Bruce Vielmetti

Milwaukee Journal Sentinel

The future of Pabst Brewing Co. may be decided by a Milwaukee County jury deliberating whether the maker of iconic brands like PBR and Schlitz was done wrong by MillerCoors, which has made Pabst's beer since 1999 but says it won't continue past 2022.

Pabst sued MillerCoors over that decision in 2016, saying the larger company feared Pabst, under new ownership, might be too much competition in a shrinking market and fabricated the excuse it wouldn't have sufficient capacity to extend the deal. And without it, Pabst could go out of business.

MillerCoors says it was only looking out for its own survival in the ever-changing industry and was under no obligation to continue subsidizing Pabst beyond the terms of the current brewing agreement.

In closing arguments Tuesday, Pabst's attorney Adam Paris used a colorful slide presentation to recap and highlight some of the hundreds of internal documents he said showed MillerCoors used a reverse-engineered capacity analysis as a pretext for just ending the contract.

"A deal is a deal is a deal," he said, "and they walked on it."

Pabst says MillerCoors breached its contractual duty to operate in good faith and violated Wisconsin law against unfair competition. If the jury agrees, any damages or other relief would be decided at a second trial.

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Slick presentation 'full of distortions'

Eric Van Vugt, for MillerCoors, admitted to the jury that Paris' slick presentation looked like a fairly compelling case of conspiracy and deceit — except that it's full of "distortions, quotes out of context, a whole case made of cut-and-paste."

Besides, Van Vugt said, it just doesn't make sense that MillerCoors executives and an outside consultant would come up with such a scheme or think they'd get away with it.

He noted that MillerCoors continues brewing Pabst brands under the contract, and will, through 2022 if Pabst wants two years to wind down after 2020. Pabst's lawyers confused terms that apply to the existing contract to ones used in the portion addressing a possible option to extend it, he said.

Using simple blowups of the sections of the contract, Van Vugt said it clearly gives MillerCoors the discretion to determine its potential future capacity, and that Pabst's option to extend the deal another five years only existed if MillerCoors said it had the future capacity.

9 days of testimony

Over nine days of trial, jurors heard from nearly two dozen current and former executives at the two companies, plus a consultant hired by MillerCoors and some experts, some in person, and some via their videotaped depositions.

The testimony and documents focused on spring to fall of 2015, when the brewing contract required both sides to discuss the capacity question and potential five-year extension — under the same terms — to 2025.

The plaintiff's first witness was Eugene Kashper, who bought Pabst in 2014 on the belief, he testified, that an extension of the MillerCoors deal was nearly certain, since the larger company was also shrinking, had plenty of capacity and was making $70 million to $80 million on the Pabst deal.

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But MillerCoors presented internal Pabst records showing Kashper knew MillerCoors had reasons to want out of the deal. One even foretold the possible option of suing MillerCoors for unfair business practices.

In late 2015, when Pabst was trying to respond to MillerCoors' announcement that it would not extend the deal without nearly tripling the per-barrel fee, Pabst was also negotiating to buy City Brewing, which could have taken over production of much of Pabst's existing and planned future products. Ultimately, Pabst did not buy City Brewing.

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MillerCoors said while it earned some money making Pabst, it wasn't as much as it could make brewing its own sub-premium brands of beer. It said it was looking to expand its own offerings in the future and didn't want to have its marginal capacity legally committed to Pabst.

The original 1999 contract was struck in part to keep Pabst afloat because it owed more than $100 million to MillerCoors and to a pension fund to which all legacy Milwaukee breweries contributed. MillerCoors was left on the hook for all the pension payments if Pabst went away.

The Pabst production, about 5 million barrels a year, was only 7 percent or 8 percent of MillerCoors total output. Between when Pabst said it wanted to extend the deal, and when MillerCoors said no, MillerCoors announced it was closing its North Carolina brewery.

MillerCoors said if it couldn't charge Pabst about $42 a barrel, instead of the roughly $17 it gets under the current contract, it might be better off shrinking its brewery footprint even further to save costs and raise efficiencies.

Pabst argued that even if MillerCoors closed a second brewery, in California, as was contemplated, it would still have the capacity to make all Pabst's beer.

Besides Pabst Blue Ribbon, Pabst sells beer under 21 other labels, including Schlitz, Old Style, Blatz, Pearl and Stroh's. Kashper testified he hoped to grow and expand with MillerCoors into super premium and craft beers.

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