Pabst Brewing to Transfer Majority of Production Volume to City Brewing By December 2024

Pabst Brewing Company today announced a long-term agreement to brew the majority of its production volume at City Brewing Company by December 2024.

The Los Angeles-headquartered beer company’s agreement with City Brewing lasts until 2040.

“We are thrilled to establish this long-term partnership with City Brewing. We have great respect for George Parke and his family, and also for the management team’s operational excellence, and the entire organization’s commitment to quality,” Pabst chairman and CEO Eugene Kashper said in a press release. “For over 175 years, Pabst has celebrated both tradition and innovation, and we are proud to offer some of America’s most iconic beers. This partnership provides clarity and certainty for our employees and our customers, and will allow us to innovate more effectively.”

“We are pleased to welcome Pabst as a long-term partner,” City Brewing chairman and CEO George Parke added in the release. “This long-term commitment accelerates our ability to move forward with an investment program to expand our facilities and enhance our capabilities — which will provide a huge benefit to all of our customers. We look forward to brewing PBR and some of the other great brands in Pabst’s portfolio that are beloved locally and nationally.”

The expectation is Pabst Brewing will wrap up its production through MillerCoors (Molson Beverage Company) over the next five years, although no volume will be moved in 2020. The exact timeline and transition plan have not yet been determined.

City Brewing operates contract production facilities in Memphis, Tennessee; Latrobe, Pennsylvania; and La Crosse, Wisconsin.

News of the new contract agreement comes one year after Pabst Brewing settled a lawsuit against MillerCoors over contract production of its brands — including Pabst Blue Ribbon, Lone Star, Schlitz, Old Milwaukee and others — which the company claimed could have forced it out of business. At the time, both companies said they amicably resolved the issues in the case, and Pabst said it had reached a long-term solution to its contract production.

The lawsuit centered around a nearly two-decades old contract brewing arrangement between Pabst and MillerCoors that was slated to expire in 2020. However, Pabst held options to renew the contract through 2030.

Despite the renewal options, MillerCoors argued that it may not have the brewing capacity required to extend the contract. Volumes for the maker of Coors Light and Miller Lite have declined in recent years, and, as a result, the Chicago-headquartered company shuttered its production facility in Eden, North Carolina, in 2016.

MillerCoors notified Pabst in 2015 that the company would not have the brewing capacity to extend the contract arrangement through 2025. In turn, Pabst filed suit, claiming MillerCoors was attempting to “sabotage” its ability to compete. Pabst also argued that MillerCoors would have enough capacity to brew the nearly 4.5 million barrels of beer the company produces annually.

During last November’s trial in Milwaukee County Circuit Court, MillerCoors said it made between $70 million and $80 million annually brewing Pabst’s brands. However, MillerCoors claimed the $17 per barrel rate was below market rate, and the company would need $42 per barrel to continue brewing for Pabst.

For its part, Pabst had contended that the $42 per barrel rate was too expensive, and Kashper testified that if MillerCoors did not extend the agreement, his company could be forced out of business.

Attorneys for Pabst argued that MillerCoors breached its contract by rejecting its contract extension, and the company was trying to force Pabst out of business in order to claim its share of the sub-premium beer market.

According to the Milwaukee Journal Sentinel, Pabst negotiated to buy City Brewing in late 2015 but ultimately passed.

In 2018, Pabst Brewing shipments declined 10%, to 4.5 million barrels, but the company held 2.1% of the beer industry’s market share, the Brewers Association reported.

So far in 2019, Pabst ranks as the eighth largest beer company, with off-premise dollar sales of more than $385 million, down 8.2%, through October 6, according to market research firm IRI. Flagship Pabst Blue Ribbon’s dollar sales in off-premise retailers are down 6.2% year-to-date.

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