Boston Beer Company & Dogfish Head Brewery Are Merging

Discussion in 'Beer News & Releases' started by Todd, May 9, 2019.

  1. AlcahueteJ

    AlcahueteJ Meyvn (1,084) Dec 4, 2004 Massachusetts

    While this is true, this is like saying you're the tallest short kid in the room. Ironically Sam Adams has a New England IPA and Dogfish Head doesn't. Which is arguably the most "in" style in the craft beer world today.

    I don't think this was about acquiring a "hip" beer brand at all. I think it was about acquiring a beer brand that's doing better than the Sam Adams beer brand currently. I personally think both will continue on, business as usual. This just made sense for both of them financially in a volatile beer landscape.

    Not like we haven't seen this before, and tell me, did these brands radically change after these mergers?

    Victory Brewing Company Southern Tier Brewing Unite New Holding Company

    Duvel, owner of Brewery Ommegang, to merge with brewer Firestone Walker
    Matt_Rouge, cjgiant, Buck89 and 11 others like this.
  2. Newport_beerguy

    Newport_beerguy Zealot (550) Feb 24, 2011 Rhode Island

    I think it is as simple as Sam and Jim respect each other and have had business discussions in the past. In recent years Sam saw he needed new facilities in order to take the "next step" in distributing a greater amount of beer than current levels, and decided his time is better spent on the beer (and culture as evidenced by his busy festival visiting schedule) as usual and him and Jim talked about a partnership. DFH needs to make more beer, and BBC is selling less beer. It also works on the surface as far as Dogfish sharing in Boston Beer's more expansive intellectual/business information which is their strength, and Boston Beer sharing in Dogfish Head's beer brewing and branding information which is their strength.

    As it is, I had a couple bottles of Boston Lager at a banquet hall last night, and apart from really hitting the spot every time I return to it, I can't help but place DFH 60 minute as an evolution from Boston Lager with it's malt presence on the way to the more modern IPA styles.

    My only concern is on spoiling the vibe DFH has going at their Delaware HQ, and the pains of consolidation. It seems like there will be no disturbance of each other's assets *in the near future*. Sam Adams in Boston is "fine" to visit, but is really not what you would expect seeing as their production packaging is happening hundreds of miles away.
  3. drtth

    drtth Poo-Bah (4,006) Nov 25, 2007 Pennsylvania

    We can strengthen your point by looking at the history of Duvel Moortgat in a bit more detail:

    First for Duvel Moortgat there is Duvel their long time signature beer.

    Duvel Moortgat has brewed the Maredsus core lineup under license from the Abbey for years.

    Duvel Moortgat acquires Leifman's thereby reviving the brewery and saving Goudenband from extinction.

    Duvel Moortgat acquires Brassiere d'Achuffe and the core lineup is still much the same.

    Duvel Moortgat increases partial ownership of Ommegang from minorty stake to full ownership and the core lineup of Ommegang is still much the same.

    Duvel Moortgat acquires Boulevard and the core lineup is still much the same.

    Duvel Moortgat and Firestone-Walker combine operations and the core lineup of Firestone-Walker is much the same.

    In all cases there is a broadening of the range of beers on offer under the Duvel Moortgat umbrella through the M&A, and in almost every case there has been increased collaboration that has resulted in beers that have seen success in the marketplace.
    #123 drtth, May 10, 2019
    Last edited: May 10, 2019
  4. drtth

    drtth Poo-Bah (4,006) Nov 25, 2007 Pennsylvania

    Agreed. And as suggested by my brief review of the Duvel Moortgat history (just above) I'd say they've a good chance BBC and DFH will be doing what you hope for. Especially given the distance between the Duvet Moortgat production facilities having been apparently turned into an advantage.
    Newport_beerguy likes this.
  5. mooseo

    mooseo Champion (887) Aug 11, 2008 Pennsylvania

    Aside from upping their distribution power, acquiring significant assets, and fortifying their brand for the future, it sure was senseless.
  6. Pmehs

    Pmehs Initiate (180) Jan 8, 2017 Virginia

    Wow! Surprising. Reading the official release is more of SAM acquisition of DFH than a merger. I see SAM shares have gone up in price. I believe this is a good move of 2 very good breweries. Especially to do battle against BMC.
    eldoctorador likes this.
  7. jayrutgers

    jayrutgers Aspirant (201) Oct 29, 2011 New Jersey

    Almost all mergers are acquisitions. Sam has a seat on the board and is now the individual with second most shares after Jim Koch.

    That's a merger. If Sam took the money, retired, and retained zero control over this new entity, then it'd be an acquisition outright.
  8. Kahunapig

    Kahunapig Initiate (53) Aug 21, 2014 Hawaii

    A notable example of grow or die in a budding industry. It is the fate of all businesses in the current economic environment to grow by acquisition (oops, I mean merger), rather than organically. As soon as growing revenue and profit becomes a requirement to avoid being acquired, companies of a certain size must acquire. Kiss DFH good-bye. The brand will be there, and the beer (for a while), but things WILL change. You know... synergies!

    I'll stick to home brewing.
  9. officerbill

    officerbill Disciple (346) Feb 9, 2019 New York

    Almost every bar or restaurant has at least one draft Sam Adams. I'm hoping SA can leverage that into getting Dogfish Head on tap too.
  10. jmdrpi

    jmdrpi Poo-Bah (6,264) Dec 11, 2008 Pennsylvania

    Even if they were the Class B voting shares, there is no way it's more than Jim Koch (he previously owned 100% of them), so Sam Calagione effectively has zero control of this new entity. Just like any other public shareholder, he can make money from those shares, but they aren't going to give him any control.
    Kman_Colorado likes this.
  11. jayrutgers

    jayrutgers Aspirant (201) Oct 29, 2011 New Jersey

    I think it's a pretty cynical and simplistic view to say the guy who probably now has the second most voting power overall (I don't think the breakdown of stock types was disclosed but I find it hard to think he won't be getting any of the class B shares) and is on the board of directors has zero control here.
    chrismattlin and Scottie_A25 like this.
  12. prpnews

    prpnews Initiate (75) Dec 5, 2008 Pennsylvania

    I think this is much more about competing against AB/In-Bev and maintaining shelf space in beer distributors, grocery stores, and other visible venues. One example, years ago when Citizens Bank Park (home of the Phillies) opened here in Philadelphia, there was a rather large and diverse selection of craft beers, some local, some not. Now, 15 years later, you can still get craft, but the selection is much narrower (Yards, Victory, Troegs, Conshohocken etc) with the non-local pretty much non-existent, and it's almost all in cans. The scene is now dominated by Goose Island, which is everywhere in the ballpark including a huge Goose Island bar in the middle of the new highly touted beer garden. (and yes Goose Island has a brewpub in Philly, but it's still a corporate behemoth). You might be able to get Sam Adams in the stadium, but you'd have to hunt for it, DFH too. I would love for DFH to be as prevalent (actually more-so) than Goose Island, but there's no way for that to happen unless they are bigger. The combined SA/DFH is probably still too small to tackle In-Bev but it helps.
    chrismattlin likes this.
  13. Frankinstiener

    Frankinstiener Aspirant (204) Jul 28, 2009 Illinois

    He sits on the board of directors. He has more control than anyone not on the board of directors and likely more than anyone else on the board besides Jim. Hes probably entitled to a very large salary, less risk, and retains most of the control over his brand.
    chrismattlin likes this.
  14. zid

    zid Meyvn (1,329) Feb 15, 2010 New York
    Society Trader

    These two are neither. They are standing between David and Goliath and are getting hit by the blows of both. :wink:
  15. NoMoreBeerBelly

    NoMoreBeerBelly Initiate (144) Dec 2, 2009 North Carolina

    He has a seat on the board of a publicly traded company. He absolutely has some control. Board of directors control the company (which the CEO Jim is part of) but Jim just doesn't get to do whatever he wants....he lost that option the moment they IPO'd.

    They aren't bringing DFH on to just sell the beer or they would have just done a cash transaction. They wanted to bring Calagione in and his brand.
    chrismattlin likes this.
  16. JackHorzempa

    JackHorzempa Poo-Bah (4,148) Dec 15, 2005 Pennsylvania

    Considering that Jim Koch is in the driver seat as regards this 'new' Boston Beer Co. how is it that Sam has "control" of the beers that will be branded as Dogfish Head? There is no longer a company called Dogfish Head.

  17. jayrutgers

    jayrutgers Aspirant (201) Oct 29, 2011 New Jersey

    Because there'd be no reason to have Sam on the board then. Heck Sam was probably brought on more to direct the beer side of BBC than for BBC to gain control over DFH beer.
    chrismattlin and NoMoreBeerBelly like this.
  18. LambicPentameter

    LambicPentameter Meyvn (1,486) Aug 29, 2012 Nebraska

    Full disclosure: I didn't read all the comments to this point after going through the letter. I think the ownership question is an interesting one, but more interesting to me are the questions about how this is going to work from a marketing and branding perspective.

    Both of these breweries have a metric shit-ton of brand equity built up over decades of existence and strong identities within the market. And while the fact that their identities are so different theoretically makes for some benefits from the perspective of mitigating sales cannibalization, it also means striking a balance between their identities will be more difficult. I would be shocked if Sam Adams just completely absorbs the DFH brand, given the aforementioned equity.

    I’m assuming they’re going to go with something like Dogfish Head by Sam Adams or Sam Adams Presents: Dogfish Head. I guess they could also do something similar to how Duvel Moortgat has handled Ommegang, Boulevard and Firestone Walker and just leave the brands completely separate, but part of the same financial and production profile.

    It will certainly be interesting to see how things progress from here. All that said, a couple things did stand out to me from the letter:

    The irony of making a misleading statement about the attack on transparency is hilariously rich. I can't recall seeing a lot of Big Beer entities making a show of describing themselves as "independent"--that's a line that the Brewers Association drew in the sand. Nor have I seen much in the way of attempts to claim themselves as "local".

    Now, before anyone jumps down my throat, I'm well aware that when Big Beer has purchased regional or local brewers, they have not gone out of their way to add "owned by ABInBev" or "a MillerCoors company" on their packaging. They are clearly banking on the established equity of those formerly independent brewers to help sell beer and have no regrets that someone might buy a formerly independent brand thinking it was locally-owned.

    But I just think it's important to establish the fact that this fight really started over the ownership of the term "craft". All the independent brewers took exception to Big Beer's foray into craft and, as a way to distinguish themselves as "true" craft, they began focusing on the independence and regionality of "true" craft brewers, since that was easier than attempting to gatekeep the term "craft".

    As an aside, I do find it funny to hear a brewer like Boston Beer Company pitch a fit about being independent and local, seeing as how they are publicly traded* and have brewing locations in three different states.

    *yes, I realize Jim Koch still retains operational control

    This is another interesting call out. Yes, BBC/DFH is still miniscule compared to the Big Beer giants, but they are orders of magnitude larger than SO many craft brewers. If I'm doing my math right, doesn't that make them 20% of the independent craft market? Craft penetration is something like 10-11% of the overall beer market, so 2% of beer sold divided by 10% of beer sold is 20% of that segment.

    At any rate, if this means keeping both of these operations and their employees up and running, that's a good thing. There's nothing wrong with having a big player to help keep Big Beer honest in the mid-size segment. Theoretically, a step like this will help avoid a stratification of the craft beer market where you have Big Beer controlling the bulk of regional and national sales and penetration, and "Craft" beer owning the market via local penetration and selling beer out of their taprooms and brewing facilities. Plus, I would assume this merger will allow Boston Beer Co. to continue investing in start up breweries.
    HopsAreDaMan, Buck89, WormGod and 4 others like this.
  19. zid

    zid Meyvn (1,329) Feb 15, 2010 New York
    Society Trader

    I could be off by a few, but I counted 8 uses of “indie/independent” and 1 use of the term “merger” in that announcement about a merger and loss of independence. :wink:
  20. billandsuz

    billandsuz Devotee (407) Sep 1, 2004 New York

    Nothing much to add except that
    I like these people. They are good beer people. They are great Beer Advocates.

    I wish them well.
  21. OldBrewer

    OldBrewer Aspirant (275) Jan 13, 2016 Ontario (Canada)

    Interesting that a (mostly) lager brewing company and an IPA brewing company get together. I'm not sure how this will help Dogfish Head Brewery as they are already quite successful on their own, but it should help Boston Beer Company.

    I wonder - does this mean that Dogfish Head products will now be sold in the eastern USA market?
  22. BayAreaJoe

    BayAreaJoe Savant (927) Nov 23, 2017 California
    Society Trader

    I see how the announcement mentions "high end price points" and "high-end beer category," so I guess that means DFH prices will just remain where they're at and not get more inline with Sam Adams. Oh well.
    ESHBG likes this.
  23. ESHBG

    ESHBG Aspirant (274) Jul 30, 2011 Pennsylvania

    I know that this is market specific but outside of a few beers SA and DFH = now too expensive in my market for what they are and I just don't buy [pun intended] that this is going to lead to a big price drop. But this merger is interesting for sure and will be neat to see how it plays out.
  24. AlcahueteJ

    AlcahueteJ Meyvn (1,084) Dec 4, 2004 Massachusetts

    Do you have any examples of breweries that were acquired and/or mergers that drastically changed the portfolios of those companies?
  25. JackHorzempa

    JackHorzempa Poo-Bah (4,148) Dec 15, 2005 Pennsylvania

    Maybe that was what was necessary to bring the buy-out to fruition. Part of the negotiated sale.
    I seriously doubt that since he was not granted the title of CEO.

  26. jesskidden

    jesskidden Poo-Bah (1,849) Aug 10, 2005 New Jersey
    Society Trader

    Boston Beer Co. Annual Report:

    The Class B Shareholder Has Significant Control over the Company.
    The Company’s Class A Common Stock is not entitled to any voting rights except for the right as a class to (1) approve certain mergers, charter amendments and by-law amendments and (2) elect a minority of the directors of the Company. Although not as a matter of right, the Class A stockholders have also been afforded the opportunity to vote on an advisory basis on executive compensation. Consequently, the election of a majority of the Company’s directors and all other matters requiring stockholder approval are currently decided by C. James Koch, who is the founder and Chairman of the Company, as the holder of 100% of the voting rights to the outstanding shares of the Company’s Class B Common Stock. As a result, Mr. Koch is able to exercise substantial influence over all matters requiring stockholder approval, including the composition of the board of directors, approval of equity-based and other executive compensation and other significant corporate and governance matters, such as approval of the Company’s independent registered public accounting firm. This could have the effect of delaying or preventing a change in control of the Company and makes most material transactions difficult or impossible to accomplish without the support of Mr. Koch. While Mr. Koch is currently the 100% holder of the Company’s Class B Common Stock, there is nothing that prevents Mr. Koch or his heirs from transferring some or all shares of the Class B Common Stock to others.

    ? Typo? Did you mean "western"?

    DFH's current distributors list covers most US states (and DC), from coast to coast.
    #146 jesskidden, May 10, 2019
    Last edited: May 10, 2019
  27. drtth

    drtth Poo-Bah (4,006) Nov 25, 2007 Pennsylvania

    Yes, and that ongoing management/decision making involvement by Sam is part of what makes it a Merger rather than a simple Acquisition.
    chrismattlin likes this.
  28. oldbean

    oldbean Disciple (343) Jun 30, 2005 Massachusetts

    His judgement was that it was time to cash out.
  29. WormGod

    WormGod Aspirant (200) Jun 30, 2016 New York

    While I am happy for both of these breweries and have enjoyed many of their beers in the past, I don't see much in the way of benefits for the craft beer consumer. Neither of these breweries has been innovative for quite some time now.
    Matt_Rouge likes this.
  30. OldBrewer

    OldBrewer Aspirant (275) Jan 13, 2016 Ontario (Canada)

    Sorry, my mistake. I thought Dogfish Head was west coast.
  31. JackHorzempa

    JackHorzempa Poo-Bah (4,148) Dec 15, 2005 Pennsylvania

    We will see how this will play out. I have been worked for several companies that were 'merged' with a larger company and while it was advertised as being a merger of 'equals' with executives of my company given high level positions (e.g., membership on the board) it was shortly clear that it was a buy-out. Nothing necessarily wrong with this situation unless you were part of a department which was viewed as being redundant and all of the purchased company's employees were laid off and the buying company's employees were permitted to stay (but with a heavier workload).

    Dandrewjohn likes this.
  32. officerbill

    officerbill Disciple (346) Feb 9, 2019 New York

    The various Sam Adams beers are competitively priced around here and sell well. Dogfish Head, on the other hand...
    Matt_Rouge and ESHBG like this.
  33. i_still_like_beer

    i_still_like_beer Initiate (43) Nov 21, 2018 New Jersey

    I personally am not a fan of Dogfish Head, and I feel like they missed a huge opportunity get into the NE style IPA beers early on, but wow good for them. Sam and his family will get 406,000 shares of SAM valued @ 314.60/share!
  34. Newport_beerguy

    Newport_beerguy Zealot (550) Feb 24, 2011 Rhode Island

    Selectively choosing their most expensive brand? lol
    Actually $9/bottle is a bargain for 120, mostly $10 each around my neck of the woods. Love that I have seen 90-minute 4-pack tallboys for $10-11 on occasion, much tastier than half the NEIPAs going for $13-15/4-pack at the store.
    chrismattlin, jrnyc, Roguer and 8 others like this.
  35. AlcahueteJ

    AlcahueteJ Meyvn (1,084) Dec 4, 2004 Massachusetts

    It's 20% ABV, so this is more than understandable.

    Utopias is 28% ABV and goes for ~$200 for a 750 mL bottle (25.4 ounces).
    chrismattlin likes this.
  36. Dandrewjohn

    Dandrewjohn Disciple (381) Apr 13, 2013 Texas

    Man, why do I get a sinking feeling about this? The rhetoric is right out of the M&A playbook, the principals are getting wildly rich, and I'm having trouble seeing how this is going to benefit the craft beer business. Another really big brewer taking more shelf space because of improved economies and the little guy being pushed aside even more. IDK, maybe I'm wrong. Big consolidations come at a price. I just know I wouldn't want to be one of those small brewers trying to get a piece of the market. Who's next, Greg Koch?
    Matt_Rouge likes this.
  37. SFACRKnight

    SFACRKnight Meyvn (1,349) Jan 20, 2012 Colorado

    I spend about $100 a year on Sam Adam's, but cant recall the last DFH brew I purchased. As long as Utopias keeps coming I will be happy.
    LuskusDelph likes this.
  38. MNAle

    MNAle Poo-Bah (1,557) Sep 6, 2011 Minnesota

    So, one bottle of BBC every other year, then... :wink:
  39. Claude-Irishman

    Claude-Irishman Crusader (752) Jun 4, 2015 New Jersey

    Does this mean Dogfish Head is now a macro brewer ? Boston beer company was great 30 years ago. They diversified too much and I personally don't like the direction they went. Boston Lager was the epitome of craft brewing a long time ago. Now they kinda suck-When Sam stared selling hard liquor I assumed greed had taken over at that point. This is like the merger of greed-
  40. jayrutgers

    jayrutgers Aspirant (201) Oct 29, 2011 New Jersey

    Boston Beer is not a macro brewer, and Sam started selling hard liquor almost twenty years ago.