Pabst has managed to get itself backed into a very painful corner over this contract brewing deal they had, or have, with MillerCoors. The important question here being what the hell were these people thinking when they brewed it up? For what they’ve done is make their production entirely reliant upon one of their two major competitors for the same market.
Yes, of course, efficiency is good, lower costs are good, utilising spare capacity is a good thing. But still, passing over the actual production of the thing you sell to the people who compete with you to sell the very same thing does strike as pretty risky. And that’s just what Pabst did. Their contract is that they don’t actually make any beer, they just market it. It’s MillerCoors which does the brewing. The thing being that MillerCoors also sells beer and attempts to do so to the same people that Pabst does. So, what do we think is going to happen when the contract comes up for renewal, or hits a reset or option point?
Well, those wise in the ways of nefarity in business will assume that the following will happen:
Pabst Brewing Company and MillerCoors are going to trial, with hipster favorite Pabst contending that MillerCoors wants to put it out of business by ending a longstanding partnership through which it brews Pabst’s beers.
If you could slice a major competitor out of the market well, wouldn’t you?
The case has high stakes for Pabst, whose lawyers argue that the company’s very existence relies on the partnership with Chicago-based MillerCoors, which produces, packages and ships nearly all its products, which include Pabst Blue Ribbon, Old Milwaukee, Natty Boh and Lone Star. MillerCoors, meanwhile, says it’s not obligated to continue brewing for Pabst and that Pabst doesn’t want to pay enough to justify doing so.
Basically, and not accurately, Pabst books the advertising space and MillerCoors does everything else. And given that it’s the brand bit of brewing that makes the money, not the brewing bit, why would you continue such an arrangement if you didn’t have to?
Paul Gatza, director of the Brewers Association, said he hasn’t seen the agreement between MillerCoors and Pabst. However, “a company that does not control its own beer production capacity would be at risk as the time of agreement winds down, particularly if there isn’t capacity at other breweries that would allow one company’s needs to be satisfied by other companies’ excess capacity,” he said.
Well, yes, that’s about as complex a business thought as the idea that maybe babies like breasts. Not that Yiddish is a language widely used in American brewing circles but this should be met with a heartfelt “Nu?”
There is obviously enough a minor mystery here, why the heck do hipsters like this Pabst stuff? Surely that’s taking post-modern irony a sip too far? I did, in my own teenage years, once attend a party where the beverage on offer was Pabst Red White and Blue Light – served warm. This was at about the same time that Brett Kavanaugh – and in roughly the same geographic location, even roughly the same sort of class and circle, but not the same actual party – wasn’t indulging in non-consensual sex. Let’s just say that the Pabst fuelled party didn’t rise to the consensual kind either. Perhaps it’s that hipsters have no taste?
But then we’ve this greater mystery. Who on Earth thought that this contract brewing arrangement was a good idea? To ship off the entirety of production to a competitor? And then to leave them with option points in the contract where they might refuse to continue the arrangement?
Not that this can actually be done but if I were a shareholder I’d be looking to track those people down and at the very least confiscate their pensions. At the very least.