Iron City’s new owners predict full-bodied future

By Joe Napsha
TRIBUNE-REVIEW
Wednesday, June 6, 2007

The new owners of Pittsburgh Brewing Co. believe the brewery is well-positioned for growth under a bankruptcy reorganization plan approved Tuesday, and a beer industry expert agrees.
The ownership group, led by Connecticut investment manager John N. Milne, plans to take over the Lawrenceville brewery on July 7 and operate it under the name Iron City Brewing Co., which was the name of the brewery when it was formed in 1861.

“Today marks a positive first step for Iron City Brewing Co.,” said Timothy Hickman, who will become the brewery’s president, in a statement yesterday.

U.S. Bankruptcy Judge M. Bruce McCullough approved the reorganization plan, which will enable the beermaker to emerge from bankruptcy for the first time since Dec. 7, 2005.

“Pittsburgh Brewing was in bankruptcy for two main reasons — a weak balance sheet and an excessive cost structure. The reorganization plan addresses those issues and positions it well for future growth,” Hickman said.
A beer industry expert believes that with the right business plan, the new ownership can succeed.

“They are just sitting on a gold mine,” because Pittsburgh Brewing’s brand equities “are just phenomenal,” said Daniel Bradford, publisher of All About Beer magazine in Durham, N.C.

Even so, though the new owners pledge to spend $4.1 million on a new kegging line and a new gas-fired boiler, and $500,000 on marketing the brands, having money to spend is not a guarantee of success, Bradford said.

“It is not just a question of (spending) money. You have to be strategic, and you have to execute well,” Bradford said.

Bradford believes the news ownership can “tap into some really strong trends right now.” One of those is what he calls the “retro trend,” the popularity of older beer brands like Iron City and IC Light, among adults in their 20s.

The new ownership group has an opportunity to create a specialty beer segment, a whole new brand they can roll out within the existing market, and add value to the business, Bradford said. Brewers such as High Falls Brewing Co. of Rochester, N.Y., which brews the Genesee family of beers, along with the Matt Brewing Co. of Utica, N.Y., and City Brewing Co. of La Crosse, Wisc., which bought the former Latrobe Brewing Co. plant, are among such success stories.

“It’s not just an extension of Iron City. It is thinking more along lines that reflect the indigenous culture of Western Pennsylvania,” Bradford said.

The new ownership group will take over the brewery from Joseph R. Piccirilli, who bought the business out bankruptcy in 1995. Milne’s group convinced creditors to accept a repayment plan that offers creditors no more than $5.03 million on claims totalling more than $26 million. There was a near-unanimous approval of the reorganization plan, brewery attorney Robert O. Lampl told the judge.

“I did not think we would be here today,” McCullough said as he approved the reorganization plan during a 15-minute hearing. However, he added a cautionary note, saying, “I don’t know how long it will last.”

The developments yesterday “give us optimism,” said George Sharkey, president of the negotiating board for the bottlers and brewers, members of the International Union of Electrical Workers-Communication Workers of America Locals 144b and 22b. “We’re hoping for great things. We hope the people of Pittsburgh buy the beer and support the business.”

Milne’s group projects that it can boost sales from $30.5 million in its first full year of operation to $37.4 million after three years.

The group will be able to take advantage of a 15 percent reduction in union workers’ wages and benefits under a contract that takes effect when new ownership is in place. Retirement costs were cut by terminating the union-sponsored pension plan, and medical insurance costs for employees were reduced by 20 percent.

Joe Napsha can be reached at jnapsha@tribweb.com or (412)-320-7993.