Samuel Adams helps save Latrobe brewery
The Latrobe brewery, which was closed down by InBev and then sold to City Brewing, has been given a new lease on life with a contract to brew the Samuel Adams beer.
In April the Boston Beer Company, the brewer of Samuel Adams beers, has signed an agreement with a wholly-owned subsidiary of City Brewing Company to brew some of its beer in Latrobe, Pennsylvania.
According to a company press release, Boston Beer and City Brewing will upgrade the brewery by purchasing equipment to allow for Samuel Adams’ traditional brewing process. Brewing of Boston Beer products is expected to begin during the second quarter of this year.
Samuel Adams, which was launched by Jim Koch in 1984, is the best selling craft beer with production having reached 1.58 million barrels of beer (1.84 million hl) at the end of 2006. The stock market listed Boston Beer Company had sales of almost USD 20 million and was valued USD 493 million at the end of April 2007.
“This agreement [between Boston Beer and City Brewing] gives us increased flexibility,” said Martin Roper, President & CEO of Boston Beer.
The agreement with City Brewing is not expected to have an impact on brewing operations at the Boston Beer’s breweries in Boston and Cincinnati. The brewer continues to investigate building a new brewer near Boston. The company originally sold beer brewed under contract at other breweries, but now produces the majority of its beer at its own Cincinnati brewery. According to Martin Roper sales of Samuel Adams grew 17 percent in 2006.
Boston Beer’s investment at Latrobe is expected to be between USD 3 million and USD 7 million. In keeping with Boston Beer’s commitment to the brewery, the parties are discussing the potential of Boston Beer buying a stake in the brewing facility.
Boston Brewing did not say how many hectolitres of Samuel Adams would be brewed at Latrobe, but people close to the action estimate it could involve several hundred thousands hl a year, considering the investment.
City Brewery acquired the Latrobe facility last September after owner InBev sold the Rolling Rock brand to Anheuser-Busch for USD 82 million which took the production to its brewery in New Jersey. Rolling Rock had been brewed in Pennsylvania since 1939.
The value of the transaction between City Brewing and InBev was not disclosed.
City Brewing is headquartered in La Crosse, Wisconsin, where it revived the former G. Heileman brewery. It has been on the lookout for more production capacity as it forecasted significant volume increases, mainly because of the company’s production of non-alcoholic beverages. The company, with 450 employees, brews its own portfolio of beers, including City Lager and City Light.
But City Brewing gets most of its business through contract production, making beverages for other companies. Beverages produced under contract at City Brewing’s La Crosse brewery include flavoured malt beverages Smirnoff Ice and Mike’s Hard Lemonade, AriZona Iced Tea, and energy drinks Monster, Rockstar and BooKoo. City Brewing has been contract brewing for Boston Beer since 2002.
In January this year the state of Pennsylvania granted City Brewing USD 4.5 million in state financial aid to help restart and modernise the Latrobe brewery that could create as many as 250 jobs in three years. City Brewing will match the state’s package with an USD 10.4 million investment of its own for new equipment and infrastructure improvements.
City Brewing said it plans to produce 2 million barrels of beer annually in Latrobe, 700,000 barrels more than the plant’s current capacity. That’s when government officials requested City Brewing to build a wastewater pre-treatment plant at the Latrobe brewery to accommodate that growth. In January, finally, Pennsylvania’s Commonwealth Financing Authority approved a USD 7 million grant and loan package for the construction of a pre-treatment facility, thus removing the last stumbling block for City Brewing in its effort to revive the Latrobe brewery.
With all that money coming in, the future for the Latrobe brewery looks much brighter than it did last year when InBev announced its decision to pull out.
