INTERNATIONAL BREWERIES INC. (IBI)
It's Creation & Merger With
Bavarian Brewing Co., Inc.
THE CONSOLIDATION OF BREWERIES
- In the 20th Century
After the number of breweries in the U.S. peaked in the 19th and 20th Centuries to 4,171 in 1873, there was a tremendous amount of consolidation that began in the brewing industry. Of course, during nearly 15 years of Prohibition beginning in 1919, nearly all breweries went out of business, except for a small number that tried to make near beer, malt extracts or soda - and some that operated illegally. Many industrial improvements were also made over this period, making brewery equipment and facilities obsolete. There were also changes in the families that had owned and operated the breweries. Some had sold off their brewing assets, making it difficult to reenter the business. Often the descendents of former brewers were often uninterested or without the experience to be involved in brewing, and in some situations, there were no direct descendents to cary on the business. In the case of Cincinnati, the three largest breweries before Prohibition, including Moerlein, did not reopen after Prohibition. However, improvements in transportation, refrigeration, packaging/canning, marketing, etc., increased the capital to enter the brewing business. It caused the smaller brewers to be acquired by larger brewers, or simply being forced out of business, and the large brewers became larger.
The trend of consolidation was evident before Prohibition, but occurred more rapidly after Prohibition. In 1934, there were 756 brewers in the U.S.; considerably less than before Prohibition. In 1950 there were just 430 breweries. In 1960 there were only 225 breweries owned by 178 companies and in 1965 there there were only 198 breweries owned by 136 firms. However, by 1972 the number of breweries dropped by more than one half, to only 78. Still, there were some entities that thought they could be part of the consolidation trend and be successful, especially in the 1950's and 1960's, if they were at least moderately large in size.
THE CREATION OF INTERNATIONAL BREWERIES INC. (IBI)
The concept of establishing IBI in 1955 was fairly basic. Acquire several good breweries in different cities and in a certain region of the country and improve their overall profitability through economies of scale, improved logistics and increased marketing. As the name implies, the company may have been a little over ambitious of calling themselves International when they only consisted of six breweries in five states at its peak, all located east of the Mississippi River. However, they did have operations in Detroit and Buffalo, not far from Canada, and apparently the company once had some thoughts of acquiring a brewery in that country.
IBI Corporate Emblem
The creation of IBI was through multiple acquisitions, as summarized below.
•Iroquois Beverage Co., Buffalo, NY in 1955
Iroquois Beer and (Tomahawk) Ale
•Frankenmuth Brewing Co., Frankenmuth, MI in 1955 (Plant acquired by Carling in 1956)
Frankenmuth Beer (& Bock Beer) and (Old English & Pioneer) Ales
•Krantz Brewing Co., Findlay, OH in 1956
Old Dutch Beer and Ale
•Southern Brewing Co., Tampa, FL in 1956
Silver Bar Beer and Ale
•Phoenix Brewery Co., Buffalo, NY in 1957
Phoenix Beer and Cream Ale
•Bavarian Brewing Co., Covington, KY in 1959
Bavarian’s Beer (& Bock Beer)
Other brands that were added without the acquisition of additional breweries were:
•Tropical Ale – from the defunct Tampa Florida Brewery, Inc., (brand only) in 1961.
•IBI Malt Liquor - beginning in about 1961.
THE 5-YEAR PERFORMANCE OF IBI
The acquisition of the above noted brewers, along with some added brands, allowed IBI to attain its goal of becoming the 25th largest brewery in the country after their first five years. IBI's five main breweries at the end of 1959 and their brands are shown on the right in the a financial summary report. This complete report in PDF format can be viewed here. The founder & President of IBI, Bruce Berckman, was a pilot in WWII and visited the breweries in his private plane called the Flying Brewery. He considered himself a maverick and successful in creating a firm that others said wouldn't work, according to the noted report. In the year following this report (in 1960), IBI invested $500,000 in a new bottling plant at Bavarian to increase its production. It installed optimism in the future of this brewery under IBI's management.
Despite considerable marketing research Bavarian Brewing Co. conducted to establish its advertising with a "Bavarian Girl and brewed "Natures Way...", and the "Old World Way.." from 1957 into 1959, IBI ditched those efforts. (See Ads: 1957-1966). Rather than have separate marketing efforts for each brand, IBI decided to have similar advertising among its brands emphasizing the IBI name and logo. After all, it was expanding rapidly into n 20 states and more than doubling the number of its distributors. IBI also advertised their brands nationally in Life Magazine, one of the premiere national magazines at that time, as reflected by the front cover in the 1961 Annual Report below. In consolidating IBI's advertising, they used a MEL-O-DRY slogan for Bavarian as well as for all their other brands. These ads first featured men, with no effort to cater to women. Bavarian had previously done this from 1946 to 1956, but then decided to rebrand their beer to make it more attractive to women, couples and contemporary tastes by changing their labels and packaging. Nevertheless, IBI decided to rebrand most of the beers they acquired with the same plain and generic design, which emphasized IBI, besides a common slogan among all its brands. Please refer to the brands that comprised the IBI stable of beers (1959) summarized to the left, by the labels below (1961) and please see Beer Labels, 1959-1966. As shown, of IBI's six breweries, the labels for four of the beers looked the same. IBI was basically marketing IBI to a similar extent as its other brands.
The entire 1961 annual report some disturbing trends were indicated. (This entire report in PDF format can be viewed here.) Gross sales seemed to have plateaued, there was a significant decline in net income and dividends were cut from $1.00 to 70 cents per share. However, share earnings were only 21 cents per share. In the third image below, the Directors and Management of IBI are listed. As indicated, William Riedlin Schott, the son of Lucia Riedlin Schott who was the daughter of Bavarian founder William Riedlin, was one of the nine IBI Directors. Additionally, most of the other members of the Schott family (William C. and Louis L. and Lou) remained shareholders in IBI, even though they were no longer working at the brewery.
Despite a good deal of optimism IBI generated about its future among their employees, the competition form the larger brewers was taking is toll. By the early 1960's, the expectations that a company of multiple breweries, with combined purchasing and advertising power and the success that Berckman boasted about in the 1959 report, was questionable. Among other issues, another possible concern that challenged IBI's success may have been the orientation of their advertising.
One of the main advertising themes of IBI was the slogan "MEL-O-Dry to satisfy your taste!" A diagram that illustrates this brewing process is on the side. It apparently applied to all of IBI's brands. Therefore, this advertising seemed to imply that there may have been a relatively consistent taste among all IBI brands, and that there may not have been significant differences as there were. If that was what actually occurred, then there may have some changes in the tastes of some or all of the beers that IBI acquired. Another issue, is that most of the distinctive labels and branding of the IBI beers were changed to a rather non-descript and plain style.
The earnings for IBI continued to erode more significantly in the early 1960's. By 1964, the IBI Directors decided torepace the founder and President of IBI, Bruce Berckmans, because the shareholder discontent and disappointing profitability. The new President became Albert Roach, by only a one vote margin. The former President of Bavarian’s, Wm. R. Schott, who was an Executive V.P., on the Board of IBI and the manager of the Bavarian Brewery plant, supported the new President.
In 1965, the struggles of IBI continued and other shareholders in the company had concerns with the practices of President Roach. A proxy fight ensued over the control of IBI headed by Terry J. Fox and Charles George. In a close 5-4 Board vote, it resulted in the removal of the other Board members, including Wm. R. Schott. Over the following year, the new IBI board determined that the operation of their breweries could not be profitable. Consequently, they decided to exit the beer business altogether in 1966. They closed the Bavarian plant in 1966, sold off their brewing assets, acquired a controlling interest in Aberdeen Management and changed their name to that firm in 1967.
The departure of Wm. Riedlin Schott from IBI that ended Riedlin and Schott family’s involvement in Bavarian Brewing Co. beginning in 1882 and lasting for 83-years. Bavarian’s was the largest employer in Covington, KY with about 250 employees that added some $1 million annually into the local economy before it closed. However, arrangements were provided for Bavarian’s Select Beer to be made elsewhere.