The Stroh Brewing Company

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The Stroh Brewing Company

100 River Place
Detroit, Michigan 48207
U.S.A.
(313)446-2000

Public Company
Incorporated: 1850
Employees: 6,800
Sales: $1.65 billion

The Stroh family began brewing beer in a family-owned inn during the 18th century in Germany. In 1848, during the German Revolution, Bernhard Stroh, who had learned the brewing trade from his father, emigrated to the United States. In 1850 he founded a brewery which has been owned and operated by the family for more than 130 years. While the company has expanded considerably in recent decades, it is still directed by a Stroh, and all of its stock shares are in the hands of 27 Stroh family members.

Bernhard Stroh established his brewery in Detroit when he was 28 and immediately started producing Bohemian-style beer, which had been developed at the municipal brewery of Pilsen, Bohemia, in 1840, In 1865 he purchased additional land and expanded his business. He adopted the Lion’s Crest from the Kyrburg Castle in Germany and named his operation the Lion’s Head Brewery. The company still uses the crest in its advertising.

Bernhard Stroh, Jr. took charge of the brewery on the death of his father, the founder. He changed the brewery’s name to the B. Stroh Brewing Company. With the introduction of pasteurization and refigerated rail cars, Stroh was able to ship some of his beer to Florida and Massachusetts. In 1893 Stroh Bohemian Beer won a blue ribbon at the Columbian Exposition. In 1908 Bernhard Stroh’s brother Julius took over the brewery and renamed it the Stroh Brewing Company. After a tour of famous European breweries, he introduced the European fire-brewing method in the Stroh brewery. Today Stroh’s is the only fire-brewed beer on the American market. Common in Europe before World War I, the fire-brewing process uses a direct flame rather than steam to heat beer-filled copper kettles. The company claims that the resulting higher temperatures bring out more of the beer’s flavor.

During Prohibition Julius Stroh operated the business under the name The Stroh Products Company, producing near beer (beer with its alcohol extracted), soft drinks, malt products, and ice-cream. Though production of most of these items ceased when Prohibition ended in 1933, a special unit of the brewery still makes Stroh Ice Cream. The product is sold in retail groceries and independent icecream parlors in Michigan.

Upon Julius Stroh’s death in 1939, his son Gari assumed the presidency. Gari’s brother John succeeded him in 1950 and became Stroh’s chairman in 1967. Gari’s son Peter, who had joined the company following his graduation from Princeton in 1951, became president in 1968. He is now chairman of the board. At present, Stroh’s president is Roger Friedholm.

In 1964 the company made its first move toward expansion from its traditional position as a small but successful producer of one brand of beer and ice cream when it bought the Goebel Brewing Company across the street. At the same time, Peter Stroh directed the company into a period of large-scale changes motivated principally by two causes: the 1958 Michigan beer strike, and the mergence of the Anheuser-Busch and Miller brewing companies as corporate leaders in the beer industry.

In 1956 Stroh sold 2.7 million barrels of beer. A long statewide beer strike two years later enabled out-of-state beers to capture larger shares of the Michigan market, and while Stroh remained the largest brewer in the state in 1968, it still had not fully recovered the ground lost in the strike. Sales were low in Michigan that year and far behind the sales of 12 years earlier. Recognizing that half the company’s production was sold outside Michigan, Peter Stroh ended a 40-year relationship with Stroh’s advertising agency to search for a large national agency that would help develop the company’s growing business on a national scale.

By 1971 the Stroh Brewery Company had moved from 15th to 13th place in the national beer market. In 1972 it entered the top ten for the first time and had a market area of nine states. A year later it was the eighth-largest brewery in the United States, selling four million barrels of beer per year in 17 states.

At the same time Miller and Anheuser-Busch entered into intense competition; Anheuser wanted to maintain its position as America’s dominant brewer, while Miller attempted to rise from its seventh-place rank to overtake Anheuser’s position. The large advertising budgets, wide distribution areas, and efficient production methods used by the two breweries through the 1970’s proved impossible for many regional breweries to match. Peter Stroh’s willingness to depart from years of tradition enabled Stroh to survive, though his family’s pride in the brewery’s heritage made many of his revolutionary changes difficult to implement. It is not surprising that Peter’s decisions would have seemed radical to many in a company that had produced only one brand for nearly 130 years. Stroh himself had prevously seen his role as “more a braumeister than a promoter,” but the soft-spoken man now remarked that “as the industry changed I’ve had to become more marketing oriented. Deep in my heart I know it’s either grow or go.”

Peter Stroh broke the company’s old-world management tradition by recruiting outside experts from such companies as Pepsico and Procter & Gamble to manage the brewery’s affairs. He also expanded the product line by introducing Stroh’s second brand, Stroh’s Light, in 1978. Adamant in the conviction that his brewery should not sacrifice its product’s taste, however, Stroh insisted that the light version be held to 115 calories rather than being cut to the 96 calories of most other light beers. At 115, Stroh’s Light was 25% lower in calories than Stroh’s regular beer.

The 1973 increase of market area to 17 states had caused the brewery nearly to outgrow its production capacity by 1978, when it produced 6.4 million barrels of beer. The Detroit family was 66 years old and had a capacity of seven million barrels annually. As it became difficult to make efficient shipments to new markets in the east, the company recognized that it must build a new brewery.

A solution presented itself in the form of New York’s F&M Schaefer Brewing Corporation, one of the regional breweries that had been a victim of Miller’s growing market share. Stroh, planning to purchase all of Schaefer’s stock to gain control of the brewery, paid an initial $800,000 for 8.5% of the total shares. After the takeover was complete in 1981, the combined breweries ranked seventh in beer sales. Under the terms of the deal, Stroh gained access to Schaefer’s Allentown, Pennsylvania brewery, With its capacity of a million gallons it is one of the industry’s most efficient United States operations. In addition, Stroh was able to take advantage of Schaefer’s distributors in the northeastern part of the country. The acquisition also brought Stroh three new brands: Schaefer and Piels beers, and Schaefer’s Cream Ale. The company now had a volume of over 40 million barrels and 400 distributors in 28 states, Washington, D.C., Puerto Rico, and other Caribbean islands. The Stroh brewery Company began to take the form of a smaller version of the industry leaders.

Early in 1982 Peter Stroh made a bid on 67% of the Schlitz Brewing Company, the first step in acquiring the third-largest brewery in the United States. By April of that year, Stroh had purchased the entire company for $17 a share. Schlitz became a wholly owned subsidiary of the Stroh Brewing Comany, making Stroh the third-largest brewery in the United States. The acquisition was by no means simple. Schlitz resisted the takeover by taking Stroh to court. Schlitz finally accepted the takeover when Stroh raised its offer from an initial $16 per share to $17, and the U.S. Justice Department approved the acquisition once Stroh agreed to sell either Schlitz’s Memphis or Winston-Salem breweries.

Along with the expansion of Stroh’s brewery came a departure from the company’s traditional marketing approach. Stroh had always been marketed as a popularly priced “blue-collar” beer, with a six-pack selling at 25¢ less than national premium brands. Commercials noted the fire-brewed flavor of the beer. A large part of Stroh’s national market, however, began to find it difficult to reconcile the brew’s low price with its advertised quality. The new premium beers recently introduced by Miller and Anheuser became more popular with the working class that had previously purchased Stroh beer. In order to revive blue-collar sales, Stroh reduced the price of Schlitz to below the premium level.

Stroh divested itself of the Schlitz-run Geyser Peak Winery in order to concentrate on beer products. Despite the success of its light beer, Stroh initially moved with typical caution in introducing new products. Because of its two major acquisitions the company now marketed regular and light versions of Schlitz, Stroh, and Old Milwaukee, as well as Goebel, Piels, and Schlitz Malt Liquor. Even so, it was not until four years after the introduction of Stroh’s Light that the company introduced another new product of its own. Stroh Signature marked the brewer’s entry into the premium market.

The move from a regional market into the national arena was especially challenging for Stroh’s advertising and promotional efforts. As mentioned above, the company did away with the emphasis on its fire-brewing process when consumers seemed unable to reconcile Stroh’s reputed high quality with its relatively low price. Ad campaigns became more upbeat, first using an “Alex the Dog” commerical where Alex would fetch, buy, or pour beer for his master. The company then turned to the “From One Beer Lover to Another” campaign that had science-fiction and phantasmagorical themes. The brewery won two awards for its “Beer Lover” ads. In 1985 Stroh moved to the good times-good friends-good beer theme popular in the beer industry. Its slogan was “Stroh’s is Spoken Here.” The company felt the theme was more relevant to the all-American beer drinker and showed more confidence in the beer, rather than being merely entertaining.

In the 1980’s the company also turned to corporate sponsorship to gain needed national publicity. In 1982 Stroh was a sponsor of the World’s Fair in Knoxville, Tennessee, an event that strengthened Stroh’s new national standing considerably. For many years Stroh had received little television exposure because of an agreement between the major networks and Anheuser and Miller which allowed the two top brewers exclusive advertising rights. Stroh fought the agreement and in 1983 was allotted advertising time on ABC’s Monday Night Baseball, on two NBC boxing events, and on other popular U.S. television sports shows. Confronted with nearly prohibitive network costs, the company began “The Stroh Circle of Sports” on cable television and independent stations. The program featured live events with reporting and analysis. Stroh also looked to such sports as hockey, which had been overlooked by Anheuser and Miller, for increased publicity opportunities. Stroh sponsored broadcasts of National Hockey League games on the USA cable network. The company sponsored the Formula One stock car race with Valvoline Motor Oil. The event was considered an important boost for Stroh’s international name recognition. “High Rollers,” a contest for amateur bowlers, was also developed and sponsored by the company. Stroh’s most popular non-sports promotion is the “Schlitz Rocks America” concert series.

Americans’ increased health and moderation awareness caused beer sales to drop considerably in the first half of the 1980’s. Stroh’s challenge, therefore, was to maintain strong profit margins in the declining beer industry. In attempting to do so, Stroh has begun to consider itself a general beverage company rather than strictly a brewery. In 1985 it introduced White Mountain Cooler, a citrus-, orange-, or berry-flavored drink that contains 5% alcohol. The cooler is not wine-based like its competitors; instead Stroh uses its beer technology to make a malt-based beverage that has been successful. Stroh differentiated the cooler from its beer brands by forming the Colorado Cooler Company division to market the new product.

Other new subsidiaries are Stroh Foods, Inc. (formerly the Pacific Health Beverage Company), the Great Northern Import Company, and Stroh International, Inc. Creation of Pacific Health in 1985 marked Stroh’s entry into the competitive soft drink market. The division produces and markets Sundance 100% Natural Juice Sparklers, which contain 70% pure fruit juice and 30% sparkling water. Great Northern has expanded Stroh’s product line by importing alternative beverages, including Koenig, Germany’s top-selling beer, and Barbican, a nonalcoholic malt beverage from England. Finally, Stroh International introduces Stroh products into world markets.

Stroh now owns six breweries, in Pennsylvania, North Carolina, Tennessee, Texas, Minnesota, and California. The company operates two container manufacturing plants and a growing network for recycling aluminum beverage containers. Stroh products are available in many European countries, as well as in Asia, the Middle East, and the Caribbean.

The flurry of new and successful activity started in 1985 appears to promise a healthy future for Stroh. Company management clearly is able to anticipate consumer trends and market Stroh products to the best advantage.