Molson Coors to Cease Production in Irwindale, California; Pabst Brewing Holds Option to Purchase Facility for $150 Million

http://xbr.sndui.com/news/molson-coors-to-cease-production-in-irwindale-california-pabst-brewing-holds-option-to-purchase-facility-for-150-million
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Molson Coors Beverage Company announced plans to cease production at its facility in Irwindale, California, by September 2020.

The second largest U.S. beer manufacturer also announced an agreement with Pabst Brewing Co., giving the Los Angeles-headquartered beer company the option to purchase the Irwindale facility for $150 million.

“This move will allow us to optimize our brewery footprint while streamlining our operations for greater efficiency across the network,” Molson Coors chief integrated supply chain officer Brian Erhardt said in a press release. “While it was a very difficult decision, we have extra capacity in our system and Irwindale’s production can be absorbed by other breweries in our network.”

The 40-year-old Irwindale facility employs about 470 workers and produced 4.8 million barrels of product last year — including Miller Lite, Coors Light, Miller High Life, Miller Genuine Draft, Steel Reserve, and Miller 64, among others — which was shipped to 261 independently owned wholesalers.

Molson Coors will begin moving production from Irwindale to its facilities in Golden, Colorado, and Fort Worth, Texas, over the next nine months.

As for Molson Coors’ arrangement with Pabst, the maker of Pabst Blue Ribbon will have 120 days after receiving notice from Molson Coors of Irwindale’s closure to exercise its option to buy the brewery, according to a U.S. SEC filing. The document notes that as part of the agreement between Molson Coors and Pabst, both companies have “executed mutual release of claims related to their ongoing litigation and dismissed the litigation with prejudice,” referencing Pabst’s lawsuit against the former MillerCoors over a nearly two-decades-old contract brewing arrangement. Both parties announced a settlement in that case in November 2018.

In a statement, Pabst Brewing chairman and CEO Eugene Kashper said the company is “pleased to have finalized our settlement with MillerCoors.”

“We will work with our new long-term supply chain partner, City Brewing Company, to evaluate this opportunity and are committed to choosing a path forward that is in the best interest of all our stakeholders,” he added.

This past November, Pabst reached a long-term agreement to brew the majority of its production volume at City Brewing Company by December 2024 and maintain contract production at City facilities until 2040.

For Molson Coors, the announcement of Irwindale’s impending closure follows last October’s announcement of new CEO Gavin Hattersley’s sweeping restructuring and revitalization plan aimed at reinvesting $150 million annually in its core products, above-premium offerings, new beyond beer innovations and digital capabilities.

As part of that initiative, Molson Coors consolidated its corporate center and four business units into two business units – North America and Europe. Molson Coors’ Chicago office became its North American headquarters and the company closed its Denver office. The company also moved its functional support roles to its offices in Milwaukee, Wisconsin.

At the time, Molson Coors said it would cut as many as 500 jobs as part of the effort. The layoffs came a little more than a year after MillerCoors announced it would eliminate 350 salaried positions by the end of October 2018.

Although the Irwindale closure marks another major streamlining effort by Molson Coors, the planned Irwindale closure is unrelated to the larger effort, the company said.

This isn’t the first aging facility Molson Coors has shuttered in recent years. In 2016, the company closed its 37-year-old facility in Eden, North Carolina. That facility sold one year ago for $2.75 million to 770 Ventures LLC, which shares an address with Greensboro-based demolition and site development company D.H. Griffin, according to the Greensboro News & Record.

The 2016 shutdown of Eden came as Molson Coors’ U.S. business unit, then called MillerCoors, was negotiating an extension of a nearly two-decades old contract brewing arrangement with Pabst that was slated to expire this year.

Despite Pabst holding renewal options through 2030, MillerCoors argued that it likely wouldn’t have the brewing capacity required to extend the contract as its volumes have declined in recent years. Due to those declines, the company said it was forced to close Eden.

Pabst sued MillerCoors, claiming the company was attempting to “sabotage” its ability to compete and argued that MillerCoors would have enough capacity to brew the nearly 4.5 million barrels of beer the company produces annually.

During the trial, Pabst CEO Eugene Kashper testified that he attempted to buy the Eden facility for $100 million after MillerCoors announced the closure, but MillerCoors countered with an offer of $750 million, the Milwaukee Journal Sentinel reported. Kashper declined, believing the counteroffer was closer to the price for a new facility.

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