Craft Brew News – 5/10/19

(Courtesy of Brewbound.com)

Boston Beer Company and Dogfish Head Agree to Merge in $300 Million Deal

Eight years ago, Dogfish Head and Boston Beer Company teamed up to brew a collaboration beer for the annual SAVOR craft beer and food pairing experience.

Today, the two companies announced the signing of a definitive merger agreement valued at about $300 million. The deal is expected to close in the second quarter.

The merger comes nearly four years after Dogfish Head sold a 15 percent stake to LNK Partners, a New York-based private equity firm. As a result of the merger, LNK will exit its investment in the Delaware-based craft brewery.

The merger brings together the Brewers Association’s second-largest craft beer maker, Boston Beer, with the 13th largest craft brewery, Dogfish Head. Both companies will retain their status as BA-defined independent craft breweries.

Speaking to Brewbound, Sam Calagione said the deal came together over pints this past February, during Beer Advocate’s Extreme Beer Fest in Boston.

Sam said “We talked about how challenging the industry is getting, the indie craft definition, brands that consumers think are indie craft, active lifestyle beers, and we discovered how beautifully complementary and not competitive our portfolios were,” he said.

In a press release, the two companies said the merger would “create a powerful Amercian-owned platform for craft beer and beyond.”

Koch said, via the press release. “This combination is the right fit as both Boston Beer and Dogfish Head have a passion for brewing and innovation, we share the same values and we will learn a lot from each other as we continue to invest in the high-end beer category,”

According to the release, Dogfish Head is on pace to sell 300,000 barrels of beer in 2019, with net sales of about $120 million.

Boston Beer chief executive Dave Burwick, who previously served as the CEO of Peet’s Coffee & Tea Inc. before taking over as CEO of the brewery last February, will lead the merged entity.

According to Calagione, Burwick — who led the acquisitions of two super-premium coffee brands, Intelligentsia and Stumptown, while at Peet’s — was “very involved” in the merger.

Burwick said, via the release “United, we will have the highest quality, most distinct, high-end portfolio, from both a price-point and product perspective with the top-ranked sales organization to bring it to market,”. “We expect that we’ll see more consolidation in the craft industry over time, and we’ll be in the best position to take advantage of those changes.”

Calagione, who noted that Dogfish shares about half of its wholesalers with Boston Beer, said the two companies would also look to “align distribution geography everywhere it makes sense.”

Red Bull Terminates 3 Massachusetts Wholesalers, Leading to ‘Mass Layoff’ at Burke

Red Bull North America this week announced it would terminate distribution contracts with three Massachusetts beer and non-alcoholic beverage wholesalers in June, as it transitions to a self-distribution model for off-premise accounts. The energy drink maker also announced it would transfer its on-premise business to wine and spirits distributor Martignetti Companies.

Starting June 3, Red Bull Distribution Company (RBDC) will take over the brand’s distribution rights from Burke Distributing Corporation in Boston, Atlas Distributing in Worcester and Williams Distributing Company in Chicopee.

In a statement released to media outlets, Red Bull said its focus is on “providing the most effective and efficient route to market in every geography.”

Unlike beer breweries, non-alcoholic beverage companies are not subject to Massachusetts’ franchise laws, which lock beer brands into nearly unbreakable contracts with their wholesalers. The state’s beer companies and wholesalers have been at odds over reforming those laws for several years, but a resolution has proven elusive.

“Due to unforeseen circumstances arising out of the termination of a major business contract, Burke Distributing Corporation will be conducting a mass layoff at its corporate offices,” he wrote in the letter to Business Services/Rapid Response Manager Ken Messina.

Burke added that the job cuts are expected to be “permanent,” with the “first separations” slated for June 24. The Boston Business Journal reported that Burke — a third-generation wholesaler whose brands include MillerCoors, Constellation Brands, Boston Beer Company and several craft brands — employed 320 workers as of 2018.

Red Bull Distribution Company operates in 22 states with 82 warehouses and more than 2,000 employees, according to its website. The company sold 6.8 billion cans worldwide in 2018, a 7.7 percent increase over 2017 levels.

Schlafly Sold Again: Sage Capital Sells Controlling Stake in Saint Louis Brewery Back to Family

The Schlafly family once again has controlling interest of The Saint Louis Brewery, makers of Schlafly Beer.

More than seven years after acquiring a majority interest in the Saint Louis craft brewery, private equity firm Sage Capital, as well as several current and former Schlafly Beer employees, including co-founder Dan Kopman, have sold their stakes in the business to a new investor group led by David Schlafly, a real estate developer and cousin of brewery co-founder Tom Schlafly.

Specific financial terms of the deal, which closed May 3, were not disclosed. Following the transaction, the new investor group, including members of the Schlafly family, as well as individual investors, will control 80 percent of the company.

Speaking to Brewbound, David Schlafly said his first goal was to return ownership of the brewery to the Schlafly family and close friends.

“Through the virtue of that, the brewery can do what it’s always done — it can lead in making great beer,” he said. “Quality companies like Schlafly are very rare, and [they] are things you want to be a part of.”

In 2017, the last year in which production numbers were available, Schlafly brewed about 45,000 barrels of beer, down from a peak of 60,000 barrels in 2015. Tom Schlafly told Brewbound that the company’s production had declined even further in 2018, but was unable to provide final production figures.

Nevertheless, David and Tom Schlafly remain bullish on the growth prospects of the beer category. According to Tom Schlafly, the company has an opportunity to succeed because of its “history of quality and excellence.”

“Can I prove that empirically? Not yet,” he said. “But it’s just an instinct that I have that as consumers become more knowledgeable, they recognize that we have brewed dozens of styles in perfect compliance with the established standards.”

Schlafly’s brand image was damaged last December following the circulation of a newsletter to bars and restaurants that criticized another local competitor, 4 Hands Brewing. Following the debacle, The Saint Louis Brewery and 4 Hands issued a joint statement in which the maker of Schlafly Beer apologized on behalf of an unnamed “senior executive” who had “caused negative and misleading information to be circulated about 4 Hands” via an anonymous newsletter. Then-CEO James Pedegraft abruptly resigned from the company days before the joint statement, and it is widely understood that he was responsible for designing and distributing the disparaging remarks.

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