CBA (32.2% owned by AB-InBev and Master Distributor) acquires stake in Cisco Brewers

The massive consolidation continues, and big brewers continue to make moves:

http://craftbrew.com/2015/09/29/cra...rtnership-with-nantucket-based-cisco-brewers/

Portland, Ore., and Nantucket, Mass. (Sept. 29, 2015) – Craft Brew Alliance, Inc. (“CBA”) (Nasdaq: BREW), a leading craft brewing company, today announced it has formed a strategic partnership with Cisco Brewers, the first and only craft brewery on Nantucket Island in Massachusetts.

As part of the strategic partnership, the two companies are entering into a master distribution agreement and alternating proprietorship, in which Cisco Brewers will gain access to CBA’s extensive sales and distribution network and New Hampshire brewery to support Cisco’s growth, and bring more of their coveted island-inspired craft beers to more consumers throughout the Northeast.

Through the alternating proprietorship agreement, Cisco will not only leverage CBA’s state-of-the-art brewing facility in Portsmouth, N.H., but the two craft beer companies will also share a master brewer. CBA Lead Innovation Brewer Mark Valeriani will oversee production of Cisco beers at Cisco’s brewery on Nantucket, as well as CBA’s Portsmouth brewery, which is ideally located to support growing demand in the Northeast for distinctive craft beers with local relevance.

“This new partnership is exciting to us for several reasons,” said Andy Thomas, chief executive officer, CBA. “First, the team at Cisco has built an exceptional company with a deep connection to its local community and strong cultural values that mesh really well with CBA. Second, Cisco has already established a strong presence in the Northeast, which is an important market for us as we continue to expand the Alliance and leverage our East Coast footprint. And third, we see some terrific growth opportunities for both companies as we partner to bring more great brands and brews like Whale’s Tale and Grey Lady to more beer drinkers in the East.”

Cisco Brewers is one of the fastest-growing craft breweries in New England and has been featured by People Magazine, TripAdvisor, and the Huffington Post, among others, as a top destination on Nantucket. As demand for the brewery’s innovative beers continues to expand, the master distribution agreement with CBA will enable Cisco to increase distribution of its beers in chain and other retail accounts throughout its core markets in the Northeast. CBA will work with its network of wholesaler partners, as well as Cisco’s existing wholesalers, to bring the beers to market.

“Today, there are a lot of options for breweries that want to grow. Working with the team of people at CBA to craft this partnership has been extremely energizing,” said Cisco Brewers Chief Executive Officer Jay Harman. “Having a partner that knows how to manage a wholesale network and properly bring craft beer to market is just one of the reasons this partnership with CBA is so appealing. Anyone who has been to Cisco falls in love with the beer but also the mismatched handmade bar stools and carefree unbuttoned culture that makes us who we are. When it comes to sharing Cisco off the island, and the steep competition in New England and beyond – with a new brewery opening every 12 hours – our goal is to get good, fresh beer to market in a way that truly represents our brands and culture.”

Harman continued: “We evaluated several options when looking for ways to embark on the next stage in our journey, and after sitting around the kitchen table with Andy and his team, we realized we had found a partner who could not just help us grow, but who could also help us realize the full potential of what we started 20 years ago.”

The partnership with Cisco Brewers expands CBA’s family, which already includes one of the westernmost island breweries, Kona Brewing Company, with one of the easternmost island breweries in the United States. Cisco Brewers was founded 20 years ago on Nantucket Island, 25 miles off the coast of Cape Cod, and is best known for such island-inspired brews as Whale’s Tale Pale Ale, Grey Lady Ale, and Shark Tracker Light Lager, which benefits science and education programs for OCEARCH.

About CBA’s Emerging Business
CBA is committed to continue growing the Alliance through forging strategic partnerships with distinctive, identifiable craft beer brands in geographies that leverage CBA’s national brewing footprint and capabilities. As breweries explore the range of options for growth, CBA’s partnership model offers tangible value for both companies. Partners gain access to CBA’s sophisticated distribution network, state-of-the-art breweries, and deep craft beer expertise, while CBA establishes new home markets and local relevance in strategic growth areas. The company looks for partners that have strong potential for growth and deep connections to their local communities, such as Nantucket, Mass.-based Cisco Brewers and Boone, N.C.-based Appalachian Mountain Brewery.

About Craft Brew Alliance
CBA is a leading craft brewing company, which brews, brands, and markets some of the world’s most respected and best-loved American craft beers.

The company is home to three of the earliest pioneers in craft beer: Redhook Ale Brewery, Washington’s largest craft brewery founded in 1981; Widmer Brothers Brewing, Oregon’s largest craft brewery founded in 1984; and Kona Brewing Company, Hawaii’s oldest and largest craft brewery founded in 1994. As part of Craft Brew Alliance, these craft brewing legends have expanded their reach across the U.S. and more than 15 international markets.

In addition to growing and nurturing distinctive brands rooted in local heritage, Craft Brew Alliance is committed to developing innovative new category leaders, such as Omission Beer, which is the #1 beer in the gluten free beer segment, and Square Mile Cider, a tribute to the early American settlers who purchased the first plots of land in the Pacific Northwest.

Publicly traded on NASDAQ under the ticker symbol BREW, Craft Brew Alliance is headquartered in Portland, Ore., and operates five breweries and five pub restaurants across the U.S. For more information about CBA and its brands, please visit www.craftbrew.com.

About Cisco Brewers
Cisco Brewers is a craft brewery out to sea that embodies Nantucket’s “away off shore” lifestyle. Part of the alcohol trilogy that started with Nantucket Vineyard in the early 1980′s, continued in 1995 when winery employees launched the brewery in a shed behind the Vineyard, and expanded further when the partners joined forces to launch Triple Eight Distillery in 2000, Cisco Brewers is a unique operation, proud to be one of the very first producers in the United States crafting beer, wine, and spirits. Over twenty years of quaffing libations together, the five owners (Dean and Melissa Long, Randy and Wendy Hudson, and C.E.O. Jason Harman) and their dedicated team have grown the business organically in ways that value quality, experimentation, and innovation, as well as dogs, families, and fun. Their home base is a major attraction for locals and tourists alike on Nantucket, and perhaps even more impressively, their products are recognized as world-class in a variety of categories. (Most recently, Triple Eight’s Single Malt “Notch” was honored as the world’s best single malt whisky made outside of Scotland at the International Spirits Challenge.) Cisco beer truly is–as they’ve been saying since day one–”nice beer if you can get it”, and everyone involved is excited about this opportunity to make that saying apply to more people.

 

That's easy. Look at the top 50 Breweries of the United States by volume 2 years ago, and then look at them now.

The MAJORITY of them are no longer independent.

That's unprecedented consolidation for craft beer.

@JackHorzempa @drtth

 

Private equity has been known to do this also. They start out with an initial minority stake, but later purchase a majority or complete acquisition of the company.

Many times this is baked into the cake of the original contract.

 

@JackHorzempa yup, Chris from PDX nailed it

 

Yes, not to mention that the list of "craft" breweries is subject to change with the whims of the Brewers Association, who may redefine what it means to be a craft brewer.

With all that being said, even if you just did a list of the top 50 breweries (and not the top 50 craft breweries) there still has been huge consolidation! After all, InBev bought Anheuser Busch, the largest brewery in the United States.

And of course SAB Miller merged with Coors, so there's that as well.

Even Boston Beer Co. (Sam Adams) has bought multiple brands in the past few years.

So among the top 50 (whether "craft" or not craft) this has been a huge period of consolidation (with craft the activity has been much more recent).

cheers

 

Jack,

It appears you did not look hard enough! :-)

"Independent
Less than 25 percent of the craft brewery is owned or controlled (or equivalent economic interest) by an alcoholic beverage industry member that is not itself a craft brewer."

 

Jack has a valid point, so we should address it. I'm in agreement with him that the definition of "independent" should not vary from one brewery to another. The same criteria should apply to all.

I think the difficulty with applying the BA definition to all breweries is that many of the largest breweries are part of international beverage conglomerates and/or are publicly traded. So all of them would automatically not be considered independent.

It does bring about an interesting question though....what is the essence of independence? It seems the spirit of it was to ensure that the brewery was free to make the creative and brewing decisions they wanted to make, without being beholden to the priorities of a large brewer or the "profit motive."

FWIW I do believe the "spirit" of independence is indeed a hallmark of craft beer. How to define that though is much more tricky!

cheers

 

1) AB owned substantial parts of Red Hook and Widmer and their distribution before CBA was even created. CBA is simply a public holding company of pooled brands (that AB-Inbev continues to be a part of)

2) 68% of craft beer drinkers care about the ownership structure of the beer they buy, as per the latest Nielsen report released by the Brewer's Assocation. People want to know who are the people who own the breweries of the beer they make - its important to them.

3) to acquire a large stake of a public company is not that easy - you can't acquire more than 5% of a publicly traded company without filing a schedule 13D with the SEC.

4) AB has two seats on the board of directors

cheers

 

probably because the PE firms that own Oskar Blues and Full Sail and the foreign brewery that owns Founder's does not also own 50% of the US beer market and almost 25% of the global beer market ;-)

 

@JackHorzempa @drtth

The consumer is somewhat blind to what is happening right now in the industry, simply because we see press releases like "there are now 4,000 breweries operating in the United States." Yup, everyone keeps talking about the "huge growth of craft beer" but what that usually means is them seeing more breweries opening up in their own backyard, but the reality is there has been massive consolidation on a global scale, and now that consolidation is entering craft beer as well.

Even if there are more producers, more and more of the total beer production is being concentrated into fewer and fewer companies. This is unprecedented on a global scale - never been seen before in the history of the beer industry.

and in case you didn't hear:

https://www.washingtonpost.com/post...ing-to-fend-off-craft-beer-by-getting-bigger/

"Anheuser-Busch InBev, brewer of Budweiser, Stella Artois and more than 200 other brands, is already the largest beer maker in the world, controlling more than 20 percent of global sales. It may soon get a lot bigger. This week it reportedly plans to bid for its closest rival, SABMiller, in a deal that could create a company worth some $275 billion.

If this transaction were to occur without either party being forced to sell off too many assets to meet the demands of government regulators — not a sure thing — it could create one of the world’s 10 largest companies by market value. The resulting “MegaBrew,” a term coined by Sanford Bernstein analyst Trevor Stirling, would control as much as 30 percent of total beer sales.

The planned acquisition continues a dramatic trend of fewer and larger brewers dominating the beer industry. Back in 2000, there were 22 major beer makers. A series of mergers, takeovers, joint ventures and majority purchases whittled that down to just four in 2012. These four giants, which also include Heineken and Carlsberg, are all headquartered in Western Europe and currently account for more than three-quarters of U.S. beer sales.

And soon that could be just three giants.

So what’s driving this intense consolidation in the beer industry?"