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Miller to shut down historic brewery - Officials cite fiscal,
environmental hurdles
Tumwater, WA - Miller Brewing Co. announced Thursday that the Tumwater
brewery will close after producing beer for more than a century and
establishing itself as a Northwest icon. The closure sent shock waves through South Sound. About 400 workers will lose family-wage manufacturing jobs that are not likely to return. Suppliers and support businesses will try to carry on without a key customer. The city and community will be without a cornerstone of charitable funding and identity. The closure tears at the fabric of South Sound. "For everyone involved, it's a tremendous blow. Workers. Their families. The community. It's a loss to the historical roots of Tumwater," said Ralph Osgood, the city's mayor. "The landscape of the city and South Sound has changed forever." Miller bought the brewery in 1999 from Pabst, which had bought it from the founding Schmidt family in 1983. In July, London-based South African Breweries acquired Miller from Philip Morris Cos. for $5.4 billion and formed SABMiller -- the world's second-largest brewer. Brophy said the decision to close the brewery along the banks of the Deschutes River was initiated and carried out by Miller, which functions as a wholly owned subsidiary of SABMiller. Brophy, who works out of Miller's headquarters in Milwaukee, said the decision was extremely difficult but that the company couldn't justify the capital expenditures needed to make the brewery more efficient. He said there was no single reason for the action, but a collection of hurdles Miller couldn't overcome. Brophy said Miller will be supportive of employees and the community during the transition. "Suffice it to say, a great deal of thought and consideration went into this decision," Brophy said after the news conference. "We recognize the historic value of the brewery and everything the employees have done. "That's what made it even more difficult. It's a special community, with a special relationship to the brewery. In many ways it's like Milwaukee in that regard." More bad news The dour economic news comes on the heels of a proposal announced last month by Gov. Gary Locke to eliminate about 2,500 state government jobs in the next biennium. A third of those cuts could come in Thurston County. Brewery workers earn an average of $18 to $21 an hour. The plant's annual payroll is about $27 million. By losing the plant, Thurston County's slim manufacturing sector -- which supplies 4.2 percent of its jobs -- will further erode. There are now 3,700 manufacturing jobs in the county, and Miller pays at least 25 percent above the local industry average, according to the Employment Security Department. "This is terrible stuff for 400 people," said Dennis Matson, executive director of the Economic Development Council of Thurston County. The EDC determined in a study that the brewery creates 1.6 jobs in South Sound for every person employed at the plant, Matson said. That includes employers that do business with Miller, such as suppliers and trucking outfits, and restaurants that serve brewery workers, he said. Since buying the plant, Miller has made about $10 million in capital improvements to enhance operations in brewing, bottling and distribution. Brophy said in the end those were stopgap measures and the cost to bring the brewery up to necessary efficiency in a competitive market were prohibitive. He declined to estimate how much those costs might be. He said wastewater treatment was an issue but not an overriding factor in the decision. After contentious negotiations, Miller and the LOTT Wastewater Alliance -- which is made up of the cities of Lacey, Olympia and Tumwater and Thurston County -- came to an agreement under which Miller would receive $8 million for disconnecting from the LOTT sewer system. Under the deal, Miller hoped to build its own wastewater treatment plant but ran into cost and environmental hurdles. On Dec. 16, LOTT sent a letter to Miller, seeking answers about the plant's future after indications surfaced that Miller had decided to close the brewery and was seeking a buyer for the plant and property. Closing up shop Rumors that the brewery might close had circulated for two months, but Miller had remained silent on the question until Thursday's news conference. When asked if progress on the treatment plant could open the door for Miller to keep the Tumwater plant open, Brophy said the decision was final and reiterated that the wastewater issue was only one of several that prompted the closure. "It's a whole package, and I can't single out specific items that would be listed as reasons it closed," he said. "Taken as a whole, it was impossible to justify operating the brewery beyond the closing date." He said that Miller has yet to actively pursue a buyer for the plant and property. Brophy said Miller has no intention of building a new plant elsewhere or of shutting down any of its other U.S. breweries. Severance The Tumwater plant will wind down in phases before July 1. Brophy said the plant could close earlier, but not significantly so. The brewery won't conduct any more tours. The tours had been popular among tourists and South Sound residents, drawing 32,000 visits in 2001. Miller representatives will sit down with the union and work out severance packages for hourly workers. Salaried employees already have received their packages, though Brophy would not give any details. He did say some of the salaried employees, including plant manager Jack Jackson, will be transferred to other Miller plants. The Tumwater plant brews Henry Weinhard's, Hamm's, Olde English 800, Mickey's and contracted labels. Miller trademark brands, such as Miller Lite, were never brewed in Tumwater. For those brands, Miller's plant in Irwindale, Calif., serves the Northwest market. Production of Tumwater's products will shift in phases to other Miller plants. "We'll have a plan in force in the next few weeks," Brophy said. The only people who won't notice a different will be beer drinkers. "There will be no changes there. They'll see the same products, they'll just be made somewhere else," Brophy said. "It will be a seamless transition in terms of production and distribution." Struggling products Tumwater was among the first of Miller's plants to brew malt-flavored beverages such as Skyy Blue. The malt-flavored beverages helped stabilize production at the Tumwater plant and raised the work force to about 385 non-salaried employees. While Skyy Blue has performed well, two other malt-flavored beverages Miller produced failed to make inroads in a market aimed at younger drinkers, Brophy said. Malt-flavored beverages also are produced at Miller plants in Milwaukee and Albany, Ga. In the end, Miller's national presence and its ability to shift production to other plants were part of the death knell for the Tumwater brewery, which is the smallest of seven Miller operates in the United States. The Tumwater brewery produced 1.7 million barrels last year, well below its rated capacity of 4.0 million barrels, according to Miller. The Tumwater production can be spread among other Miller breweries that also are below capacity, but not at the low levels of Tumwater. High hopes The closure comes about three years after the brewery appeared to have a savior in Miller, which took over after a tumultuous 16 years under Pabst and vowed to bring the plant up to speed. In May, it was hoped that the acquisition of Miller by South African Breweries might fuel further growth. When the deal was announced, Tumwater plant manager Jack Jackson said the change in ownership was likely to benefit the brewery. "One reason to do the business deal is that the companies really do complement each other," Jackson said May 30. "It will give us a worldwide focus and be good all around." SABMiller became the second largest brewer worldwide behind Anheuser-Busch Cos. of St. Louis and had 111 breweries. But Miller's performance has yet to improve nationwide. In an interim report issued in November, SABMiller announced that Miller's market share in the United States fell 2.4 percent for the quarter ending Sept. 30 compared to the same period in 2001. 'Optimal performance' The worst-case scenario would be the Tumwater brewery sitting deserted for years, even decades, Matson said. "There is an economic impact on the community, which is very large," Matson said. "Beyond that, we just lost a part of our history." That by itself wouldn't overly concern SABMiller, a company with more than 35,000 employees worldwide, Matson said. SABMiller wants plants that will yield a healthy profit. "They're not emotionally involved in the community," Matson said Still, Matson said he understands why the company wouldn't want to operate in a setting where costs seem open-ended. Under Miller's previous parent, Phillip Morris Cos., the brewery might have enjoyed benign neglect because beer was a fraction of Phillip Morris' operation, he said. "The focus always should be on optimal performance, regardless of who you are affiliated with," Brophy said of the adjustment to SABMiller. In decades past, only Prohibition stopped the Tumwater brewery from churning out beer. By July, the plant will close. Miller time will be over in South Sound. On the Web Miller Brewing Co.: www.millerbrewing.com SABMiller: www.sab.co.za LOTT Wastewater Alliance: www.lottonline.org City of Tumwater: www.ci.tumwater.wa.us Washington State Department of Community, Trade and Economic Development: www.cted.wa.gov |