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Wednesday, Feb. 27, 2008

Is it Miller's Time?

Proposed joint venture creates corporate beauty contest for new

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Both companies are tight-lipped about what’s in store for the future MillerCoors, but it’s apparent that two corporate headquarters will merge in one location, a process that will match Milwaukee in a corporate beauty contest with picturesque Golden—or even another location. Two weeks ago Coors head Peter Coors hinted that a third city could land the prize, leaving both Wisconsin and Colorado crying in their respective beers.

To those jaded by the loss of Pabst, Schlitz and Blatz, the song may sound familiar. But the reality, say local business leaders, is far from grim. First, there are no plans to move brewing operations out of the city. Second, the new joint venture, they say, will better position Miller Brewing to compete with industry heavyweight Anheuser-Busch. What’s more, it is hoped that a strong MillerCoors will lead to greater brewing capacity and more manufacturing jobs in Miller Valley.

Miller spokesman Julian Green further assures the skeptics that Miller remains committed to Milwaukee’s civic life, even if the new headquarters—or the “joint venture center” (JVC)—is not sited here.

“Regardless of where the JVC is located, the company will remain engaged in its corporate social investments,” Green said.

Miller Brewing is a major supporter of the Milwaukee County Zoo, Summerfest, lakefront ethnic festivals and all three of Wisconsin’s major league sports teams.

Coors Brewing Co. is owned by Molson Coors, which splits its own headquarters between Colorado and Montreal. Miller Brewing is owned by SABMiller, based in London. Miller hasn’t been locally controlled in more than 40 years, when W.R. Grace Co. bought out the family stock and Philip Morris Inc. purchased it a few years later. Miller’s corporate headquarters at 3939 W. Highland Blvd. on the city’s near West Side currently employs about 900 people.

But no decision regarding job cuts or corporate structure can be final until after the proposed partnership is reviewed and approved by the U.S. Department of Justice (DOJ), a decision not expected until this summer.

“Until the DOJ clears the joint venture, it would be premature,” Green said.

Impact on Jobs
Chicago, Dallas and other cities are also reportedly thirsting for MillerCoors, a scenario that some business leaders minimize.

“I don’t see us losing all 900 jobs or close to that,” said Pat O’Brien, executive director of Milwaukee 7, which promotes business in the region. “While there are synergies in co-locating certain functions, it is also difficult and expensive to move existing staff or hire and train new staff. I would expect some of the back office functions to stay, whether the corporate HQ is located here or not.”

Those back office functions include personnel, IT support, accounting and purchasing. Still, the company will be reducing “redundancies” where possible. MillerCoors is relying on job reductions, plus other efficiencies, for an estimated $500 million annual savings, according to press statements released by MillerCoors.

“Certainly, Milwaukee will lose some jobs and some types of jobs in the short term and possibly forever,” O’Brien said. “But remember, the whole idea of the combination is to make Miller stronger vis-a-vis their competition, primarily Bud, and this combination should do that. Hopefully the end result is to increase production and jobs both at the local brewery and in the other functions that remain in Milwaukee.”

Far more damaging than any potential loss of jobs, though, will be the blow to the city’s image as a friendly home for large companies. Milwaukee is fifth in the nation in the number of Fortune 500 corporations per capita, nestled between Cincinnati and Detroit.

“We punch way above our weight class,” said Tim Sheehy, president of the Metropolitan Milwaukee Association of Commerce (MMAC). “That’s a good indicator that this is a good place to do business.”

Though Miller Brewing Co. is not a Fortune 500 company because it is not publicly traded, its annual revenue of just less than $12 billion is nearly as great as Kohl’s Corp., the region’s fourth-largest company on the Fortune list.

Any job losses could also have an impact on the city’s identity as the home of great breweries.

“Miller has a place in the heart of Milwaukee because of our history as a brewing town,” said Eileen Force, spokeswoman for Milwaukee Mayor Tom Barrett, who has joined the charge with Gov. Jim Doyle to keep the headquarters here. “Attracting jobs and retaining companies is a top priority for the mayor.”

Force echoed business leaders who say the joint venture is likely to create more jobs, not less.

“Under the [joint venture] scenario, the brewery operations are likely to grow,” she said. “The partnership aims to feed off the efficiencies of the two companies, so we may be brewing Coors products in Milwaukee as well.”

Milwaukee 7 (M7) has also been facilitating cooperation between the mayor and governor’s offices, and the joint venture team.

“We are working hard to make sure the decision-makers understand all the great qualities of our region,” O’Brien said.

Brew City’s Charms
So what is MillerCoors looking for in a host city?

“The issues with any corporate headquarters location are recruiting and locating talent,” said MMAC’s Sheehy. “They look at the city’s overall image, and things like quality of life, housing prices, as well as arts and entertainment, recreational opportunities, cost competitiveness and access to air travel. That’s the normal basket of issues with any corporate headquarters location. It’s a fair place to look at what the joint venture team will be sorting out.”

Sheehy said corporations have different needs, and the job of M7 is to match Milwaukee’s strengths to corporate functions.

“Each company has a different lens for looking at what is important to them,” Sheehy said.

One clue for what corporations look for in a host city is the description of Milwaukee found in Forbes Magazine’s 2007 list of most affordable cities. Milwaukee ranked No. 6, according to Forbes:

“Milwaukee has a strong tradition of charitable giving and civic involvement; both have helped create cultural institutions and fund the arts … The city is 21st for its combination of museums, sports outlets, libraries, universities and parks, though if access to good beer were a category, there’s no doubt the city would perform even better. Cost of living sits right about at the national average.”

What are Milwaukee’s chances? Do we pass the MillerCoors taste test?

“It’s much too early to tell,” Sheehy said. “If this were a football game, we’d be coming to the coin toss right about now.”

John Gurda, historian and author of Miller Time, published on the 150th anniversary of the company, sees good reasons to keep the headquarters here, including “Milwaukee’s image as a beer capital and the relative size of the two partners.”

But Gurda noted that Miller hasn’t been locally controlled since 1966, and local concerns may not factor as much as civic leaders would like.

“If the headquarters were to move, the effect would be more psychological than economic,” Gurda said. “Milwaukee would lose a significant number of well-paying jobs, but the brewery would still make beer, Miller Valley would look the same and Miller Park would still be Miller Park.”

Locating in Chicago, another possibil- ity, “would put a definite damper on any talk of cross-state cooperation,” Gurda said.

In a way, this latest episode in Milwaukee’s brewing history brings us full circle, to the days when area brewers relied on little more than business sense to muscle their way into a national market.

Beer historians (yes, there are such people) have long wondered if Milwaukee made its brewers great, or if the brewers made Milwaukee great.

According to BeerHistory.com, Milwaukee didn’t enjoy any significant advantages over other Great Lakes cities with cheap water transportation and abundant ice in the winter. True, our German heritage was a big plus, but in the end it was business acumen that put the city on the map.

“Guys like Fred Pabst really were exceptional businessmen,” Gurda said. “And the proximity of Chicago helped.” And then there was the Chicago fire of 1871, which increased demand for Milwaukee beer. According to BeerHistory.com, sales of Schlitz doubled following the conflagration.

Meanwhile, Milwaukee is hoping that its last flagship brewery can improve its own fortunes, without an accompanying disaster. We’ll know more this summer when the DOJ gives a thumbs up, or down, to the proposed joint venture.

What’s your take? Write: editor@shepex.com.

Photos by Kate Engbring

Mkecorppower.jpg
Miller Brewing Co. Statistics:

Employs 1,700 workers in Milwaukee, with a $120 million payroll.

Spends around $500 million on products and services from Wisconsin businesses each year. These businesses—which include ingredients, equipment and services for Miller—create an opportunity to place money back into the community.

Produces about 45 million barrels of beer every year. At capacity, the Milwaukee Brewery can produce more than 10 million of those barrels annually.

Invested more than $40 million in Miller Park and supports the state’s major professional sports teams, including the Admirals, Brewers, Bucks and Packers.

Contributes millions of dollars to economic development and Milwaukee tourism. Miller helps to support the Milwaukee County Zoo, Summerfest, the Wisconsin State Fair and many of the city’s ethnic festivals.

(Source: www.millerbrewing.com) —K.R.

 

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