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The Rise and Fall of Pabst Brewery

Executive Summary

What was once the second largest brewery in the U.S., Pabst is now a virtual brewery headquartered in Texas and brewed by Miller Brewing located in Milwaukee, Wisconsin. The descent of Pabst Brewery can be attributed to a few key difficulties such as poor use of new product development, organizational mismanagement, and increased competition.

Not enough resources were put back into the organization to ensure effective and efficient new product development. Pabst Brewing had poor organizational cash flow, inaccurate tax reporting, a lack of corporate level support, and a loss of market share due to increased competition including the introduction of non-alcoholic and light beer. In addition, the corporation suffered a significant setback when traces of PCB were found in over 100 train cars of Pabst beer, leading to an unprecedented and crippling recall.

The Rise and Fall of Pabst Brewery

From the signs atop local skyscrapers to its professional baseball team, Milwaukee wears its pride in its association with the beer industry openly. Pabst Brewing Company laid the foundation for the industry that helped make Milwaukee famous. At its peak "during the 1970s, Pabst ranked third in sales nationally", and by the mid 1990s Pabst found itself struggling to hold onto the number six position (Price, 1996). How does a company so entrenched in the Milwaukee community find it necessary to close its doors after decades of success? The fall of Pabst cannot be traced to any one cause. Instead, the combination of poor product development, mismanagement, and stiff competition all contributed to the failure of Pabst as a company.

Background

Though known as the Pabst Brewing Company today, the brewery actually originated as Best and Company more than 150 years ago. The Brewery's famous history in Milwaukee can be traced back to Jacob Best a German immigrant. Jacob's brother Charles had been living in Milwaukee operating a vinegar factory. Charles went back to Germany to convince his family to relocate to Milwaukee. At the time, Jacob was running a successful brewery; however, he decided to make the move to Milwaukee, bringing his family and his brewery with him. Jacob had an advantage over other brewers in the area since he already knew what it would take to run a successful brewery.

Land was purchased on Chestnut Street Hill and by the fall of 1844 a small brewery with a capacity of 18 barrels was developed (Pirie, 1994). Less than one year later the company's first lager was put on the market and within the first year of business produced 300 barrels (Cochran, p.21). By 1852, the brewery was producing "2,500 barrels annually and was ranked as fourth largest among Milwaukee breweries"(Pirie, 1994). When Jacob Best retired, he put the future of the company in the hands of his sons, Jacob Best Jr. and Phillip Best. Phillip, like his father, was a motivated individual who wanted to see the company grow beyond Milwaukee. Unlike his brother, Phillip was not content with producing a few thousand barrels a year because he knew the company could achieve more. He set his eyes on Chicago where he set up the first sales office and warehouse.

While in Chicago, Phillip acquainted himself with Captain Frederick Pabst who was successful in the shipping industry. Phillip's daughter Maria also took an interest in Pabst and the two ultimately married. Pabst eventually left the shipping industry and moved to Milwaukee to become part of the brewing industry and more specifically, Best Brewery. "Captain Pabst bought half interest in the brewing company in 1864, when the plants production was 5,000 barrels a year" (Boy Meets Girl, 2002). Pabst, like Phillip Best, wanted to improve the company's growth. His three major ambitions were to "constantly improve the quality of his beer; to continue to increase capacity of the brewery; and to sell his product to an even broader market"(Pirie, 1994). Pabst knew that to reach these goals, he would need to find the finest brew masters possible, searching the world until he found the individuals that satisfied his high expectations. He also convinced stockholders that to increase profit, money would need to be spent on better equipment. Pabst understood that to make money they needed to spend money. By 1873, production had increased to 100,000 barrels (Boy Meets Girl, 2002). Through Pabst's leadership and ambition, Best and Company had become the second largest brewery in the United States (Pirie, 1994).

While Pabst enjoyed the continued success of the brewery, he continued to develop concepts that would set him apart from the other companies. He decided his bottles of beer needed to stand out from the others and leave a lasting impression in the minds of consumers. Bottles were extremely important to breweries but when they first came out they were very boring and plain. Pabst came up with the idea of tying blue ribbons around the neck of the bottles and it did not take long for the concept to catch on with consumers. At the time the beer was known as Best Select but as the public kept asking for the beer with the blue ribbon, the words blue ribbon were eventually added to the label (Pirie, 1994). "By 1892, this special packaging idea became so popular that the company was purchasing 300,000 yards of silk ribbons, which workers had to tie by hand around each bottle"(Pirie, 1994).

In 1888, co-owner Emil Schandein passed away leaving Pabst in control of the company. Captain Pabst changed the name to the Pabst Brewing Company, the name we are familiar with today. The name change did not negatively affect the company since Pabst was widely known in the community and had an extremely positive reputation. Pabst created a balance between improving the Milwaukee community while still improving the brewing process for his company. The name Pabst became recognized for quality and generosity among Milwaukee citizens (Pirie, 1994).

To help his company continue to grow, Pabst began expanding his operations outside of Wisconsin. He made plans for breweries in Atlanta, Georgia; Peoria Heights, Illinois; Newark, New Jersey; and Los Angeles, California (Pirie, 1994). These locations allowed Pabst a greater opportunity to reach consumers across the country.

Captain Pabst continued to set his company apart from the rest when, in 1935, Pabst Brewing was the first company to put beer into cans (Pabst Blue Ribbon).