Victory Brewing Company and Southern Tier Brewing Unite Under New Holding Company

Discussion in 'Beer News & Releases' started by Keene, Feb 16, 2016.

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  1. Keene

    Keene Initiate (0) Sep 11, 2009 Washington

    Downingtown, PA (February 16, 2016) – Having just marked 20 years in the craft brewing industry, Victory Brewing Company (Victory) proudly announces a landmark alliance with Southern Tier Brewing Company (Southern Tier) under parent company Artisanal Brewing Ventures (ABV). As the first major transaction of 2016 within the rapidly evolving craft beer industry, this union presents a new model for craft beer partnerships by preserving brewery independence while pooling deep collective resources.

    This new strategic framework between ABV, Victory and Southern Tier provides capital, security and vision for the future. ABV, formed to unify independent craft brewers and distillers, embraces the collaborative craft spirit while administering crucial growth resources. As a key partner in this formation, Arlington Capital Advisors acted as exclusive financial consultant to Victory. The transaction is expected to close within the next 60 days.

    Under the umbrella of ABV, Victory and Southern Tier will independently operate their breweries, commanding a joint capacity of over 800,000 barrels of potential annual production. This alliance creates one of the largest brewers in the Northeast and ranks within the top 15 craft brewing companies in the United States with combined 2015 shipments of over 250,000 barrels according to Brewers Association criteria. With a world-class roster of complementary beer brands and an even stronger standing in the marketplace, ABV will shepherd Victory and Southern Tier in collaborative sales and marketing efforts to strengthen, support and expand its distributor and retail partnerships. Victory and Southern Tier brands will become increasingly available to loyal and new consumers across their combined markets as a direct result of this union.

    “The craft beer community is at its most critical moment since its inception as larger brewing corporations have bought into our grassroots movement, irrevocably changing the marketplace. Like-minded brewers such as Victory and Southern Tier can preserve our character, culture and products by banding together,” said Bill Covaleski, Founder and Brewmaster of Victory Brewing Company. “Allied we can continue to innovate and best serve the audience who fueled our growth through their loyal thirst.”

    "Having gotten to know Phin, John and the whole management team, I am more excited than ever about the innovations that lie in our collective futures. One walk through their brewery and I knew that Southern Tier had the same belief in quality and excellence that has driven our culture for 20 years,” explains Ron Barchet, COO of Victory Brewing Company.

    The Victory and Southern Tier leadership teams and employees will remain intact. Bill Covaleski and Ron Barchet of Victory, who will become significant shareholders in ABV, will join the Artisanal Brewing Ventures’ Board of Directors. John Coleman, CEO and Bill Wild, CFO will lead ABV's management team.

    “This is exactly the kind of alliance we imagined when we created Artisanal Brewing Ventures in 2014,” said Phin DeMink, founder of Southern Tier Brewing Company and also a major shareholder in ABV. “This is a concept that was specifically designed by and for craft brewers, so we can focus on the things we’re best at while creating meaningful scale advantages. I’m proud to see this model validated and am grateful that my friends Ron and Bill have become our partners.”

    “This is the ultimate craft beer collaboration. It is an honor to be associated with these pioneering entrepreneurs who have been contributing to the industry since craft’s early days,” said John Coleman, CEO of ABV. “I look forward to guiding these two truly great organizations forward as they collaborate, innovate and share best practices.”

    “I believe this is a watershed transaction for the craft brewing world. This union of two great regional players preserves their independence and distinct cultures while sharing administrative and management functions to support deeper investment in sales, marketing and innovation,” commented Vann Russell, Managing Director and Founder of Arlington Capital.

    About Victory Brewing Company
    Victory Brewing Company is a craft brewery headquartered in Downingtown, PA. Founded by childhood friends, Bill Covaleski and Ron Barchet, Victory officially opened its doors in February of 1996. Victory’s second state of the art brewery opened in February of 2014 in Parkesburg, PA to serve fans of fully flavored beers in 37 states with innovative beers melding European ingredients and technology with American creativity. In addition to the original Downingtown brewpub, Victory’s second brewpub is in Kennett Square, while Parkesburg recently launched self-guided tours and the third brewpub. To learn more about Victory Brewing Company, please visit www.victorybeer.com.

    About Southern Tier Brewing Company
    In 2002 Phin and Sara DeMink founded Southern Tier Brewing Company in Lakewood, New York with the vision of reviving the practice of small batch brewing to a region rich in brewing tradition. Following several expansions from 2009 through 2013 Southern Tier now ships over 100,000 barrels annually to 33 states to meet growing demand for Southern Tier’s diverse portfolio of innovative beers that embody the spirit of American craft brewing. In 2015 Southern Tier Distilling Company was formed to create innovative small batch spirits using unique local ingredients under a New York farm distilling license. To learn more about Southern Tier Brewing Company, please visit www.stbcbeer.com.

    About Artisanal Brewing Ventures
    Artisanal Brewing Ventures is located in Charlotte, NC and was formed by Phin and Sara DeMink and Ulysses Management LLC, a New York based family office, with the vision of creating a home for like-minded, best-in-class craft breweries in close partnership with their founders. Ulysses Management was founded nearly 20 years ago by Joshua Nash as the successor firm to the pioneering investment firm Odyssey Partners, LP. Ulysses invests in profitable, well-established companies with tangible, competitive advantages with the goal to build long-term value that benefits all stakeholders while maintaining brand independence. To learn more about Ulysses Management, please visit www.ulyssesmgmt.com.

    About Arlington Capital Advisors
    Arlington Capital Advisors, LLC is a boutique investment bank that specializes in providing middle-market businesses with advisory services. Arlington focuses on providing strategic advice to our clients, including sell-side and buy-side mergers and acquisitions, sourcing growth capital and other capital- centric strategic alternatives for businesses across a wide array of industries including a specific focus and expertise in multi-unit consumer businesses. Securities offered through M&A Securities Group, Inc. M&A Securities Group, Inc. and Arlington Capital Advisors are not affiliated companies. For more information on Arlington Capital Advisors, please visit www.arlingtoncapitaladvisors.com.

    # # #
     
  2. jesskidden

    jesskidden Poo-Bah (2,148) Aug 10, 2005 New Jersey
    Society Trader

    Further blurring the line* between "craft" and "macro", some more info on some of Southern Tier's current management, From Brewbound:

    John Coleman
    previously was the Pabst Brewing Company president and COO during the short Metropoulos era. "Prior to joining Pabst, Coleman spent more than 22 years as a vice president of sales with Anheuser-Busch InBev."

    ST's VP of sales and marketing, Brendan Smith, had a "17-year career at Anheuser-Busch, where he climbed to the rank of senior sales director in both North Carolina and South Carolina".

    Southern Tier Brewing has hired Sean Lavery, a former Anheuser-Busch (A-B) brewmaster, to serve as its newest director of brewing, the company announced this week.

    Bill Wild's LinkedIn entry shows he was an Anheuser-Busch executive (numerous positions) from 2001-2013.
    * Of course, that "line" was never too exact, and contrary to the myth of "Craft Beer" promoted by the Brewers Association and others, brewers and other personnel have come from the "macro" side of the industry almost from the beginning of the "craft" era in the US.
     
    #2 jesskidden, Feb 16, 2016
    Last edited: Feb 16, 2016
  3. AlcahueteJ

    AlcahueteJ Poo-Bah (1,664) Dec 4, 2004 Massachusetts
    Society

    Hmm, my first thought is, "What the Helles going on here?"
     
  4. emannths

    emannths Initiate (0) Sep 21, 2007 Massachusetts

    I am so confused. What the point of this transaction? It this basically ST buying a piece of Victory?
     
  5. lateralusbeer

    lateralusbeer Aspirant (232) Feb 7, 2010 North Carolina
    Trader

    I wonder if this is the ultimate future for midsize and regional craft breweries. Otherwise growth gets very tricky. On a regional and national level you're fighting the macro beer marketing machine for the public's attention, and market by market you're competing with several beloved locals. The ultimate path may be consolidating marketing and production efforts so you can effectively stay competitive on price.
     
  6. rgordon

    rgordon Meyvn (1,093) Apr 26, 2012 North Carolina

    None of these happenstances should surprise anyone, but this one kinda did! It's all about money, marketing networks, and the growth of the industry. Going forward, I would assume that many unexpected alliances will have been in the works for a good while, and we'll see them being reported with a growing regularity. It makes room for more small great breweries and should never be seen as a threat to anyone.....except for maybe some of the BIG companies.
     
    russpowell, RobH and Zthoren like this.
  7. JackHorzempa

    JackHorzempa Poo-Bah (4,883) Dec 15, 2005 Pennsylvania
    Society

    You could have stopped there.

    Cheers!
     
  8. EazyBeeze

    EazyBeeze Initiate (0) Apr 10, 2009 Colorado

    Seems smart. Increased purchasing power has to help with supply chain. They can prolly brew at each others facilities if capacity becomes an issue. Joint sales efforts. I wish them luck.
     
  9. invertalon

    invertalon Devotee (485) Jan 27, 2009 Ohio
    Trader

    As long as quality doesn't drop (especially you, Victory... Which happens to be one of my absolute favorite breweries), power to them. If they can maintain the quality, increase product and reduces costs and all that... Perhaps they are a gateway for other craft breweries expanding in the future to help with distribution and such... Think about it, BMC owns almost all of the distro stuff now, right? Maybe this is to create a bigger competitor against the BMC products going forward.

    Let's just hope it all goes well...
     
  10. mwa423

    mwa423 Initiate (0) Nov 7, 2007 Ohio

    I'll be waiting for all you "drink independent" people to add your Victory and Southern Tier swag and cellared bottles to your boycott list with your Oskar Blues, Dogfish Head, Ballast Point, Terrapin, Goose Island, Boulevard, Ommegang, Elysian, 10 Barrel, St. Archer, etc. burn pile.

    Oh wait, that would require that crowd to be intellectually honest with themselves about how the beer industry works....
     
  11. lateralusbeer

    lateralusbeer Aspirant (232) Feb 7, 2010 North Carolina
    Trader

    Until someone actually bashes them over this move, that's a lovely Straw Man you got there.
     
  12. emannths

    emannths Initiate (0) Sep 21, 2007 Massachusetts

    Ah here we go. Some background from 2014:
    So this is basically the second PE deal in the craft beer space made by Ulysses.
     
  13. jesskidden

    jesskidden Poo-Bah (2,148) Aug 10, 2005 New Jersey
    Society Trader

    Not sure exactly what you mean by "distro stuff" but if you're suggesting that Anheuser-Busch and MillerCoors owns "almost all" the beer distributors in the US, that's not right.

    AB owns about two dozen of their approx. 500 distributors, MillerCoors owns one (or two) of theirs. The rest of the 3,300 (NBWA figure) beer wholesalers in the US are independently-owned.
     
    Pisthetaerus likes this.
  14. mwa423

    mwa423 Initiate (0) Nov 7, 2007 Ohio

    I'll bet you a case of beer it happens within 24 hours.
     
  15. drtth

    drtth Initiate (0) Nov 25, 2007 Pennsylvania

    For a situation like this one we're seeing described above I suspect self-protection could be a bigger factor than the money per se.
     
    rgordon likes this.
  16. jageraholic

    jageraholic Disciple (331) Sep 16, 2009 Massachusetts
    Trader

    I think two independently owned craft breweries combining is a little different than some of the complete buyouts you listed above.

    I have no problem with this, it seems odd since the two companies are fairly geographically close together. I don't immediately see how this improves distribution for either company. I wonder if being a larger commodity as a joint ABV company helps them to be more appealing to other breweries/investors interested in the group.
     
    ericwo likes this.
  17. jmdrpi

    jmdrpi Poo-Bah (7,240) Dec 11, 2008 Pennsylvania
    Society

  18. lateralusbeer

    lateralusbeer Aspirant (232) Feb 7, 2010 North Carolina
    Trader

    Perhaps. I like to hope not. But I'm naive.

    I think there's a pretty big difference between an investment firm buying part or all of a brewery (or two craft brands merging), and supporting a brand that is in AB's cabal of fake craft brands that they use (many times illegally) to reduce consumer choices and bully the market. And no, I don't and will not buy Bourbon County.
     
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  19. bluehende

    bluehende Poo-Bah (2,440) Dec 10, 2010 Delaware
    Society

    Interesting stuff. No where does it mention how much capital is being put in for how much ownership. Unless I missed something.
     
    mwa423 likes this.
  20. Harrison8

    Harrison8 Poo-Bah (4,196) Dec 6, 2015 Missouri
    Society Trader

    Very interesting. We get Southern Tier around here, although not all of their offerings. I haven't seen any Victory on the shelves. Maybe we'll start getting it all...?

    I also find their new name abbreviation funny. Did they plan that out?
     
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  21. emannths

    emannths Initiate (0) Sep 21, 2007 Massachusetts

  22. mwa423

    mwa423 Initiate (0) Nov 7, 2007 Ohio

    They're "partnering" (this is another word for being purchased) by a New York private equity fund. It isn't a couple of small breweries deciding to join together to grow. The logical goal for Ulysses Management is to either cash out via IPO or eventual sale to another beer marketing company/macro brewery.

    Erm, if you want to call....really anything from Goose Island, 10 Barrel, Elysian, Golden Road, etc. "fake craft", I suppose that's your right, but that doesn't make you right. So, are we on? Case of beer of loser's choice, shipping included to the winner if this is deal is/isn't bashed in this thread within 24 hours.
     
    LambicPentameter likes this.
  23. Vizualize

    Vizualize Initiate (0) Jun 13, 2014 New York

    Quick cash infusion for expansion while maintaining some ownership. The other option is to go to a bank and take out a loan and pay interest. I guess the amount of ownership given up is less than the interest on a bank loan?
     
    rather likes this.
  24. lordofthemark

    lordofthemark Initiate (0) Jan 28, 2015 Virginia

    This will be a craft brewer. Independent of any alcoholic beverage firm that is not a craft brewer.

    And I have not heard that hiring someone from big beer disqualifies a brewery as craft. So many straw men around here.

    Or maybe people pissed that an ABI acquisition target got snatched away?
     
    lateralusbeer likes this.
  25. JackHorzempa

    JackHorzempa Poo-Bah (4,883) Dec 15, 2005 Pennsylvania
    Society

    A question for the business experts out there:

    The Brewers Associations definition for a craft brewery has the part of: “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.”

    As I understand this new business structure, both Victory and Southern Tier are owned by “parent company Artisanal Brewing Ventures (ABV)”.

    In the original post: “About Artisanal Brewing Ventures

    Artisanal Brewing Ventures is located in Charlotte, NC and was formed by Phin and Sara DeMink and Ulysses Management LLC, a New York based family office, with the vision of creating a home for like-minded, best-in-class craft breweries in close partnership with their founders.”

    Is Artisanal Brewing Ventures an “alcoholic beverage industry member”? To the best of my knowledge ABV is not a craft brewer per se.

    I suppose a simpler question is does this newly created business create issues wrt defining Victory and Southern Tier as being craft breweries under the current Brewers Association definition?

    Cheers!
     
  26. lordofthemark

    lordofthemark Initiate (0) Jan 28, 2015 Virginia

    Note ABV owned a minority stake in ST. It is not clear to me what their stake in the combined ST/Victory will be. Anyone know?
     
  27. drtth

    drtth Initiate (0) Nov 25, 2007 Pennsylvania

    What is it that leads you to believe that Ulysses is purchasing the whole shebang (Victory, Southern Tier, ABV) rather than being a limited partner in ABV?
     
  28. mwa423

    mwa423 Initiate (0) Nov 7, 2007 Ohio

    I think the likely (but intellectually questionable) answer is that they will no longer be a craft brewer per the current brewer's association definition, but considering how hard the brewers association works to keep anybody who isn't purchased by AB/MC as a craft brewer with their constant moving the goalposts to accommodate Sam Adams, Yuengling, etc. that there will likely be some carve-out for just this scenario.
     
  29. Dan_K

    Dan_K Zealot (514) Nov 8, 2013 Colorado
    Trader

    Oskar blues essentially took out a loan from a private equity firm. That's not really the same thing as Elysian, 10 Barrel, Ballast Point, or Goose Island.
     
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  30. otispdriftwood

    otispdriftwood Initiate (0) Dec 9, 2011 Colorado

    Seems to me the best thing to do is wait to see how this shakes out for Victory and Southern Tier and if it works, how it may affect other mid-sized regional breweries. If this becomes a trend, there may be some hope for calling all brewed beverages "beer".
     
  31. lateralusbeer

    lateralusbeer Aspirant (232) Feb 7, 2010 North Carolina
    Trader

    I don't trust the unwashed masses quite that much :slight_smile:
     
  32. Oprimist1

    Oprimist1 Initiate (0) Jun 17, 2014 Kentucky

    Another Wall Street plot...We'll see how this play ends very shortly, folks..Cheers!
     
    chrismattlin likes this.
  33. lordofthemark

    lordofthemark Initiate (0) Jan 28, 2015 Virginia

    MWA mentions Ommegang, which BA still considers a craft brewery. Is this that different?
     
  34. drtth

    drtth Initiate (0) Nov 25, 2007 Pennsylvania

    Ommegang is owned by another brewer (Duvel Moortagat) considered by the BA to fall under the craft brewery umbrella.
     
    PatrickCT likes this.
  35. Sponan

    Sponan Initiate (0) Jan 20, 2008 Tennessee

    From a post above:
    "Southern Tier, a rapidly growing regional craft brewer located in upstate NY, has sold undisclosed stake to family office Ulysses Group. (That stake is a majority, CBN understands). And simultaneously, Southern Tier has hired a new prexy, John Coleman, formerly prexy of Pabst Brewing, an AB region vp out west and a NY native. John starts Monday.

    Deal allows owners Phin and Sarah DeMink to simultaneously cash out and stay in. They retain stakes in company, but get infusion of patient capital from Ulysses Group, which has sought to enter beer space before, even looked at a sizable beer distrib."
     
    mwa423 likes this.
  36. jesskidden

    jesskidden Poo-Bah (2,148) Aug 10, 2005 New Jersey
    Society Trader

    Magic Hat/Pyramid's former parent company was called "Independent Brewers United" (IBU).

    They haven't made a lot of exceptions for the "Independent" clause - Anchor (owned by Griffin Group) and Gambrinus (began life as one of two US Corona importers) being the notable ones. But Redhook/Widmer/Kona-CBA and Mendocino/Olde Saratoga are all "non-craft" because of their ownership. I think the B.A. has stated that Lagunitas and Founders will drop off the "Craft" list but Duvel Moortgat-owned Firestone Walker/Boulevard/Ommegang will remain?

    Did anyone imply it was? I think the hiring of AB and Pabst execs is very interesting - but I think it's probably the craft beer geekery's kneejerk reaction to those hirings that had them leave that info off the Press Release, but facts they are.

    One might suppose they have the experience and the desire to compete with their former employer.
     
  37. BeanWolf

    BeanWolf Initiate (0) Mar 1, 2012 Maryland

    This is not a Victory for taste.
     
  38. SCW

    SCW Initiate (0) Jul 25, 2004 New York

    ABV owns 100% of Southern Tier and Victory.
     
  39. BrewsingBuffalo

    BrewsingBuffalo Initiate (0) Jul 6, 2015 New York

    I wonder how this will change things, if at all. Increased distribution, better pricing? (though ST and Victory already have pretty stellar pricing for the quality). Either way, as long as the quality doesn't change, I doubt I'll see much of a difference here, considering my proximity to both breweries (Though Victory's line-up could be a little more robust here- ST is already everywhere and in quantity)
     
  40. emannths

    emannths Initiate (0) Sep 21, 2007 Massachusetts

    And what fraction of ABV do the former owners of ST and Victory hold? That's the key consideration, I'd think.
     
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