Fireman Capital Isn't Disrupting Craft Beer. It's Sustaining It.

Discussion in 'Beer News & Releases' started by drtth, Jan 3, 2019.

  1. drtth

    drtth Poo-Bah (3,680) Nov 25, 2007 Pennsylvania

    There have been lots of comments and discussion about the role of Venture Capital (VC) firms. Historically VC have developed a reputation for rapid "flipping" of small businesses for quick profit. However, that stereotype isn't the only way that VC firms operate. Sometimes the VC is in for the long haul and invests money to make a long term profit.

    A recent article presents an interesting case looking at the impact of at least one VC in the area of Craft Beer and Breweries.

    "Last month, the CANarchy Craft Brewery Collective announced the launch of a brewpub that will take over the Lexington Avenue Brewery (LAB) in Asheville, N.C. Dubbed the CANarchy Collaboratory, the space promises to be a one-of-kind brewery and creative hub where brewers, chefs, artists, and musicians will cocreate under one roof.

    CANarchy, established in 2015, currently includes seven breweries: Oskar Blues, based in Longmont, Colo.; Cigar City of Tampa, Fla.; Three Weavers of Inglewood, Calif.; Perrin of Comstock Park, Mich.; Deep Ellum of Dallas; and Utah Brewers Cooperative’s Squatters Craft Beers and Wasatch Brewery, based in Salt Lake City. The group purports to be a “disruptive collective of like-minded brewers dedicated to bringing high-quality, innovative flavors to drinkers in the name of craft beer.”

    Of course, no collective stands alone. CANarchy is backed by Fireman Capital Partners (FCP), a private equity firm helmed by the founder of Reebok.

    The partnership raises several questions for craft brewers and drinkers: What’s the founder of Reebok doing investing in beer? What’s so “disruptive” about being funded by a private equity firm? And, ultimately, what does the future hold for CANarchy’s individual brewers?"

    The full article appears here:

    https://vinepair.com/articles/fireman-capital-craft-beer-canarchy/

    As the article points out, VC money does not necessarily weaken the Companies it supports and even appears to be able to strengthen the future for Craft Breweries.
     
    Retroman40 likes this.
  2. FatBoyGotSwagger

    FatBoyGotSwagger Meyvn (1,136) Apr 4, 2009 Pennsylvania

    in March 2015, FCP invested nearly $133 million in Oskar Blues, becoming a majority investor. With FCP’s help, Oskar Blues acquired Perrin Brewing shortly thereafter. With four breweries between them, Fireman and Katechis saw a larger, long-term opportunity to unite similar breweries across the country that sought mom-and-pop ideals but had outgrown their hometowns. In other words, breweries that needed to reach more markets to survive, but not willing to compromise their “independence” to do so.

    It’s also “pretty different [from] traditional private equity” in that there is no three-to-five-year hold, meaning FCP isn’t preparing to flip its shares in the short term. “[FCP] can hold a business for five, 10, 20 years,” Fraser says. “Everybody’s joined the collective because of the long-term hold strategy.”

    I wouldn't call FCP a Venture Capitol firm in the traditional sense. Maybe new age investors.

    Also I can't stand reading the word disruptive, personally cringe worthy.
     
  3. beertunes

    beertunes Poo-Bah (5,682) Sep 24, 2007 Washington
    Trader

    Would a rose, by any other name, not smell as sweet?

    Just like selling laundry soap: put "new and improved" on the label, keep the contents the same.
     
  4. Retroman40

    Retroman40 Devotee (490) Dec 7, 2013 Florida

    Thanks to the OP for the post - good quick morning read. My views and opinions on the craft beer industry/market scream "TLDR" if I wrote it all here but this just looks like the natural evolution and progression of this market sector.
     
  5. brentk56

    brentk56 Poo-Bah (8,961) May 13, 2004 North Carolina
    Trader

    A lot of confusion in the previous posts about what is and isn't a "venture capital" firm,

    Venture capital firm's invest in early stage businesses that have not yet reached a point of sustainability based on internal cash generation. Using this definition, a VC firm might back the start-up of a new brewery or provide the capital for a gypsy brewer to build a new brewery. VC firms typically acquire a minority interest in a company rather than buying a control position.

    Private equity firms typically acquire control positions in businesses that have reached a point of maturity where additional cash infusions are not necessary to sustain operations. (I recognize this is a broad generalization and not always the case, so bear with me.) What we have seen in the craft brewing industry are private equity firms acquiring established breweries. Fireman is a private equity firm, not a VC firm.

    Both VC and PE firms raise funds that typically have a finite life - often five years to deploy the capital and another five years to harvest the investments. Since we are dealing with a PE firm, recognize that Fireman will look to sell the business at some point in the future, either to another PE firm or to a strategic buyer, such as a larger brewery or a beverage company.

    Fireman's success or failure in the CANarchy investment will be based upon growing revenues profitably, consolidating operations efficiently and expanding the customer base. If they can't achieve these objectives or if they destroy the brands, they will get a poor return. But make no mistake, their returns will be achieved by selling the company at some point in the future, typically in a five year time frame.
     
  6. drtth

    drtth Poo-Bah (3,680) Nov 25, 2007 Pennsylvania

    Useful information/clarification. Thanks! Personally I've always thought of VC as a subset or synonym of PE without paying enough attention to their purchases of choice.