USA: Pyramid Breweries moves production to Portland Brewing Co. facility

Pyramid Breweries Inc. said in January 2005 that it was moving the majority of its beer production previously done in Seattle to the Portland Brewing Co. facility it purchased in 2004, American City Business Journals posted on January 27.

The company said the prospect of cost savings and an increase in sales spurred the transition, which will begin in early February. The shift in beer production also will allow Pyramid's Seattle facility to accept a malt beverage contract project in the range of 24,000 to 30,000 barrels a year.

"We expect that these changes will help make meaningful reductions in the cost structure of the company," said John J. Lennon, president and CEO of Pyramid. "We see these moves as opportunities to strengthen Pyramid's position as one of the Northwest's leading craft brewers, while opening the door for continued growth in the future."

In choosing the Portland facility, Lennon cited its larger brewing capacity and more modern bottling equipment. The shift will allow Pyramid to increase branded beer production in Portland by 80,000 barrels, while the newer bottling equipment is expected to reduce the company's overall operating costs.

Pyramid announced in January 2004 that it was buying Portland Brewing for $4.2 million. With three breweries and five brewery-restaurants, the combined operations generate estimated annual revenue exceeding $46 million.

Pyramid officials tend to use the word "merger" to describe the deal and call it a strategic move meant to build a strong, West Coast craft brewery.

Now, more than a year after the merger, Pyramid is the region's largest independent craft brewer and sixth in the nation. It defines its territory as everything west of the Rocky Mountains.

The merger created a stronger business better able to handle the logistics of expanding into new markets, Lennon told the Portland Business Journal in an interview last September.

In January 2005, the Pyramid board of directors agreed to suspend dividend payments in order to invest in the company's expansion. Prior to that, it regularly paid dividends.

Pyramid and Portland Brewing went into the merger as separate, public companies. Both were looking at $200,000 to $300,000 in legal accounting costs to keep current with federal regulations. The merger paid immediate dividends by cutting their separate compliance costs in half, Lennon said.

The merger has brought efficiencies, Lennon said. But it is still operating in the red, reporting a net loss of $963,000 in the first half of the year, or 4.2 percent of net sales.

A year earlier, the losses were slightly higher, 4.6 percent of net sales, according to statements filed with the Securities and Exchange Commission.

The combined company operates five alehouse restaurants on the West Coast -- MacTarnahan's in Portland, three in California and one in Seattle. Its hometown alehouse is neighbors with the Mariners' home turf, Safeco Field. All sell both Pyramid- and MacTarnahan-labeled brews, offering both lines access to a new market.

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