American beer drinkers are a force to be reckoned with. They determine the fate of a $16 billion industry, and competition for their taste buds has erupted into a fight for survival among the nation's breweries. The American beer industry is undergoing rapid changes and, if current trends continue, five companies will control 85 per cent of the beer market by 1985.
One brewery, Stroh's of Detroit, is waging a major offensive not only to survive the compression of the American brewing industry, but also to pose a serious challenge to the "Majors" (Anheuser-Busch, Schlitz, Miller, Pabst and Coors).
Beer is one of those things Americans cannot do without. Even as breweries close or take a stand and fight like Stroh's, beer consumption has increased by 25 percent in the past decade. Beer is very American and always has been. On December 19, 1620, a passenger aboard the Mayflower wrote in his diary that the principal reason for anchoring at Plymouth was the depletion of the ship's beer supply.
Stroh's was just another obscure regional beer as recently as the 1960s, but today it is the only large family-owned brewery left in the U.S. And with its national expansion in full swing, Stroh's is vigorously courting the beer drinkers of the Washington area.
"They either had to expand so they could compete or eventually go out of business," explained Mike Minning of Potomac Distributing, exclusive wholesaler of Stroh's for Washington and suburban Maryland.
"When you look at the beer industry over the last 10 years, there's been a tremendous consolidation within the industry," Minnig said. "A lot of small brewers are going out of business. Stroh's had to get in the game so they could compete."
Stroh's saw the handwriting on the wall: The small brewery is an endangered species. The United States once had more than 700 breweries; modern economics has reduced that number to 48. New York City once boasted 78 breweries but today has none. With the recent sale of Schmidt's, Philadelphia has only one brewery left; 20 years ago, the city had 42. The smaller, local breweries have been hard hit by rising grain prices, the cost of metal and glass for packaging, and labor costs.
The Stroh family has faced hard times before and its brewing business has survived immigration, Prohibition and now expansion at a time of uncertainty in the American economy. Stroh's beer is seventh in national sales, which is remarkable considering that, as recently as 1970, Stroh's was not even among the nation's top ten beers.
Five members of the Stroh family run the brewery today, including Peter Stroh, its president, and John Stroh, 86, chairman of the board, who made his debut in the business in 1908 pasting labels on cases. The Strohs' ancestors were brewing beer in Kirn, Germany, earlier than 1775, a fact which confirms Stroh's claim that it is older than the United States itself. The firm's present capacity is 7 million barrels yearly but, compared to the 40-million-barrel capacity of Anheuser-Busch, it still has a long way to go.
The arrival of Stroh's in Washington figures heavily in the company's long-range plans. "Washington is desirable because geographically it's in the middle of their expansion up and down the East Coast," Minnig said. "They'd like to establish a foothold in the East and this is a large beer-consuming market - one that's necessary for them to do well in to continue expansion."
Placing an unknown regional product on the crowded shelves of Washington's bars and stores was a complex task. Stroh's financed an expensive advertising campaign to create some product familiarity. At the same time, headquarters in Detroit began receiving more than 100 inquiries from Washington wholesalers: Word was out on the brewery circuit that Stroh's was in growth phase and, by anybody's guess, there was money to be made. They weren't wrong. Minnig, a large, curly-haired man of thirty-four, expects to sell 750,000 cases this year in Washington and Maryland.
In preparation for the move into Washington, Stroh's executives studied the demographic composition of the area to aim their advertising at the most promising consumers, and began shopping around for a local distributor. Meanwhile, Minnig and two former partners were doing their homework in early 1976 to bid for the distributorship. "For five months, we conducted marketing research," he said. "The majority of custombers seem to be young adults. They're more willing to try something new and they haven't formed brand loyalties."
One Washington wholesaler, who asked not to be named, said "we bid for the Stroh's line and they put it in another house. They chose someone who wasn't even in business in this area. We handle so many other brands, I guess they wanted someone to devote full attention to Stroh's, which is ideal."
By any standard, Minnig fit the bill. He has 10 years of marketing and sales experience with a major brewery. "I finally decided that I wanted to get on the wholesale said of the business rather than the large corporation. There are benefits in owning you own company and being your own boss." In early April 1976, he spent several hours in a conference room in Detroit answering questions from John and Peter Stroh, three vice presidents and two sales directors.
"We sold the Stroh family on the fact that Stroh's would be our main brand and get 100 percent of our attention, and also on our marketing expertise and financing. I think they felt we knew what we were doing," he said. Minnig later brought out his two partners.
On April 26, the Stroh's beer distributorship was theirs. In two months, Minnig built an operation from scratch. Starting with $500,000 capital, (half their own money, half borrowed) Potomac Distributing bought 16 trucks for $22,000 each, warehouse space in Maryland and the first shipment of beer from Detroit. Route salesmen were hired and trained to present a convincing sales pitch, and delivery routes were mapped out in the fertile territory of D.C. and Prince Georges and Anne Arundel counties. Minnig arranged a brokerage agreement with Montgomery County. Working out of a cluttered office in Brentwood, he and liquor licensees for the assault on Washington.
Also in the spring of 1976, Stroh's began its national advertising campaign produced by New York advertising moguls Doyle, Dane and Bernbach. The "Heritage Campaign," as they dubbed it, featured a dramatization of the Stroh family history which fit in nicely with the U.S. Bicentennial. Stroh's spent $650,000 for media coverage of the Washington area for the first year.
As the new guy in town, Potomac Distributing met some resistance. Although it took six months to get his operation off the ground, Minnig was not daunted by the competiton. "I remember walking up and down Wisconsin Avenue, calling on places and they'd say 'we don't have enough room' or 'we don't need another beer.' One day the trucks went out and came back with only 20 or 30 cases sold when we needed 150 or 200 to break even. But we kept after the salesmen, tried to boost morale."
One of his first breaks was placing Stroh's in three Northwest bars, Mr Henry's Tenley Circle, AU Tavern and Babe's. Mr. Henry's manager Al Meltzer said, "I was reluctant at first. I'm from Massachusetts and I'd never heard of it. They kept coming by, asking if I'd buy a keg. Then people started asking for it. It's a premium beer, costs less than Schlitz. Now we sell 30 to 40 kegs a week and we're probably a top draft beer account. If you write thousands of dollars worth of checks to a company, you like to know the people have an interest in you. Stroh's gives good service."
Minnig still combs the neigborhoods of Washington and Maryland, frequently making night calls. "I try to get out at least once every day. Most retailers are receptive and very few are impolite. But our job would be extremely difficult without the brewery support. Most stores took Stroh's right away because it was being advertised," he added.
Minnig and his salesmen called on some bars took 15 to 20 times before adding Stroh's to their shelves. "Stroh's had been calling on us for a year," recalled Neal Hanna, day manager of the Childe Harold near Dupont Circle. "But it wasn't until we had a change in management that we took it. It's advantageous for us to sell Stroh's because they have a big advertising campaign. We needed a good bottled beer to sell along with our draft and more expensive importeds."
Stroh's origins did not hurt business either. Two Southwest bars, Pier 9 and Lost and Found, carry only two beers, and Stroh's is one of them. Manager Jesse Kennison explained, "The owners knew the beer from the Midwest and decided to try it when Stroh's branched out to this area. It sells well and they're good service people. When Bud(weiser) went on strike, we went right through the company and no one would help us get beer. Stroh's is there when you need them."
From a prestige point of view Minnig wants to see Stroh's beer accepted by more restaurants and bars like Clyde's of Georgetown. Chris Toomey, general manager of Clyde's said, "We have a very limited capacity for stocking beer and the only beer we've added in over two years is Miller Lite because there's a demand for it. Not a whole lot of people ask for Stroh's here." But Stroh's moves very well at Bojangles's, Winston's, Fran O'Brien and the Dancing Crab, to name a few.
Potomac Distributing can safely be considered off the ground after 18 months. "We've been operating in the black since April, which we think is pretty fantastic, although that really means only keeping our head above water." Minnig said.
Stroh's is moving into other frontiers, most recently the Carolinas, with plans under way for a major infiltration of Pennsylvania. Stroh's is already the top selling beer in Pittsburgh and West Virginia, and Detroit headquarters is receiving letters from interested Delaware wholesalers.