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Busch to shut down Tampa brewery

Published Oct. 4, 2005

After brewing beer for 36 years in Tampa, Anheuser-Busch Cos. on Wednesday said it will shut down what has become its smallest brewery as part of a broad restructuring of its vast $12-billion business.

The mid-December shutdown of the plant at Busch Gardens will cost about 375 of the best-paid skilled workers in Tampa their jobs as the city loses a manufacturer that has long been a source of civic pride.

Blamed on Americans' decreasing thirst for beer, the brewery closing is only part of an ongoing strategic overhaul at the St. Louis-based brewing giant.

The company will get out of the food products business _ selling its money-losing Eagle Snacks operation and spinning off to shareholders ownership of Campbell-Taggert, a Dallas-based baking subsidiary that helped the company survive Prohibition. Also put on the block is the St. Louis Cardinals baseball franchise and its home field, Busch Memorial Stadium.

"We are focusing on what we know best," said August Busch III, chairman and president, "providing customers with the highest quality beer and entertainment at affordable prices."

The changes are a sign of Busch's continued interest in becoming more of a global force in the beer business since the domestic market went flat in 1991. The cash raised will be used to broaden the company's reach in rapidly expanding overseas markets and to expand its collection of theme parks, which include two Busch Gardens and four Sea Worlds.

"All of these are very positive strategic actions," said Martin Romm, a securities analyst with CS First Boston Corp.

"We think this should have been done a long time ago," added Jerry Wise, vice president of an Oklahoma investment fund that owns a stake of Busch. Eagle Snacks and the Cardinals "have always been money-losers," he said.

"The only time the Cardinals make money is when they win the pennant," said Roy Burry, an analyst with Oppenheimer

&

Co., a firm that controls mutual funds that combined are Busch's eighth-biggest shareholder.

Opened in 1959, the Tampa brewery became less and less significant as the company built bigger and more efficient plants elsewhere. In fact, today it doesn't make enough beer to satisfy even the Tampa Bay area's thirst for Busch brews.

Because the Tampa plant makes only Budweiser and O'Doul's in 12-ounce bottles and cans, even the draft beer handed out next door at Busch Gardens' hospitality center has been shipped in from Jacksonville, St. Louis or Cartersville, Ga., for years.

Surrounded on three sides by Busch Gardens, the plant could not be expanded. Now, the 17 acres it covers will be used for as-yet-undetermined expansion of the 300-acre theme park.

The company has nothing in mind yet for a Busch Gardens expansion, but until now faced ripping out old attractions to wedge in new ones. The next park expansion _ a theme area called Egypt that opens next June _ already is under construction.

"I intend to start a task force to evaluate the prospective uses right away," said Joe Fincher, the park's general manager.

Although the brewery's fate has been talked about internally for the past two years, few who work there suspected the ax was about to fall. And despite investments in equipment over the past few years, the Tampa brewery had the highest per-barrel costs among the company's 13 breweries.

Negotiations over severance packages for rank-and-file employees will begin shortly with the Teamsters union local that represents the workers.

Salaried employees face layoffs unless the company finds jobs for them elsewhere. Rank-and-file employees will be offered a severance package, extended health benefits, assistance in job retraining and "help in seeking new positions in the Tampa area," the company said.

"The brewery probably will be demolished pretty quickly," said Renaul Abel, plant manager for nine years. "It's hard. We're all like family here. But if it had not been for the 1991 doubling of the federal excise taxes on beer, I don't think I'd be here talking to you about a plant closing today."

Indeed, consumption of imports and microbrews accounts for the only growing segment in the U.S. beer business. Busch has been able to increase its market share to 44.3 percent of the domestic market, but overall consumption of domestic beers stopped growing after Congress doubled the federal taxes on beer in 1991. And production by major domestic competitors has shrunk.

Busch, meanwhile, has invested heavily in new types of beers andestablished overseas brewing companies such as Kirin in Japan, the makers of Corona in Mexico and Tsingao Brewery in China. The company also has invested in microbreweries such as Seattle-based RedHook Ale as well as mimicking some of the more popular microbrew products.

Busch will take a $150-million charge to close the Tampa plant. It also expects to save $33-million in annual expenses by shifting production to a 4-year-old Cartersville brewery that is five times as big and has excess capacity.

The other cutbacks, while also saving the company money, will be painful to Busch's corporate ego.

Busch has enjoyed bountiful public relations and advertising benefits since it bought the Cardinals in 1953 to prevent the team from leaving St. Louis. The team comes to St. Petersburg each year for spring training.

Campbell Taggert, the nation's second-largest bakery, became part of the Busch empire when it needed alternative uses for its grain and yeast supplies during Prohibition.

And Busch had muscled Eagle Snacks into a distant No.

2 behind snack-food leader Frito-Lay Corp., although the 16-year battle has yet to turn its first profit.

_ Information from Bloomberg Business News was used in this report.

Anheuser-Busch companies

Beer

1994 sales $9.2-billion

Percent of total sales 76%

Anheuser-Busch Inc., world's largest brewer; and support companies in agriculture, containers, recycling, transportation and labeling.

Food products

1994 sales $2.1-billion

Percent of total sales 18%

Campbell Taggart Inc., nation's No. 2 baked goods company; Eagle Snacks Inc., chips and nuts.

Entertainment

1994 sales $742-million

Percent of total sales 6%

Busch Entertainment Corp., including Busch Gardens, Adventure Island and Sea World parks; real estate development; St. Louis Cardinals.

Source: Annual reports, Hoover's Handbook