Industry Consolidation Continues in U.S. Beer Market

In a series of moves that continue the ongoing consolidation of the U.S. beer market, the Stroh Brewery Co., Detroit, has agreed to sell its Henry Weinhard's and Mickeys brands to Miller Brewing Co., and the balance of its beer brands and its Lehigh Valley, PA, brewery to Pabst Brewing Co. The terms of the agreements were not disclosed and are subject to review by the U.S. Department of Justice. At the same time, San Antonio-based Pabst reached an agreement to transfer its Hamm's and Old English 800 brands to Miller Brewing.

"Given the highly competitive nature of the U.S. beer industry and the efficiency and productivity gains that will be realized as a result of this transaction, we believe these agreements make sense for all companies involved," said William Henry, president and CEO of Stroh Brewery. "While the decision to end Stroh's 149-year brewing tradition did not come easily, ultimately Miller and Pabst presented an offer we believe is in the best interest of our owners."

The transactions are expected to be completed simultaneously early in April 1999.

In addition to the acquisitions, Milwaukee-based Miller will expand its contract brewing arrangement of Pabst brands beginning this year. The expanded arrangement calls for a substantial increase in the production of Pabst products, including the brands that Pabst will acquire from Stroh. The additional contract volume as well as the four newly acquired Miller brands will be produced at Miller's breweries in Milwaukee; Fort Worth; Eden, NC; Albany, GA; Trenton, Ohio; and Irwindale, CA. Miller signed an agreement in June 1998 to contract-brew Pabst brands.

"This agreement provides us with brands which complement our portfolio as well as additional income through contract brewing," said Miller chairman and CEO Jack MacDonough.

Subsequent to the closing, Stroh will continue to operate its remaining five breweries under a transition services agreement until production can be shifted to a Pabst or Miller brewery. The transition services agreement period is expected to last approximately nine months. After production is shifted from the Stroh-owned breweries, Stroh will seek to sell its remaining breweries, either as operating facilities or for alternative use.