmanovitz had been involved with the buyouts since 1982. Since his offer was the only one Pabst accepted, the deal was closed.

The next four years were not pleasant for Pabst. Once holding the number 3 position in the United States, Pabst was no longer a contender for the "National Brand". Many employees still believe Kalmanovitz saved the brewery to this day. Even though inside the brewery had high hope, the beer drinkers turned away from from Pabst Blue Ribbon label. Kalmanovitz cut out all advertising and terminated most of the management. His business strategy was to run a lean ship. With almost no advertising budget, he was able to cut prices. He also removed quality control. There was no consistency from one batch to another. He also bought the rights to many pieces of antique art work that had been in the Pabst family and had been part of the Milwaukee heritage for many years. He moved the art from Milwaukee to his home state of California, where he also ran the Company practically from his pocket checkbook. Pabst future looked serious. Brewing industry analysts believed Pabst Brewing Company would not be around after the year 1992.

In 1988, Kalmanovitz passed away; and Lutz Issleib took over as Chairman and President of Pabst. Issleib promised to devote his career by seeing Pabst make a strong comeback. Ironically, brewing industry analysts did not believe it could be done and suggested Pabst close shop. Issleib would not listen and followed his dream.

Immediately, Issleib managed to bring back sales and install a new sense of pride at Pabst. For the first time since 1985, Pabst was pouring money into advertising and its breweries. His dream is becoming a prophecy. Since Issleib took over, Pabst has been averaging a 9 percent increase each year. This year may be producing close to 8 million barrels compared to 5.9 million barrels in 1988. Today, Pabst has regained a great market share in the West Coast and the Midwest.

Currently, Pabst is enjoying its sixth year under Issleibís leadership. Despite brewing industry analystsí predictions five years ago, Pabst is on the rebound and is slowly regaining the market share it lost during the 1970s and 80s. Pabst has plans to expand their distribution beyond the Midwest and West Coast regions for 1994. Pabstís campaign "PBR Me ASAP" is now in its third year, regaining itís image of a "quality brewer" to the younger beer drinker market. Pabstís national distribution could happen within this generation.

As a fitting climax of 150 years of constant battling and successful efforts to keep up with the times, Pabst Brewing Company is a survivor. Pabst management teams and employees at both Milwaukee and Olympia plants are still carrying out the goals once set by the Bests and Captain Frederick Pabst a long time ago.

This story , by Bob Pirie, appeared in the American Breweriana Journal, Jan-Feb 1994.

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