Wednesday, June 16, 1999
Brewery plans fiscal rehab
Oldenberg may sell divisions
BY PATRICK CROWLEY
The Cincinnati Enquirer
FORT MITCHELL — The party's over for the specialty beer industry, and Northern Kentucky's Oldenberg Brewery is left with a financial hangover.
After posting annual sales gains of 50 percent or better in the mid-1990s, the industry — which includes microbrewers, brew pubs and regional specialty breweries — has seen growth rates drop to single digits.
Oldenberg President David Heidrich blames “a prolonged and continuing slump” for sending the 12-year-old maker of specialty beers into Chapter 11 bankruptcy court.
“The specialty beer industry continues to experience a nationwide slump, a trend from which we have not been spared,” Mr. Heidrich said in a recent letter to company shareholders.
Under federal bankruptcy laws, a company is allowed to restructure its debt under a Chapter 11 filing. Oldenberg has assets of $5.2 million and debts of $3.3 million.
Because Oldenberg filed just a week ago, Mr. Heidrich said it is difficult to say how long the restructuring will take or what it might include.
Information from company documents and statements from Mr. Heidrich do give some hints as to how the company landed in financial trouble, and where it could be heading.
No employees will be laid off, and Oldenberg's beer will continue to be made at its Fort Mitchell brewery and sold at bars, restaurants and stores in Greater Cincinnati. Oldenberg made 7,500 barrels of beer last year.
Mr. Heidrich said parts of the company could be sold and some operations could be discontinued, though he has not been more specific.
Another possibility could be selling the brewery's relatively new restaurant business.
Oldenberg began opening restaurants in 1998, when it bought Superior Development Group of Louisville. Oldenberg Grill restaurants opened in Louisville and Oviedo, Fla., near Orlando. A franchised restaurant opened in Augusta, Ga., in March.
Another restaurant, the Holy Grail Brewery and Grille, opened in Clifton last year. But it has since been sold.
In a newsletter to shareholders posted earlier this year on the company's Web site, Mr. Heidrich said restaurants were planned for Fort Wayne, Ind., and New Jersey.
But Mr. Heidrich said a group of investors backed out of the Fort Wayne project, killing the restaurant chain's expansion plans.
Also earlier this year, the company, which went public in 1995, failed to raise as much money as it needed in a preferred stock offering. That forced Oldenberg to take on debt that has been difficult to pay down.
Four members of the company's board of directors also have resigned. None is from the area.
Mr. Heidrich said all four resigned because they were not only board members but stockholders, having bought preferred stock.
Oldenberg is not alone when it comes to flat, slowing sales in the specialty beer market, said K. Timothy Swanson, a beverage analyst for A.G. Edwards & Sons Inc. in St. Louis.
“The smaller craft brewers are having problems getting wholesalers' attention and getting retail distribution,” he said Tuesday. “The competition for tap space at bars and restaurants is also pretty aggressive.”
Mr. Swanson said specialty beers were a hot consumer trend that has slowed down, partially because it is no longer new but also because of more imported beers being sold in the United States.
According to Mike Starling, editor of The New Brewer magazine in Boulder, Colo., there are 1,528 specialty beer brewers like Oldenberg operating in the country.
In 1998, 183 opened and 123 closed, he said. It's a $3 billion-a-year industry, but overall beer sales total $50 billion and are dominated by such giants as Budweiser and Miller.
Still, Oldenberg is a hot seller at The Party Source, a supermarket-sized liquor and gourmet food store in Bellevue, according to the store's beer buyer, Chad Hubbard.
“We sell a ton of it,” Mr. Hubbard said. “We expect them to weather this storm because their problems are not because of a bad product.”
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