Resurgent regional - Cincinnati, Ohio brewing industry; history of Hudepohl-Schoenling Brewing Co

Resurgent Regional The city of Cincinnati was one of America's great brewing centers in the late 19th century, boasting the highest per-capita consumption of beer in the United States. In those days, Cincinnati supported 36 breweries with ease.

A century later, the picture has changed somewhat. In recent years, as the giant national brewers make inroads into local markets, regional brewers have found prosperity elusive. Cincinnati has been no exception. By the 1980s, only two of the city's independent brewers survived-- the Hudepohl Brewing Co. and the Schoenling Brewing Co. Both were economically beleagured, and in 1986 the decision was made to merge the two operations.

Today, the two brewers provide a united front as Cincinnati's Brewery--the Hudepohl-Schoenling Brewing Co. The company is larger, yet leaner, with a commitment to ongoing plant reinvestment. Led by president Ken Lichtendahl and vice president Mike Schott, Hudepohl-Schoenling has developed a strategy for the '80s that capitalizes on the company's strengths. Building on a foundation of strong local brands, the company will seek out niche markets as a distributor of imports and its own specialty brews.

"Hudepohl and Schoenling were experiencing similar problems by the mid-80s," recalls Mike Schott, H-S vice president of sales and marketing. "Our home markets, which had been the bastion of our success, were under attack as Anheuser-Busch and Miller expanded their reach.

Cincinnati's Brewery

"We decided that the two companies had more sustainability as one," Schott says, "so we joined forces. Schoenling was the healthier of the two, but we chose to name the company Hudepohl-Schoenling because Hudepohl sold more beer in Cincinnati. Then, as now, we saw our major strength as being Cincinnati's brewery."

Following the merger, the two plants were evaluated for modernity. The Schoenling Brewery, located at 1625 Central Parkway, was found to have the advantage in efficiency, and all operations were shifted there soon after the merger.

With newly-streamlined physical plant to back them up, Hudepohl-Schoenling management enters the '90s with a strategy that couples proven brands with the renewed consumer interest in specialty beers.

"Our business in Cincinnati serves as our foundation," he observes. "We have a half-million barrel critical mass, made up of products that successfully compete in the mainstream against Bud and Miller.

"Although it's impossible to match the efficiencies and marketing prowess of the big guy," Schott says, "our brands are set up to compete. Brands like Hudy Delight and Little Kings still enjoy fine acceptance in Cincinnati."

Filling niches

According to Schott, Hudepohl-Schoenling intends to build on that critical mass by filling niches for specialty beer consumers. He traces the roots of that philosophy to the waning days of the Hudepohl Brewing Co. "In the years before the merger," Schott recalls, "Hudepohl went through a period of self-analysis, and decided that niche products were the wave of the future."

The most notable specialty beers produced at Hudepohl-Schoenling are Christian Moerlein lager and Double Dark. "Hudepohl resurrected the Christian Moerlein label," Schott says, "which had been the flagship product of the old Christian Moerlein brewery here in Cincinnati. They formulated an all-malt specialty beer, and brewed it according to the German Rheinheitsgebot.

"After the merger," Schott continues, "we picked the brand up and plugged it into the network, together with the other brands from the Hudepohl portfolio." According to Schott, however, Hudepohl-Schoenling's own-label specialty products will remain a sideline. "Focusing efforts on niche markets for specialty beers might make sense for smaller regional brewers," he points out, "but we're doing a half-million barrels a year. Things that a 50,000-barrel brewery might get excited about just wouldn't work for us.

"Given the size of our company and the size of our market," Schott says. "our money, resources and manpower are somewhat stretched. We're not sure we want to spend a lot of time and effort brewing specialties."

Imported specialties

Specialty beers, Schott says, are nonetheless an important part of Hudepohl-Schoenling's future. In a strategy that is a departure for a regional brewery, Hudepohl-Schoenling will serve as importer for several major international brands. The brewery's imported portfolio will include Great Britain's Whitbread Ale and Mackeson Stout, Germany's Wickuler Pilsener and a full line of specialties from Bavaria's Hofbrauhaus. "We will treat these brands just as though they were our own," Schott states. "They fit in very well with our strategy of providing quality niche products."

According to Schott, Hudepohl-Schoenling has entered the import category in hopes of simplifying the process for wholesalers. "We want to minimize the aggravation for the multi-brand wholesaler," he says. "We think we can provide improved service for wholesalers with an expanded list of products to sell. Particularly those companies that are concerned about product freshness and product tied up in inventory."

Reasonable quantities

Schott says H-S will do this by the following one of the oldest laws of capitalism. "We'll give people what they want," he says. "We'll provide product to wholesalers in the quantities they need, and we'll do it for a competitive price. In the past, sometimes the only way for a wholesaler to get an import was to buy a 1,200-case container. Realistically, a wholesaler only needs a container every four years or so. We want to change that by giving the wholesalers what they want," he says. "If that's a pallet, that's what they'll get."

Schott points to the diverse nature of the portfolio as a draw. "If you look at the brands we're offering they include excellent examples of major styles--including pale, ale, sweet stout, pilsener and wheat beer. We wanted brands with a high degree of international recognition," he says, "and I think we've got them.

"People want to sell these products," Schott says, "there's just not enough demand to ship whole truckloads. As a result, we'll bring the containers here, break them down and ship them out. There'll be no penalty when a distributor buys a pallet."

Good Margins

Schott concedes that Hudepohl-Schoenling will initially derive limited profit from import sales. "In year one," he says, "we'll probably do no more than five percent of our business from the case standpoint. However," Schott says, "once we get past the investment stage, we think that imports will give us a very good margin of profitability."

Schott reports that Hudepohl-Schoenling will sell their new products aggressively. "The key to our business is being out on the street with the wholesalers," he says. "We don't just take them out to lunch--we work with their salespeople and go out to accounts.

"Recently," Schott continues, "I read that Anheuser-Busch was excusing their field sales force from paperwork so they could get out into the market. That's exactly our approach--we want to be out there as a partner."

Local Loyalty

Schott also notes one of the company's long-time trump cards--Little Kings Cream Ale. Long a local favorite (once known as Schoenling Cream Ale), Little Kings has received favorable notices at the Great American Beer Festival, where it received the gold medal for the cream ale category in 1989.

Schott looks to Little Kings Cream Ale as a strong brand of the future. "Little Kings may be our number one challenge and opportunity," he says. "It's sold virtually nowhere on the East Coast, and there is an opportunity here to build Little Kings into the bedrock of our business. There is a lot of sustainability in the brand, and it is likely to grow significantly.

Little Kings continues to perform well on the home-front, Schott notes, together with the company's other home-town brews. "There's a great deal of local loyalty here in Cincinnati," he says, "and part of our job is to sustain that loyalty by creating good publicity for brewing here in town, and educating people on brewing history.

"Although our Hudepohl-Schoenling business might be less than it was five years ago," Schott says, "that is just as a percentage of the whole. On an actual case basis it won't be smaller, since Midnight Dragon, Moerlein and the Imports are part of the picture now too."

Hudepohl-Schoenling is a regional brewer with its eye on the future. Building on a strong foundation of local consumer loyalty, the brewery is branching into areas that will provide it with the profit margins necessary to sustain and expand their business. A diversified portfolio that runs the gamut from old-line local products to world classic imports should allow Cincinnati's Brewery to thrive in tough beer market of the coming decades.

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