Heileman troubles may kill off National Boh

July 25, 1991|By Kim Clark

National Bohemian, Baltimore's last hometown brew, is in danger of going down the drain.

G. Heileman Brewing Co., the debt-swamped maker of local beers that include Lone Star in Texas and Baltimore's "Natty Boh," is in a financial fight for its life that industry experts say might force the elimination of many of its smaller brands.

Officials of the nation's fifth-largest beer company met with Teamsters officials last night to try to settle a 3-week-old strike at VTC its Halethorpe brewery and is in the crucial stage of negotiations with bankers, bottlers and others who were stuck with $1 billion in debt when Heileman filed for bankruptcy protection in January.

Creditors and others familiar with the La Crosse, Wis.-based company warned yesterday that unless the disputes are settled quickly and cheaply, a combination of management errors, creditor impatience and competitive pressures could tear Heileman apart.

Though Heileman executives declined to comment, customers, creditors, workers and distributors said the company is caught in a dangerous whirlpool of failure.

In the past few months, Heileman has been hit with strikes at two breweries, lost market share rapidly, and alienated many customers by targeting minority males with a marketing campaign for a high-alcohol malt liquor. Heileman this month agreed to discontinue production of "PowerMaster" after federal officials ordered the company to change the name and criticized the marketing scheme.

"It's a precarious situation . . . I am not optimistic," said Tom Pirko, president of Bevmark Inc., a Los Angeles-based industry consultant.

Even if the company manages to emerge from bankruptcy, beer industry experts said that recovery might come at the cost of locally popular, but nationally insignificant, brews such as National Bohemian.

If the company follows through on plans to sell its few strong beer brands, such as Colt 45 and Old Style, to raise cash to help pay itsdebts, Heileman won't have the economies of scale needed to produce the smaller brands profitably, industry experts said.

To Baltimoreans, the 106-year-old National Bohemian and National Premium brands may seem to be worth making, but to beer companies they are probably not worth the trouble, said Doug Mohler, vice president of sales and marketing for Metropolitan Distributing, a Heileman distributor in Jessup.

The local brew, which 30 years ago had 60 percent of the local market, sells about 4 percent of the beer consumed in Maryland today, Mr. Mohler said.

Though he said that he hopes some entrepreneur might save the brand, he is pessimistic: "The future is pretty clear. National Bohemian is going to be part of our history."

This is a strange turn of events for G. Heileman Brewing Co., which was one of the nation's few booming beer companies as recently as 1987.

But when Alan Bond, an Australian tycoon bent on creating a global beer empire, borrowed $1.2 billion to buy Heileman in 1987, things started falling apart. The company almost immediately defaulted on $200 million in "junk bonds," and later failed to make payments on about $800 million in bank debt that had funded the purchase.

Without cash to market beer, Heileman's sales drooped. Its sales, which had reached 16 million barrels and 8.7 percent of the U.S. market in 1987, last year fell to 12 million barrels and less than 6 percent of the market, according to the trade publication Beer Marketer's Insights.

The combination of huge debt and declining revenues drove the company into Chapter 11 Jan. 24, and the company is attempting to settle its debts for a fraction of their face value.

But creditors are fighting the plan. On Tuesday, Heileman's attorneys missed a second deadline for filing a reorganization plan with federal bankruptcy court.

Mitchel Perkiel, Heileman's New York-based bankruptcy attorney, said he hoped to reach an agreement with creditors in the next few weeks and to reorganize successfully.

Creditors were less optimistic, however. James Cullen, an attorney for an insurance company that holds several million dollars' worth of Heileman junk bonds and who is chairman of the creditors' committee, described the debt holders' feelings toward the company as "acrimonious." He said the creditors are fighting Heileman's plan because they think the company is exaggerating its chances to succeed and wants to trade its debts for worthless stock.

He said that the creditors are angry about the high salaries paid executives and the company's failure to inform creditors about the introduction of PowerMaster.

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.