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Founded in Wisconsin - City Brewery, La Crosse, WI

  • Writer: greenwoodphilip
    greenwoodphilip
  • 3 minutes ago
  • 9 min read

The City Brewing Company, situated at the intersection of Third and Mississippi Streets in La Crosse, Wisconsin, boasts a historical presence on a site with an industrial heritage dating back to 1858. The company has undergone three major transformations: it began as the original City Brewery, evolved into the renowned G. Heileman Brewing Company, and re-established itself as the contemporary City Brewing Company in 1999. Throughout its history, the company has transitioned from a modest local enterprise to the fourth-largest brewer in the United States, overcoming the challenges of leveraged buyouts in the 1980s, enduring two bankruptcies, and ultimately achieving revitalization through local investment. Today, it operates as a national beverage co-manufacturer, adeptly navigating the dynamic hard seltzer market.


Two German Immigrants and a River Town (1854–1858)


In the 1850s, La Crosse developed into a vibrant Mississippi River town, thriving on logging, milling, and steamboat commerce. This growth attracted numerous German immigrants and nurtured a strong beer-making tradition. Among these immigrants were Gottlieb Heileman and John Gund, who would later establish a brewery together. Heileman, born in 1824 in Württemberg, arrived in the United States in 1852 and gained brewing experience in Milwaukee. Gund, born in 1830 in Baden, had settled in La Crosse by 1854 and owned a small brewery. On November 13, 1858, they formed a partnership to create The City Brewery at Third and Mississippi Streets. Initially modest in scale, their brewery supplied local hotels and saloons. They also invested in hospitality by rebuilding the International Hotel following a fire in 1862. By 1872, differing ambitions led to the dissolution of their partnership; Heileman retained the brewery, renaming it G. Heileman's City Brewery, while Gund took ownership of the hotel and eventually established his own brewery, the Gund Brewing Company. Heileman's operation remained a small local enterprise, producing approximately 3,000 barrels annually for the La Crosse area.


The Johanna Heileman Era (1878–1917)


Gottlieb Heileman passed away in 1878, leaving the brewery to his widow, Johanna

Johanna Heileman
Johanna Heileman

Heileman, who became one of the first women to lead a major American brewing company. Under her leadership, and with her brother-in-law serving as foreman, the business experienced significant expansion, becoming one of the largest in La Crosse by 1880.


Johanna's son-in-law, Emil T. Mueller, joined the company, which was incorporated as the G. Heileman Brewing Company in 1890. Following the death of her son Henry in 1895, Mueller assumed the role of vice president. Around 1900, the brewery introduced "Old Times Lager," later renamed "Old Style Lager," which became its signature brand. By 1902, production reached 160,000 barrels, and the company recognized a union, fostering further growth. In 1914, a red triangle was added to Old Style advertising to protect the brand. By 1917, the distribution had expanded to over thirty states, the year Johanna passed away, just before Prohibition.


Surviving Prohibition (1920–1933)


National Prohibition commenced in January 1920, banning the production and sale of beverages containing more than 0.5% alcohol. This led to the closure of numerous breweries, including Gund's. In response, Heileman introduced "New Style Lager," a near-beer compliant with legal restrictions, and diversified into soft drinks and malt tonics, although the latter did not achieve significant success. The company capitalized on the demand for barley malt syrup, popular for home brewing.


Despite a catastrophic fire in 1931, Heileman sustained its operations, enabling a rapid resumption of full production following the repeal of Prohibition in 1933. Subsequently, the company was acquired by the Paul Davis Company, became publicly traded, and relaunched Old Style beer, achieving double the pre-Prohibition production by 1934. It expanded its market westward and introduced beer cans in 1935, along with "Special Export," a stronger lager. After World War II, Heileman shifted its strategy from quality to competitive pricing, launching several lower-tier labels, which resulted in a decline in sales. By the early 1950s, it remained a stable yet unremarkable regional brewer.


Becoming a National Power: Kumm and Cleary (1956–1983)


Heileman's transformation from a regional brewer to a national powerhouse was spearheaded by Roy Kumm and his son-in-law, Russell G. Cleary. Kumm, who assumed the role of president in the mid-1950s, adopted a strategy focused on market expansion, increased production capacity, and a diverse brand portfolio. He streamlined the flagship beer's name to "Old Style" and initiated Oktoberfest USA in La Crosse to enhance brand promotion. A pivotal strategy for the company was the acquisition of struggling regional breweries, which helped expand market share and reduce costs. Noteworthy acquisitions included Wiedemann in 1967 and Blatz in 1969.


Following Kumm's death in 1971, Cleary assumed leadership, guiding the company to become the sixth-largest U.S. brewer by 1979. Old Style captured significant market share in Chicago, and Heileman diversified into baking, snack foods, and bottled water, launching La Croix in 1981. By 1983, Heileman had risen to become the fourth-largest U.S. brewer, producing over fifteen million barrels annually, with sales ranging from $1.2 to $1.3 billion.



The Rise, Fall, and Resurgence of La Crosse's Iconic Brewery: From the World's Largest Six-Pack to a Beverage Powerhouse


In 1969, the La Crosse brewery gained recognition for showcasing the "World's Largest Six-Pack" and a statue of King Gambrinus. By the mid-1980s, Heileman encountered challenges due to a stagnant beer market, resulting in a hostile takeover by Alan Bond in 1987 and subsequent bankruptcy in 1991 with $1.4 billion in liabilities. Heileman's attempt to re-enter the market with PowerMaster malt liquor faced criticism, leading to its withdrawal. In 1993, Hicks, Muse & Co. acquired Heileman for $390 million, but efforts to rejuvenate the brand were unsuccessful, culminating in another bankruptcy in 1996.


Stroh Brewery acquired Heileman but ceased operations in 1999, with Pabst and Miller dividing its assets. The La Crosse brewery closed in 1999 but reopened under City Brewing following investment from Platinum Holdings and community support led by Randy Smith. City Brewery shifted its focus to contract brewing, producing for brands such as AriZona Iced Tea and Pabst, becoming Wisconsin's second-largest brewer by 2003. It expanded into non-alcoholic beverages and acquired Latrobe Brewery in 2006 and a Memphis brewery in 2011.


By the late 2010s, City Brewing emerged as the largest beverage-alcohol contract manufacturer in the U.S., driven by the hard seltzer boom with White Claw as a significant client. In 2021, a consortium acquired the company, initiating a $630 million investment to double capacity, including acquiring the Irwindale Brew Yard. Under CEO Ross Sannes, City Brewing employed 1,800 people, supported by an $850 million loan, capitalizing on the growth of hard seltzer and craft beverages.


The Hard-Seltzer Bust and Financial Crisis (2022–2025)


City Brewing encountered considerable difficulties as the previously thriving hard-seltzer market declined, and its primary client, Mark Anthony Brewing, transitioned production to its own facilities. This shift highlighted the vulnerabilities inherent in the contract-manufacturing model, resulting in City Brewing's plants being underutilized and the company accruing significant debt. By early 2023, City Brewing violated its credit covenants, and the financial pressure was exacerbated by rising interest rates.


The situation escalated to missed loan payments, leading to a downgrade to "Selective Default" by S&P Global in 2025. A $35 million bridge loan was provided as City Brewing considered restructuring options, including the possibility of bankruptcy. In August 2025, the company's lenders acquired it, which substantially reduced its debt and enhanced liquidity. A new board, composed of seasoned executives, was appointed, while Ross Sannes continued as CEO. Despite these challenges, the La Crosse plant maintained operations, with Pabst's Old Style returning to its original production site in 2023 and Real American Beer commencing production in 2024. By early 2026, City Brewing remained a leading U.S. beverage contract manufacturer, navigating a difficult market under new ownership.


Navigating Challenges and Diversification: City Brewing's Strategic Evolution in the Beverage Industry


The beverage industry, with a focus on production capacity and packaging services, faces challenges such as in-housing and evolving consumer preferences. Notably, City Brewing encountered difficulties when White Claw internalized its production. The sector is dominated by large brands, characterized by moderate switching costs and a trend toward multi-sourcing and vertical integration. Overbuilt capacity and weak demand intensify competition, as demonstrated by Asahi's acquisition of Octopi Brewing, which highlights flexible co-manufacturing. The industry contends with low margins, volatile demand, and supplier dependence, underscored by the decline of hard seltzer leading to City Brewing's debt crisis. To mitigate risks, City Brewing aims to diversify its customer base and category mix, focusing on mid-sized, high-growth brands.


City Brewing's strategy, analyzed through Hambrick and Fredrickson's Strategy Diamond, emphasizes contract manufacturing and packaging. The company expanded by acquiring distressed facilities but faced setbacks from the hard seltzer market reversal. Its economic logic of spreading fixed costs is fragile due to volume sensitivity. Under new ownership, City Brewing is diversifying categories and broadening its customer base. The VRIO assessment reveals that despite a valuable national footprint, financial mismanagement has become a liability. The company's scale provides purchasing power but relies on high demand. Acquiring distressed assets could offer an advantage with disciplined management.


From 2000 to 2020, City Brewing focused on acquiring distressed plants and reinvesting for growth, following Jim Collins' flywheel concept. However, reliance on external demand led to financial distress as the seltzer market declined. The goal is to diversify demand and build relationships with mid-sized brands. An analysis using Hamilton Helmer's 7 Powers framework highlights City Brewing's scale advantage but notes weak barriers due to replicable economies. High utilization is crucial to avoid scale becoming a cost penalty. The company lacks exclusive resources, but its emerging Process Power offers a credible advantage. Despite moderate Switching Costs and Process Power, City lacks robust strengths in a low-Power industry. The post-2025 strategy involves diversifying customers and categories and reducing leverage, shifting from scale dependency towards more defensible Powers.


Rethinking Strategy: How City Brewing's Scale-Driven Approach Led to Financial Turmoil and the Path to Recovery


City Brewing, the largest beverage co-manufacturer in the US, found itself in selective default and under lender control due to its strategy centered on scale—an advantage that this industry does not sustainably reward. The path to recovery is not about "being bigger," but rather "being more embedded, more diversified, and more disciplined." Five strategic frameworks reveal five key insights, highlighting structural challenges rather than mere misfortune. First, the industry is fundamentally low-profit due to uncontrollable factors like high buyer power and substitution threats, necessitating strategic adjustments. Second, the focus on scale was misguided as it provides no competitive barrier and becomes a cost issue when utilization decreases. Third, the leveraged expansion in 2021, which doubled capacity with significant debt at a market peak, disrupted economic logic and turned a positive cycle negative when demand declined. Fourth, reliance on external demand is risky, as demonstrated by White Claw's departure, due to a fixed-cost base tied to large customers. Fifth, true advantages lie not in scale but in moderate switching costs for mid-size customers and unique capabilities in managing distressed plants. The core strategic mistake was equating size with advantage, while the real strength lies in capability and customer integration.


The Enduring Legacy of La Crosse's Historic Brewery


The central theme of this history is the brewery itself—the brick-and-steel facility located at Third and Mississippi in La Crosse, which has been in nearly continuous operation since its founding by Gottlieb Heileman and John Gund in 1858. This site has served as the birthplace of Old Style, the headquarters of a billion-dollar national brewer, a closed relic, a locally revived venture, and a high-tech co-manufacturer for some of the most well-known beverage brands in America. The legacy of its founders endures throughout the city—Heileman in the brand still produced on-site and Gund in the restored Gund Brewery Loft Apartments. King Gambrinus has also maintained his watch over the premises since 1939. Few American breweries have experienced such a diverse history, and even fewer continue to brew against significant odds.


Reference & Encyclopedic Sources

These anchored the historical narrative from the 1858 founding through the modern era.

Business, Financial & Restructuring Coverage

These informed the 2021 recapitalization and the 2022–2025 financial crisis and lender takeover.

Trade & Brewing-Industry Press

These supplied the competitive landscape and category dynamics for the Five Forces and subsequent strategic analyses.

Company & Market-Data Sources

 
 
 

© 2025 by Dr.Phil Greenwood,CPA, PhD. Proudly created with Wix.com

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