Pabst says MillerCoors is trying to put it out of business

[Hari Seldon]

It's not MillerCoors fault.
It's Trump's fault. Everything is his fault, darn it!!

For once I agree with you.

 

[Hari Seldon]

I once drank part of a can of beer as a teenager. I do not understand how anyone can develop a taste for that sewer slop.

Spaten Oktoberfest! Sweet Baby Jesus, like drinking a meal.

 

[TU Curmudgeon]

This is all true.

Your ?Craft? Whiskey Is Probably From a Factory Distillery in Indiana

This goes for vodka and other whiskey too. Rumor has it that Tito’s ‘handmade’ vodka buys neutral spirit from them by the trainload.

The Chuck Cowdery Blog: The Truth About Tito's and All Vodka

And as for beer... Pabst is a good example of a marketed brand, but then again, so is Sam Adams.

If you want good Bourbon (yes, there actually is such a thing), try looking for products from Orphan Barrel. Their products range between 17 and 22 years old.

 

[TU Curmudgeon]

Beer is a choice beverage among drunks. Christians who want to please God abstain from drinking beer.

Quite right.

After all, Jesus didn't turn the water into beer (not even BudLite).

 

[TU Curmudgeon]

How about wine?

You mean "Jesus' Choice"? Perfectly acceptable.

 

[TU Curmudgeon]

I once drank part of a can of beer as a teenager. I do not understand how anyone can develop a taste for that sewer slop.

Reminds me of the old joke with the punch line of "Only child, I presume.".

 

[Threegoofs]

If you want good Bourbon (yes, there actually is such a thing), try looking for products from Orphan Barrel. Their products range between 17 and 22 years old.

I don’t do whiskey.

Bad experience with a bottle of Ten High in college...

 

[marke]

Quite right.

After all, Jesus didn't turn the water into beer (not even BudLite).

Jesus turned water into wine that nobody on earth had ever tasted before. It was nothing like the crap that men made in His day.

 

[Quag]

 

[Deuce]

Thanks for the explanation. I suppose in this time of Apple/Foxconn and so on I should not be surprised. But a beer company that does not brew its own beer is to me sort of like the Cowboys contracting with the Patriots to play their football games for them.

That sounds absolutely like something the Cowboys should do

 

[Moderate Right]

Okay....So what if they are? Such is the way of capitalism and competition.

That was my first thought when I read this story a few days ago. But, you're not understanding the nuts and bolts of the issue. Apparently both companies have a signed agreement whereby Miller/Coors produces, packages and ships nearly all of Pabst's products. It's not a capitalism and competition situation. It is a contract issue. But, it was rather stupid of Pabst to allow themselves to be put into this situation, depending on a competitor to literally be in existence. In the end, the legal interpretation of the contract will determine who is right and who is wrong. This is a very interesting case.

 

[Xelor]

That was my first thought when I read this story a few days ago. But, you're not understanding the nuts and bolts of the issue. Apparently both companies have a signed agreement whereby Miller/Coors produces, packages and ships nearly all of Pabst's products. It's not a capitalism and competition situation. It is a contract issue. But, it was rather stupid of Pabst to allow themselves to be put into this situation, depending on a competitor to literally be in existence. In the end, the legal interpretation of the contract will determine who is right and who is wrong. This is a very interesting case.

Red:
The contractual nature of the matter did not elide my notice.

From the article:

[The] contract expires in 2020 but provides for two possible five-year extensions. The companies dispute how the extensions should be negotiated: MillerCoors [MC] argues that it has sole discretion to determine whether it can continue brewing for Pabst, whereas Pabst says the companies must work “in good faith” to find a solution if Pabst wants to extend the agreement but MC lacks the capacity.​

• 
  [*=1]"Pabst needs 4M to 4.5M barrels brewed annually and claims MC is its only option.
  [*=1]"Pabst says MC wouldn’t agree to an extension unless Pabst paid $45/barrel — 'a commercially devastating, near-triple price increase' from what it pays now."
  • 
    [*=1]Xelor: MC is free to charge whatever it wants for the product it produces. Pabst can take it or leave it.
  [*=1]"MC [informed Pabst] it would close its brewing facility in Eden, NC, and that it eventually might have to shutter another facility in Irwindale, CA. Pabst contends that MC refused to provide any information to substantiate its claim that it would no longer have the capacity to continue brewing Pabst’s beers, and that it wouldn’t consider leasing the Eden facility and would only sell it for an “astronomical” price....MC said Pabst’s proposals to keep the Eden facility open “were commercially unreasonable” and that Pabst sought “a windfall through litigation” instead of offering to pay enough to keep a facility open.
  • 
    [*=1]Xelor:
    • 
      [*=1]MC is not obliged to support its assertions about what is and isn't viable for it, given its own business and profit goals.
      [*=1]MC is not obliged to lease the facility(s) to anyone. MC doesn't want to assume the business risks associated with retaining ownership of the facility, and that's that.
      [*=1]MC owns the facilities and is free to demand whatever selling price it wants for them, and prospective buyers are free to pay it, haggle for a lower price, or, if the haggling outcome isn't to their satisfaction, not buy them.
  [*=1]"Pabst depends on MC because the only other U.S. brewer with capacity to make its products is Anheuser-Busch, which doesn’t do contract brewing."
  • 
    [*=1]Xelor: That is what it is. Apparently Pabst isn't interested in building a facility of its own so it can supply its own demand for product.
  [*=1]"Pabst’s attorneys say the report had sections focused on how to 'eliminate Pabst altogether' and noted that MC would need to close two breweries 'to be sure they don’t have excess capacity for contract manufacturing.'"
  • 
    [*=1]Xelor: Maybe that's so; maybe it's not. Either way, MC is certainly free to uses its resources and competitive position to "deny" its competitor sales to customers. Not many firms are fortunate enough to be in a position to do that in such a targeted way as MC is with regard to Pabst, but make no mistake, denying sales to their competitors is the point of every firm's marketing efforts.

Blue:
Well, it may not have been absurd when the contract (and/or any similar predecessor contracts) was negotiated and at the times of subsequent renewal. It's clear, however, that the folly of Pabst's entering into that arrangement and, apparently, having no viable fall back plan (other, seemingly, than "bitch, moan and litigate") to deal with the risk that MC may not care to renew the agreement is most certainly absurd.


Pink:
I suppose...

I think it's interesting legally for it tests the notion of firm (MC) to control its own destiny based on its own assessments of what its owners/managers think best. That notion goes to the very heart of laissez-faire.

From a business strategy standpoint, I don't find it all that interesting, but I'm sure the matter will (likely already has) make its way into marketing, operational management, business ethics, and business strategy lectures in MBA and undergraduate business courses. It's not often such trenchant illustrations of poor planning come available.

 

[Xelor]

... It's not a capitalism and competition situation. It is a contract issue. ...

Red:
Au contraire. It's all about capitalism and how it's allowed to function in the US. It's also about how firm's are permitted to use their competitive position to their fullest advantage.

Microeconomics --> Buyers, sellers and price elasticity of demand:

• Pabst demands some 4M barrels worth of beer production (productive capacity + the inventory that capacity generates).
  • Pabst can obtain that capacity/beer in two ways: create it on its own or purchase it from someone else.
• What is the nature of Pabst's elasticity of demand for the capacity/beer? At the moment, it appears to be highly inelastic, though not perfectly so; however, that could change.
  • How might it change? A variety of ways, two being Pabst opting to exit, or shrink its presence in but not exit, the "low price" domestic beer market. Another option, rebrand it's product, or a share of it, so it can sell it at higher prices.
• When a producer/one has a product or item another party wants to buy, the seller, not the other party, sets a price for that product/item.
• What is the nature of the demand the seller faces for the product/item? Well, that depends:
  • As the quantity of available substitutes (from the buyer's POV) decreases, the inelasticity of demand the seller experiences increases. In the case of Pabst and Miller, it appears, from Pabst's POV, there are no substitutes.
    • I don't know if that's absolute and existential because the article doesn't say anything about whether Pabst can, from an assortment of smaller producers, obtain the capacity/beer it wants to purchase.
• At what minimum price should a seller price its inelastically demanded product/item? At or above whatever price allows it to maximize its returns/profits. See the following:
  • Profit Maximization
  • Determining the ideal price given elasticity of demand

Marketing --> Competitive situation/position

• A seller's competitive position in the market gives it certain advantages and presents it with certain challenges. Miller and Pabst compete directly in the low-price domestically-produced product (LPB) segment of the beer market.
• The competitive position in which Miller finds itself -- shrinking consumer demand for LPB, excess internal production capacity, and a competitor that, for its profitability and perhaps ongoing existence, depends on Miller -- Miller would, given the decreasing demand for LPB, be foolish not to avail itself of the opportunity it currently faces to drive a major competitor out of the market segment in which both firms compete directly. Miller may not succeed in doing so, but it makes sense to try.

Economic consequences:

• If Miller manages to freeze Pabst out of a segment of the beer market, several things stand to occur:
  • Demand for LPB holds steady:
    • Remaining producers -- Miller, A-B, and others -- in that segment will expand their "footprint" by supplying the demand.
    • Some firms may enter the market segment.
    • An existing or new producer may attempt to capture Pabst's market share by buying Pabst's brands, recipes and/or assets and brewing beer.
  • Demand for LPB continues to fall --> Remaining producers will supply it until it becomes unprofitable for them to do so, whereupon they'll exit that market segment.
  • Demand for LPB increases:
    • Remaining producers will supply it to the extent they can and try to prevent new entrants into the market.
    • Seeing the opportunity, entrepreneurs will enter the market segment it in order to garner profits by filling a portion of the demand for LPB.

A similar situation occurred in 2010 the watch industry. Swatch Group/ETA, faced with decreasing demand for wristwatches in general and mechanical ones in particular, decided to stop making watch movements for non-Swatch Group firms. Literally thousands of watch firms that lacked their own movement manufacturing capacity became apoplectic over that decision. The sense of that decision from a competitive standpoint was obvious, but ETA supplied movements to some 80%+ of the global watch industry. Similarly, the nonsense of it -- supplying movements was a huge cash cow for ETA/Swatch -- was clear. Thus the gambit was that by driving some competitors -- ETA had no idea of which ones specifically -- out of the market, Swatch/ETA would realize increased profits due to there being fewer players and it being the dominant player in the market. Apparently, that didn't play out as ETA had hoped.

 

[Obscurity]

No choice in the beer market? Any city over 10,000 has a dozen or more locals to choose from, + hundreds of nationwides. Pabst, Milwalkee's Best, disappeared from our market years ago. Beer shelf space has tripled.

If there's any free market in the US it would be beer.

You're right, to a point. The majority of the market is owned by less than a handful of companies. So unless you're buying exclusively micro-brewery beers, you're buying into Inbev, coors, etc.

 

[jimbo]

You're right, to a point. The majority of the market is owned by less than a handful of companies. So unless you're buying exclusively micro-brewery beers, you're buying into Inbev, coors, etc.

I do buy nearly all micros. That's because I have a choice.

About 30 years ago conventional wisdom decreed that there would be three large beer companies. Conventional wisdom was wrong. By several thousand. Which is the point of the free market.

 

[Threegoofs]

From Associated Press

Pabst says MillerCoors is trying to put it out of business
​

MILWAUKEE (AP) — 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.

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.

The trial in Milwaukee County Circuit Court begins Monday and is scheduled through Nov. 30.

Pabst’s attorneys have said in court documents and hearings that MillerCoors LLC is lying about its brewing capacity to break away from Pabst and capture its share of the cheap beer market by disrupting Pabst’s ability to compete. At a March hearing in which MillerCoors tried to have the lawsuit dismissed, Pabst attorney Adam Paris said “stunning documents” obtained from MillerCoors show that it went as far as hiring a consultant to “figure out ways to get rid of us.” MillerCoors has called that a mischaracterization of the consultant’s work.

COMMENT:-

Enough with all of this trivial "Trump this" and "Trump that" crap - this is REALLY important political news and the MSM is almost totally ignoring it!

PS - Anyone who even begins to think that the relationship between "Pabst" and "MillerCoors" is even remotely similar to the relationship between "The Republicans" and "The Democrats" will be severely chastised. I mean the labels on the bottles of beer that "Pabst" sells and the labels on the bottles of beer that "MillerCoors" sell are COMPLETELY different and you can tell which one of them is better just by looking at the label so does it actually matter that they put exactly the same ingredients in the same vats to brew them?
​

We can all rest easy now. The case was settled and Pabst will be brewed by MillerCoors thru 2025.

PBR fans rejoice: Pabst reaches last-minute settlement with Chicago's MillerCoors - Chicago Tribune

Enjoy your bad beer, hipsters.

 

[TU Curmudgeon]

We can all rest easy now. The case was settled and Pabst will be brewed by MillerCoors thru 2025.

PBR fans rejoice: Pabst reaches last-minute settlement with Chicago's MillerCoors - Chicago Tribune

Enjoy your bad beer, hipsters.

America has managed to weather yet another "Constitutional Crisis" (that was engineered by the Obama/Clinton International Conspiracy thanks to the brilliant leadership of Mr. Trump (of course the leaked eMails showing that the reason that Molson/Coors had put out for terminating the contract was pure BS had absolutely nothing whatsoever with the "successful" resolution of the matter).

I do wonder how much of an increase in price Molson/Coors is going to get away with imposing on Pabst?