10. The Merger of Bavarian Brewing Co., Inc., with INTERNATIONAL BREWERIES INC. (IBI): (1959-1966)
THE CONSOLIDATION OF BREWERIES
- In the 20th Century
After the number of breweries in the U.S. peaked to 4,171 in 1873, a tremendous amount of consolidation began in the brewing industry. Of course, during the nearly 15 years of Prohibition from 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 older brewery equipment and facilities obsolete. There were also changes in the ownerships of the breweries. They were mostly family owned and it was difficult for many families to hold on to properties that had limited profitability other than as a brewery. This resulted in the sale of many breweries, which were demolished or repurposed, and made it difficult for brewing families to reenter the brewing business after Prohibition was repealed. Another dynamic is that it was not uncommon for older family members who had operated the brewery to pass away before Prohibition ended some 15 years after it began. Their surviving relations were often uninterested or too inexperienced to get involve in brewery 15 years after Prohibition to resume brewing operations again. Or, sometimes there were no direct descendants to carry on the business. In the case of Cincinnati, the three largest breweries before Prohibition, including Moerlein, did not reopen after. However, improvements in transportation, refrigeration, packaging/canning, marketing, etc., increased the capital to enter the brewing business. This caused the smaller brewers to be acquired by larger brewers - or to simply be forced out of business - and the large brewers became larger.
The trend of consolidation was evident before Prohibition, but occurred more rapidly after. In 1934, there were 756 brewers in the U.S.; considerably less than a few thousand before Prohibition. In 1950 there were just 430 breweries. In 1960 there were only 225 breweries, owned by 178 companies, and in 1965 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 spawned by Bruce Berkmans, formerly affiliated with the Schaefer and Piel breweries. He believed that "creating an umbrella for local breweries would be a very good thing. " By combing several breweries in different regions of the country they could take advantage of economies of scale, and overall profitability could be improved through bulk purchasing, centralized merchandising, improved logistics and increased marketing. He also provided significant incentives to distributors and wholesalers. Berkmans provided much autonomy to the local breweries, but also liked to frequently visit the plants and be involved in major decisions.
IBI Corporate Emblem
As a former Canadian Air Force pilot, Berkmans was able to fly his plane named the "Flying Brewery" from his headquarters in Detroit to plant locations in Ohio, New York and even Florida. The local breweries under the International name lost some independence, but it offered them hope in a very competitive landscape. During Internationals first five years, its growth exceeded many expectations. Gross sales increased from $17,310,881 to $27,345,736 along with a doubling of net worth. The firm also repaid over $1 million in loans and reinvested some $2.5 million in excess revenues. Another aspect about International's stock, is that it paid an attractive dividend and performed well during this first five-year period. The company may have been a little over-ambitious when they chose the name “International.” After all, their locations were only situated in the U.S. - and in just four states all situated east of the Mississippi River. However, they did have operations in Detroit and Buffalo, not far from Canada, and apparently the company had once considered acquiring a brewery in that country.) Berckman believed that for his company to be successful, it had to be one of the 25 largest breweries. This occurred shortly after Bavarian Brewing Co. and IBI announced that they would be merging on February 20, 1959.
The formation of IBI was through multiple acquisitions, as summarized below.
•Iroquois Beverage Co., Buffalo, NY in 1955
Iroquois Beer and Ale (formerly Tomahawk Ale)
•Frankenmuth Brewing Co., Frankenmuth, MI in 1955
Frankenmuth Beer & Ale (& Bock Beer), (formerly Old English & Pioneer Ales)
(Plant acquired by Carling in 1956)
•Krantz Brewing Co., Findlay, OH in 1956
Old Dutch Beer
•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
Other brands that were added without the acquisition of breweries were:
Tropical Ale – from the defunct Tampa Florida Brewery, Inc., in 1961.
IBI Malt Liquor - beginning in about 1961.
Stolz Beer - beginning in the early 1960s.
Malta Huey - a beverage licensed from Bacardi in the early 1960s.
In addition, IBI may have obtained a couple other brands with very limited production.
BAVARIAN/S AS PART OF IBI
To celebrate their fold into IBI, the former top executives of Bavarian Brewing Co. met with Bruce Berckmans, the President of IBI. The photo was taken at IBI's headquarters in Detroit, MI, about a month after the merger. William R. (Bill) Schott, on the far left, had become Vice President and Board Member of IBI as well as General Manager of the Bavarian Plant. His father Will Schott, to his right, was no longer involved with day-to-day operations, but had a significant equity ownership in IBI. On the far right, Louis L. Schott, is next to Berckmans with his father and brother. Louis became the Sales Manager for the Bavarian Plant. Despite having less authority than his brother, Louis had the same equity interest in their family brewery, and in IBI.
THE NEW BOTTLING PLANT
Bavarian expressed interest in acquiring a new bottle shop (plant) a few years before the merger with IBI. Their Directors even had approved funds to begin the designs for this structure 1958. It appears that when arrangements were made to merge with IBI in 1959, there may have been an agreement for IBI to build this bottle plant as well. One of the restraints Bavarian had in constructing the bottling plant was its considerable cost, especially in light of the brewery’s lack of significant sales growth and increased costs. IBI's willingness to build a new Bottling Department at Bavarian’s main plant may have been a contributing factor to the decision of the brewers to merge. This new structure was completed in August of 1960, about a year after the merger, at a cost of $500,000. It was heralded in the local papers, and executives posed in the new plant for promotional pictures, as shown below.
1960. From left to right, a large ad in the Cincinnati Enquirer publicized the opening of Bavarian/s new Bottling Plant. In the middle photo above with new equipment are (l. to r.): Miles Ericson, IBI Exec. V.P.; Larry Schrand, Bottling Superintendent, Wm. C. Schott: and Wm. R. Schott (IBI V.P. and G.M. of the Bavarian Plant. These same individuals are in the far right photo.
Shown on the side (left to right) are: Louis Schott, William C. Schott, Henry Wetzel and William R. Schott. They are congratulating Mr. Wetzel upon his pension retirement in 1960; he had begun working at Bavarian in 1917.
Like any merger, there were some transitions after Bavarian merged with IBI About this same time, IBI no longer had a need for Bavarian's Marketing Group, as most of that work was centralized at IBI's Detroit headquarters. As a result, the Advertising Manager, Larry Rinck, resigned shortly after the merger. In 1961, Louis L. Schott, who was Marketing Director and became Bavarian's Sales Manager under IBI, resigned and took on an executive position with another Schott Family business, the Cincinnati Galvanizing Co.
SUCCESSFUL BOWLING TEAM
As mentioned under Sponsorships, Bavarian supported amateur sports and teams, which would include their workers, and occasionally employees of some of their customers or a distributor. Even before Prohibition, bowling was played at the Turners next to the brewery by William Riedlin and other employees. A Mettlach drinking vessel featuring bowling was in the Bavarian Tap Room. On the side is a picture of a successful Bavarian's employee bowling team in 1962 with a trophy displayed by Larry Schrand (Bottling Dept. Mngr.). Left and right of him are Bill Schott (V.P. & Gen. Mngr.) and Bruce Berckmans (President), respectively.