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Duvel Moortgat shopping for US breweries

Discussion in 'Beer News' started by jesskidden, Aug 9, 2013.

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  1. errantnight

    errantnight Jul 7, 2005 Iowa
    Subscriber Beer Trader

    You say that with a great deal of authority, any proof that Ommegang is shrinking instead of growing?

    Because although I can't find hard numbers with a quick, non-thorough search, everything I see implies rapid, powerful growth.
     
  2. afrokaze

    afrokaze Jun 12, 2009 Arizona
    Beer Trader

    Pretty sure they're doing better than ever, what with the great label re-design and a bigger marketing budget. And with beer tourism doing better than ever, it helps that they have a real destination brewery in a beautiful area as well. They're even in Costco near me now, pretty sure they've gone corporate :D
    EDIT: oh yeah, the beer is good too.
     
  3. drtth

    drtth Nov 25, 2007 Pennsylvania

    As part of Duvel Moortgat they have had brewery modernization and are undergoing rebranding and their price points are now comparable to other beers of the same or similar quality. Seems like strong rapid growth to me... :). And as part of Duvel Moortgat's announced growth plan it's definitely powerful growth. DM is definitely in planned growth mode with a good sense of their product and market. They have the capital to make it happen and capable management.

    Ever occur to you that they might actually be expecting to lose some customers while doing things to attract a different set of customers and improve market share while still maintaining a quality product?
     
    errantnight likes this.
  4. hopfenunmaltz

    hopfenunmaltz Jun 8, 2005 Michigan

    JP just had a Big expansion. They had more demand than supply from the old place. Keep in mind that all the beers spend time in a barrel, so there are high costs in the production of those funky beers.
     
  5. rgordon

    rgordon Apr 26, 2012 North Carolina

    So true. JP are different beers and, I think, idiosyncratic. They are for mulling and thinking, as well as drinking!
     
  6. VictorWisc

    VictorWisc Jan 2, 2013 Massachusetts

    Yes, that is exactly what "occurred" to me--that they might gain a small swath of customers who are willing to pay more and lose most of the ones who are not, who have been their base since the beginning. As for "modernization", it's been a Duvel brewery from the start, it's barely 15 years old and is pushing its traditional methodology. I'm not sure how "rebranding" is a sign of growth--usually, a company rebrands because the sales are lackluster. And I'm not even sure which "competitors" they are supposed to be price matching now--they started out at the same point as Unibroue and now they are approaching Allagash and the imports--except that there is one thing about the imports that they don't have, the extra cost of trans-Atlantic shipping and tariffs. One could justify the high cost of a Belgian beer, but Ommegang has no such justification. As for expansion, it's been mostly the non-brewing facility. If they are planning to attract more customers through their beer garden, it's an abortive effort. Meanwhile, their bottles are collecting dust on the shelves.

    Time will tell. Duvel has deep pockets and wants to expand. Perhaps they can package multiple breweries' products together, as AB has done with Leffe (e.g., they are selling a mixed case now with Leffe, Hoegaarden and Stella). Other than that, they see "premium brands" rising in all beverage markets (from soda to spirits), so they they just see dollar signs everywhere by converting to a super-premium brand. Good luck with that. The problem with stretching rubber bands is that eventually they snap.
     
  7. Greywulfken

    Greywulfken Aug 25, 2010 New York
    Beer Trader

  8. drtth

    drtth Nov 25, 2007 Pennsylvania

    Lets get the record a bit neater.

    1) Duvel Moortgat bought Ommegang in 2003 and so has owned it for 10 of its 15 years, not since the beginning.

    2) One can have a traditional methodology with a renovated brewhouse (e.g., new tiles for improved sanitation, etc.) More than one of the Abbeys producing Trappist Ales has done renovation in the last 30 years and still managed to produce a "traditional" product.

    3) Rebranding is done for a lot of reasons, including new ownership, new management, and a new growth initiative for the company. Which is exactly what Duvel Moortgat, under their new ownership and management have proposed for their future growth plans of their full range of breweries, some of which are already positioned where they want them all to be.

    4) The growth plans for the Duvel family of breweries are indeed well capitalized. So well capitalized that Duvel Moortgat is no longer a publicly traded company as the result of a family buy back of stock at well above its last traded value. Their public position is that they seek to solidfy a particular pattern of growth without having to satisfy the demands of shareholders for profit and dividends. So they are not talking or acting like a company seeking only the dollar over long term growth.

    5) Where you are looking you may see Ommegang collecting dust on the shelf. However, in this area they are not. But then SEPA is an area notorious for how popular Belgian and Belgian-style beers are. Indeed one local beer writer has publicly claimed that more Belgian style beers are consumed annually in Philly than in Brussels.

    6) True that rubber bands break if you stretch them too far, but on the other hand as George Patton once pointed out, "Leading troops in battle is like dealing with a plate of spaghetti. You'll never get anywhere by pushing from behind."

    As you say, we will see.
     
    beertunes, Kyrojack and SunDevilBeer like this.
  9. VictorWisc

    VictorWisc Jan 2, 2013 Massachusetts

    It depends what you mean by "owned"--Duvel bought out everyone else in 2003, but they had ownership from the beginning.

    As for the rest, let me just reiterate that Ommegang is no Rolling Rock--it's easier to reposition swill as premium swill than mid-premium as super-premium. They are trying to leave a burgeoning niche and enter a niche with little growth potential and already a lot of competition for slots. Of course, it's their money--they just can no longer count on mine. I'm not going to pay $15+ for a merely competent Belgian ale, let alone Saison, and I'm not alone in that. And if I'm going to spend that kind of money, it will be on Chimay or another Belgian premium brand. Or Allagash.
     
  10. drtth

    drtth Nov 25, 2007 Pennsylvania

    Duval had capital in the founding of Ommegang, as did two other family owned Belgian breweries, thus there was partial ownership at the beginning.

    Their management sees the current market differently than do you, such is life....

    As for your money, that's what makes this a free country.

    BTW, you might want to do a bit if homework on the rise and fall of Rolling Rock.
     
  11. VictorWisc

    VictorWisc Jan 2, 2013 Massachusetts

    Enlighten me...
     
  12. NickMunford

    NickMunford Oct 2, 2006 Wyoming

    It's interesting (in a good way) that they're saying the buyout will actually add nearly 60 jobs, instead of taking away jobs.
     
  13. nogophers

    nogophers Jun 28, 2011 Minnesota

    That's $540/Bbl. Their valuation seems a bit steep.
     
  14. ncstateplaya

    ncstateplaya Nov 8, 2008 North Carolina


    Seems reasonable for BBQ or Love Child...just being the devil's advocate! ;)
     
  15. Stugotzo

    Stugotzo Jun 13, 2012 Florida

    Or the Duvel's advocate (Duvel is devil in Dutch).
     
    Theniz, cnbrown313, JISurfer and 5 others like this.
  16. Stugotzo

    Stugotzo Jun 13, 2012 Florida

    I'm not sure if you're trying to be funny, because a 1/2 keg goes for ~ $100, and a barrel would be ~$200 at the store, or if you're serious with regard to valuing the company.

    I didn't see the selling price in the article, so I'm not sure where you're getting $540/barrel anyway. But, if you use $540/barrel x 175,000 barrels, you get a price of $94,500,000

    There's dozens of different methods to value a company. One simple way is to use a factor of revenues. Of course, that's about as oversimplified as it gets, and is probably the least used method, because of the margin for error. It also depends on industry. But, a good ballpark for using the "revenue factor" in valuing a company is 8x annual revenues. If Boulevard sells 175K barrels a year and they're selling them to wholesalers at $100/barrel, their annual revenue would be ~ $17.5million. 8 x $17.5M = $140,000,000.... not ridiculously far off from the $94,500,000 above.
     
    nogophers likes this.
  17. nogophers

    nogophers Jun 28, 2011 Minnesota

    I like your analysis. I'll explain my math:

    My statement, as you said, was indeed simplistic. Price was stated in an article at $100MM along with annual production of ~185M Bbls, thus the $540/Bbl price. At this basic calculation it seems high (as it should be as an owner needs the enticement to sell).

    You're right, there are many ways to value a company. Revenues not typically used. Most use free cash flow or earnings (EBIDA or EBITDA) multiples then adjust for various risk factors, marketability, growth, industry and an appropriate interest/discount rate.
     
    Stugotzo likes this.
  18. DocHo11idaze

    DocHo11idaze Aug 29, 2013 California


    1/2 barrel would run $100+(thats a full size keg you buy) of a domestic 15 gallons or so. so the barrel conversion is off, they use barrels when talking about production but, full size kegs you buy are really 1/2 barrels.
     
  19. Ranbot

    Ranbot Nov 27, 2006 Pennsylvania

    Considering Duvel's history, I think it's a safe bet this is a long-term investment and they do not expect to make their purchase price back in a single year.
     
    drtth likes this.
  20. spicoli00

    spicoli00 Jul 6, 2005 Indiana

    i would only use revenue multiples if the target was operating at a loss. Otherwise, EBITDA multiples are a better indicator for cash flows (as long as the company isn't capital intensive) from which to base a value on. Discounted cash flow is still the best though still just an estimate. The true worth of of something is whatever someone is willing to pay for it.

    what i find more surprising is how much more boulevard went for than Goose Island. in retrospect, AB got GI for a bargain.
     
  21. Ranbot

    Ranbot Nov 27, 2006 Pennsylvania

    If I remember correctly CBA stated that AB gave them some additonal discounts for their products being distributed on AB's distribution network, but an estimated value for those discounts was never disclosed.
     
  22. spicoli00

    spicoli00 Jul 6, 2005 Indiana

    Even more interesting. Thanks dont remember reading reading than
     
  23. Ranbot

    Ranbot Nov 27, 2006 Pennsylvania

    Just to be clear, CBA had a distribution deal with AB for years prior to the Goose Island purchase, but the purchase included a renegotiation of that contract, which was supposed to be more favorable for CBA. What makes it even more interesting is that AB is a minority stockholder in CBA (approximately 25%, I think), so AB was probably on both sides of the negotiating table to some degree. Don't get me wrong, I'm not implying any manipulation, wrongdoing, or conspiracy. AB is a big company with a huge stake in the beer industry, so it's no surprise they would want some options and leverage with one of the biggest publicly traded craft beer companies, and it's been a mutually beneficial relationship for CBA's distribution and growth too.
     
  24. spicoli00

    spicoli00 Jul 6, 2005 Indiana

    This is sparking some recall. I believe the ab ownership % of cba is correct. Thought that was one of "big beer's" first footholds in the craft segment. Distribution can be extremely lucrative. Two bros windy city distribution sold to reyes for $50m.
     
  25. rgordon

    rgordon Apr 26, 2012 North Carolina

    Absolutely. Where franchise laws are in effect a distributor essentially develops equity/value according to varying multiples of gross profit. When you have a brand assigned to you within this scenario you stand to make money in the long run- beyond just normal profit. I'm sure these laws vary state to state and change of ownership and other variables often come into play.
     
  26. jesskidden

    jesskidden Aug 10, 2005 New Jersey
    Subscriber

    The same percentage ("about a 1/3") quoted in most reports when AB bought the 42% of Goose Island that CBA owned for $16.3m in 2011 (paying GI owner John Hall $22.5m for the other 58%).
     
    Ranbot likes this.
  27. spicoli00

    spicoli00 Jul 6, 2005 Indiana

    So ab paid $38.8m for gi? I will checj th 10k
     
  28. jesskidden

    jesskidden Aug 10, 2005 New Jersey
    Subscriber

  29. Jake1605

    Jake1605 Nov 24, 2009 Missouri

    The Boulevard employees that I've talked too feel like the opportunities have increased & the ceiling has been raised. It's a shame he ignorant responses I've heard around, but give it time.
     
  30. spicoli00

    spicoli00 Jul 6, 2005 Indiana

    10-k is an annual report publicly traded companies must submit to the SEC. It has a wealth of information. AB is publicly traded so they have to submit all of these documents. However, AB didn't show the separate purchase price for GI, and AB had a few other purchases in 2011. They did release an official press release which also had the purchae price(s).

    http://www.sec.gov/Archives/edgar/data/1140467/000119312511079249/dex991.htm (not sure if this is identical to the trib release)

    As usual, you had the proper info.
     
  31. spicoli00

    spicoli00 Jul 6, 2005 Indiana

    I think this is a plus for boulevard. I regularly enjoy their beers (BBQ anyone?) and this should make them more widely available.
     
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