High Falls Brewing Company LLC

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High Falls Brewing Company LLC

445 St. Paul Street
Rochester, New York 14605
U.S.A.
Telephone: (585) 263-9403
Fax: (585) 546-5011
Web site: http://www.highfalls.com

Private Company
Incorporated: 1932 as Genesee Brewing Co.
Employees: 500 (est.)
Sales: $90 million (est.)
NAIC: 312120 Breweries

High Falls Brewing Company LLC is the seventh largest brewer of beer in the United States. The Rochester, New York-based firm distributes its products to most of the United States as well as parts of Canada and a handful of overseas markets. Its brands include JW Dundee's Honey Brown Lager, Genesee Cream Ale, Genny Light, Michael Shea's Irish Amber, and Koch's Golden Anniversary Beer. High Falls also serves as a contract brewer for firms like the Boston Beer Co., with as much as half of its output bearing other labels. The company is owned by members of management.

Roots

High Falls traces its origins to 1878, when Mathius Knodolf founded the Genesee Brewing Company in Rochester, New York, using a brewery that had been built in 1860. It took its name from the Seneca Indian word for the valley in which Rochester was located. In 1889 Knodolf's company and two others in the area were purchased by an English brewing syndicate, and the three companies' operations were consolidated into the Bartholomay Brewing Company, Ltd.

In January of 1919 the U.S. Congress passed the 18th Amendment to the Constitution, which banned the manufacture, transportation, or sale of alcoholic beverages. Like many others around the country, the brewery ceased operations, and its employees found new jobs.

One such worker was Louis Wehle, the company's superintendent. The son and grandson of brewers, Wehle had studied at the Rochester Institute of Technology before graduating from the National Brewers Academy in New York in 1911 and taking a job with Genesee. After Prohibition took effect in 1920 he became a grocer, and then in 1925 formed the Wehle Baking Company. He soon established a chain of bakeries, and sold the business for $1 million just before the stock market crash of 1929. In 1932, as repeal of the 18th amendment became imminent, Wehle decided to reactivate the Genesee brewery with several partners, and they invested $500,000 to renovate the dormant facility.

In September 1933 the new firm sold 50,000 shares of nonvoting stock in a public offering, and by the next year the Genesee Brewing Company was once again producing beers like the new 12 Horse Ale. The country was thirsty after more than a decade of Prohibition, and with Franklin Roosevelt's New Deal starting to bring the economy out of the Great Depression, sales took off. The firm's products were distributed regionally, primarily in New York State.

The 1940s saw Louis Wehle's longtime passion for outdoor sports lead his company to sponsor an annual statewide fishing contest that promoted conservation and sportsmanship, as well as the firm's beer. Louis Wehle also was involved in a number of humanitarian causes, and he served for more than a decade as head of the New York state March of Dimes campaign, which raised money to combat polio. The firm's success enabled him to live on a 1,700-acre estate near Rochester, which had its own harness racing track, duck-breeding grounds, and shooting range.

By the early 1950s Wehle had begun serving as board chairman, leaving day-to-day operation of the company to his son, John L. Wehle, who had attended Yale and the National Brewers Academy. Sales were strong during the decade, and after a record year of $22.5 million in revenues in 1957, the company spent $500,000 expanding its bottling operation.

Introduction of Cream Ale in 1960

In 1960 the company introduced Genesee Cream Ale, which would go on to become one of its most popular offerings. A lighter beer, Fyfe & Drum, was produced during this era as well. In November of 1964 Louis Wehle died at the age of 75, and his controlling stake in the firm passed to his family.

The mid-1960s saw Genesee install the largest lauter tun brewing vessel in the world as it continued to upgrade its plant. In 1969 the company nearly finalized a merger with manufacturer Houdaille Industries, but the $31 million deal fell through. The firm recorded sales of $29.6 million for the fiscal year, and a profit of $2 million. In addition to marketing its own brews, the company also had begun distributing the Danish beer Carlsberg in the Northeast.

During the 1970s John Wehle oversaw an expansion of Genesee distribution to nearly half of the United States, and sales grew significantly. In 1978 the firm introduced a new light beer, Genny Light, which took the place of the similar Fyfe & Drum.

John Wehle had continued to lead the firm as chairman and CEO, and after several turnovers in the president's job, in March of 1982 his 35-year-old son John Wehle, Jr., was appointed to the post. During that year the company completed construction of a $3.4 million steam plant, which saved an estimated $100,000 per month in energy costs. The generator burned cardboard from boxes used to return deposit bottles, which New York and several other states had recently begun requiring.

The 1980s saw Genesee struggling to remain profitable, as mergers around the industry created larger and more powerful national competitors. Other factors impacting the firm's bottom line at this time included a heightened awareness of alcoholism in the United States and the resultant higher drinking ages, price cutting by competitors, and new competition from products like wine coolers.

Acquisition of Fred Koch Brewery in 1985

In February 1985 the company reached an agreement to acquire the struggling Fred Koch Brewery of Dunkirk, New York from its owner, Vaux Breweries PLC of England. After the sale, Genesee would continue to produce Koch's Golden Anniversary Beer and Black Horse Ale. For the fiscal year ending in mid-1985, Genesee recorded revenues of $141.5 million and earnings of $8.8 million.

In the fall of 1986 John Wehle, Jr., succeeded his father as CEO, though the senior Wehle would continue to serve as board chairman. The company's offerings now included Genesee Beer, Cream Ale, Light, Light Cream Ale, and 12 Horse Ale.

As earnings continued to fall in the face of industry consolidation, the company began looking for new ways to cut costs, and offered its employees bonuses for money-saving ideas. Genesee also formed a planning and development division to seek out other business opportunities, and subsequently partnered with Taylor-Bolane Associates, Inc. to create equipment rental company Cheyenne Leasing, and joined with Home Leasing Corp. to buy a 600-unit apartment complex in Columbus, Ohio.

In late 1987 Genesee created a new holding company called Genesee Corp. that would oversee all of its operations, and also bought Ontario Foods of Albion, New York, a processor and packer of dry food products like drink mixes. For 1988 the company, now the seventh largest brewer in the United States, reported sales of just less than $130 million, and a profit of $6.5 million.

In 1990 Genesee switched ad agencies as it sought to rebuild its sagging brands. The firm's advertising budget now stood at just $3.5 million, down from the $12 million of several years earlier. The following year saw introduction of a nonalcoholic beer, Genesee NA, which competed in a category that generated just 1 percent of total beer sales, but was growing rapidly.

In March 1992 the firm launched a new brand name, Michael Shea's Irish Amber. Sales of imported beers and smaller "microbrews" were growing rapidly at the time, and a number of larger breweries were trying to capture a part of that market with more specialized products. The firm was now on the rebound, with production increasing for the first time in five years to 2.22 million barrels, and sales hitting $145 million.

In November of 1993 John Wehle, Sr., died at age 76. He had served as board chairman until his death. The chairmanship was subsequently taken over by John, Jr., whose brother Charles S. "Chipp" Wehle would serve as senior vice-president.

Introduction of JW Dundee in 1994

In 1994 the company introduced several new varieties including Genny Ice, Michael Shea's Black & Tan, and JW Dundee's Honey Brown Lager. Like the Michael Shea brand, Dundee's was aimed at drinkers aged 21–35. The typical Genesee customer was a working class man, age 35 or older, and the firm was trying to reach a younger generation that appeared to place a higher value on flavor and perceived authenticity. The Shea's and Dundee's brands had some success in the firm's primary markets of New York, Pennsylvania, and Ohio, but made their greatest impact further afield in places like Chicago. Genesee beer was a lower-priced product, and the new brands enabled the company to charge the premium price of specialty beers.

Company Perspectives:

High Falls Brewing Company is perfectly positioned for future growth and opportunities. Although we continue to utilize the latest technologies available in brewing today, we hold true to the same time-honored traditions established decades ago by our very own brew master. And as such, we will continue to grow our family of High Falls brands to meet the demands of a growing segment of discerning and incredibly loyal customers and consumers.

Product introductions continued in 1995 with Genny Red and Michael Shea's Blonde Lager, and in 1996 the company created a new division called High Falls Brewing Co. to oversee its specialty beers, including new India Pale Ale. The company was following in the path of other old-line brewers that had created subsidiaries to put out microbrew-like drinks with no mention of the parent company. For the fiscal year ended in early 1996, Genesee reported that its Dundee's and O'Shea's beers accounted for 18 percent of total sales, double the amount of a year earlier. Dundee's had sold 2.6 million cases, up from 930,000 in its first year.

During 1996 the firm completed a $4 million upgrade of its bottling and packaging equipment and reached an agreement to market a Canadian company's beers in the United States. Genesee also scored a major coup by winning a contract to produce Sam Adams beer for the Boston Beer Co., which had no brewery of its own.

In the spring of 1997 the firm introduced a light version of the successful JW Dundee's Honey Brown Lager along with Genny Summer Brew, which was only available in the warmer months. The firm added two new companies to its food division during 1997 and 1998, Freedom Foods of Florida and TKI Foods of Illinois, at a total cost of $30 million.

For the fiscal year ended in May 1999, the company's brewing unit posted a loss of $4.7 million, as beer sales fell by12.5 percent. The firm's nonbeer operations now made up more than a third of Genesee Corporation's income, which totaled $178.4 million. In August the company began considering an offer from Pabst to buy its beer brands. It was rejected, however, in large part because of the Wehle family's loyalty to Rochester and the jobs that would likely be lost there if Pabst relocated the brewing operations.

After the Pabst deal fell through, Genesee Brewing let 10 percent of its staff of 550 go as part of a new plan to cut costs and keep the struggling brewery in business. In December the company reintroduced 12 Horse Ale, which had originally been brewed in 1934. That same month a new suitor, Platinum Holdings of New York, struck a deal to buy the firm. Platinum already owned City Brewing Co. of LaCrosse, Wisconsin, which sold beer under a number of different brand names.

In March 2000 Genesee's 53-year-old chairman and primary shareholder, John L. Wehle, Jr., died of cancer. Control of the firm and its chairmanship passed to his brother Chipp, with Samuel Hubbard, the company's president since the preceding June, taking over as CEO of Genesee Corporation.

Sale to Management in 2000

In May the sale to Platinum Holdings fell apart amid recriminations on both sides. Shortly afterward a management-led buyout plan was put together, and in August the company reached an agreement for an investment group led by eight of the firm's executives, including CEO Hubbard, to acquire the brewing business for $25.8 million. The company's Ontario Foods unit and its other investments in real estate and equipment leasing would be divested separately. The purchase was funded in part by a $6.5 million federal grant and loan incentive package the firm had been awarded.

After the sale was completed in December of 2000, the company's name was changed to High Falls Brewing Co., reflecting management's desire to emphasize its specialty brews. The company would continue to produce its full line of beers and brew Sam Adams under contract to Boston Beer. High Falls also had recently signed agreements to make Mike's Hard Lemonade and Smirnoff Ice, a malt-based vodka drink. The company's plant was in good working order, and expanding contract production was a primary objective of the new owners. By now, one-half of the firm's brewing was contract work.

During 2001 High Falls spent some $11.5 million to add a new high-speed bottling line and other production equipment. Sixty-five new workers were hired, as the firm's contract work began to tap more of its 3.3 million barrel capacity.

The company was now actively seeking to rebuild its brands, which had suffered from a decline in marketing support. Even its most recent success, JW Dundee's, had slipped after peaking at 400,000 barrels in 1998. High Falls soon redesigned its packaging, and also boosted advertising spending, adding new point-of-purchase materials and, in 2002, the first Genesee television ads since the 1980s.

The firm ran into trouble in December 2002, when its Smirnoff bottling contract ended and it was unable to pay a $1 million note to former owner Genesee Corp. Efforts during 2003 to recapitalize in conjunction with a third party failed, and the company found itself unable to pay another $3 million payment at year's end. The year 2003 also had seen the launch of another new brand, Kipling Light, but the dark-colored, low-calorie beer made little impact.

Key Dates:

1878:: Genesee Brewing Company is founded in Rochester, New York.
1920:: Production halts with the start of Prohibition.
1932:: Louis Wehle reactivates Genesee brewery in anticipation of Repeal.
1960:: Genesee Cream Ale debuts.
1964:: Louis Wehle dies; control of the firm passes to his son, John Wehle.
1978:: Genny Light is introduced.
1985:: Fred Koch Brewery is acquired.
1986:: The company starts investing in real estate, equipment leasing, and food businesses.
1992:: Michael Shea's Irish Amber is introduced.
1993:: John Wehle, Sr., dies; control of the firm passes to his son John Wehle, Jr.
1994:: JW Dundee's Honey Brown, Genny Ice debut.
1996:: The company begins brewing Sam Adams beer for Boston Beer Co.
2000:: Contract brewing agreements are signed with Smirnoff Ice, Mike's Hard Lemonade; Genesee is sold to a group led by CEO Samuel Hubbard; the company is renamed High Falls.
2004:: Two "craft" beers, JW Dundee's American Amber Lager and American Pale Ale, are added to the firm's offerings.
2005:: High Falls takes on the distribution of three New Zealand beers made by Lion Nathan, and signs an agreement to have its beers distributed in Canada by Brick Brewing Co.

In the late summer of 2004 the firm added two "craft" brews, JW Dundee's American Amber Lager and American Pale Ale. Samples of each were packaged with six-packs of Honey Brown to introduce them to the public.

In August 2004 Boston Beer told the company it would terminate its contract brewing work, and in November production ceased, leading to the layoffs of 30 employees. In late December High Falls was able to win the work back, however, narrowly averting a major financial crisis.

In early 2005 the firm took on distribution of three New Zealand beers made by Lion Nathan, and also signed a new agreement to have its beers distributed in Canada by Brick Brewing Co. By now High Falls brands were available in most of the continental United States, and parts of Canada, England, Ireland, and China.

With roots stretching back more than 125 years, High Falls Brewing Co. was one of the oldest beer makers in the United States. The firm was struggling to fend off competition from both industry giants and new upstarts, while working to redefine itself as a regional concern that made some nationally known products. Its new manager-owners were committed to keeping it afloat, but the road ahead looked rocky.