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VOL. 126 | NO. 63 | Thursday, March 31, 2011

Road to Blues City Brewery Rough

By Bill Dries

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The plan by City Brewing Co. of La Crosse, Wis., to buy the 40-year-old Memphis beer brewery that is now Hardy Bottling Co. didn’t begin this year.

And the life of the plant in the last three years has been complicated. A tornado nearly destroyed it. Mississippi officials tried to lure it below the state line. And there were the normal challenges that come with running any business.

This week, the terms of a $30 million deal between City Brewing and Chism Hardy Enterprises that will bring beer brewing back to the plant were announced.

Just before the Memphis Coors plant was sold to Chism Hardy Enterprises LLC in September 2006, City Brewing Co. tried to buy the plant from Molson Coors. The deal never materialized.

Labor talks bogged down and George Park, CEO of City Brewing, said the timing probably wasn’t right for the company anyway.

“The industry has changed. I think City Brewing is much more well-capitalized,” he said. “Before, it was sort of a leap of faith. Now I think it’s very real.”

City Brewing had reached capacity at its plants in La Crosse and Latrobe, Pa., which meant a decision to either expand the plants or find another brewery.

Park said that brought his company back to Memphis, where Carolyn Hardy, a former Coors plant manager, led the group of investors in 2006 who bought the plant at 5151 E. Raines Road from Molson Coors after the talks with City Brewing broke down.

The plant opened in 1971 as a Schlitz beer brewery and distribution center.

The conversion from brewery to beverage bottling plant meant the bottling operation run by Hardy used about 10 percent of the capabilities of the brewery.

City Brewing makes and packages malt beers under several brand names it can’t disclose because of confidentiality agreements with the companies it works for. Park says the Memphis plant will likely continue producing the non-alcoholic beverages it has made and bottled as the Hardy Bottling Co.

Serious talks between Hardy and City Brewing about buying the plant from Hardy began in January, according to Park, with a letter of intent signed by late January or early February.

Hardy had a 10-point checklist that she used in weighing that and at least one other offer. The items included someone who could start the plant up as a brewery on a rapid basis.

“Somebody I like … someone I can trust,” Hardy said, going over some of the other items on the list. “Someone that is well-capitalized and can afford to do the business that we need to do.”

Hardy and City Brewing hope to close the deal by the end of April. The Memphis-Shelby County Industrial Development Board Wednesday approved a 15-year new PILOT (payment in lieu of taxes) for City Brewing that goes to the Memphis City Council and Shelby County Commission for approval.

The formal announcement Wednesday of a sale caps a three-year transition period for Hardy Bottling Co. and the recovery that began with the February 2008 tornadoes in Hickory Hill that heavily damaged the plant and other businesses in the area including Sharp Manufacturing.

Half of the roof on the building was torn away. The plant couldn’t operate and thus meet its contracts with clients.

Memphis Mayor A C Wharton Jr., who was then Shelby County Mayor, called the plant’s recovery “our poster child for how the community can come together and support our locally owned businesses and minorities.”

The comeback of the plant is one of several initiatives in the Hickory Hill area Wharton’s administration is backing in an area hit hard by crime, blight and home foreclosures.

The Greater Memphis Chamber was enlisted to help the company locate a temporary plant to meet the critical spring months – the most productive at the plant.

“If she doesn’t make it in March, she doesn’t make it,” Wharton said at the time.

Just across the state line in Mississippi, economic development recruiters watched, and for a time were making offers to Hardy. Wharton and chamber leaders were also aware of the offers.

The Memphis plant reopened in April 2008 with some repairs still under way. Hardy lost several of its big clients – even its biggest – but picked up some new ones.

Two years later, Hardy hoped the bottling plant could increase its packaging line and bottle and sell Memphis water. Chism Hardy Enterprises was among the local ventures applying for a share of federal stimulus recovery zone facility bonds.

Chism Hardy was in the top three projects for the interest-free financing last fall when D.G. Yuengling & Son Inc. signed a letter of intent to buy the plant and convert it back to a brewery.

Executives at the seventh largest beer supplier in the U.S. described the Memphis location as “ideal.”

But the deal never happened. Hardy disputed the reports of the pending sale and continued to seek the federal stimulus funding for the expanded bottling operations.

This week, she said a non-disclosure agreement she signed prevented her from talking in detail about what derailed the talks.

“Deals are very complicated,” she added.

Meanwhile, the federal bonds had an end-of-the-year deadline in 2010. And neither Chism Hardy nor any of the other finalists or alternates were able to secure the private financing necessary to get the recovery zone facility bonds by year’s end.

Wharton said there were numerous times in the last three years when he wondered why Hardy didn’t walk away from the business after several setbacks.

“Had she not persevered, none of us would be here today,” he said. “She kept coming back.”

PROPERTY SALES 81 201 16,108
MORTGAGES 40 104 10,026
BUILDING PERMITS 130 336 38,272
BANKRUPTCIES 28 56 7,528