- The Boston Beer Company is buying craft-beer maker Dogfish Head Brewery for $300 million in cash and stock, the companies said in a statement. Sam and Mariah Calagione, Dogfish Head's two co-founders, have elected to take "substantially all" of their merger consideration in the form of Boston Beer stock, making them the largest non-institutional shareholders after Boston Beer founder Jim Koch.
- The transaction, which is expected to close late in the second quarter of 2019, "will create a powerful American-owned platform for craft beer" that will be able to compete "against the global beer conglomerates within the craft beer category that are 50- and 100-times its size," the companies said.
- "There has been an intense amount of consolidation among many craft breweries in the U.S. More than a dozen of our peers have sold to international conglomerates, others have come together through platforms bringing a handful of craft breweries together in roll-ups," Koch and Dogfish founder Sam Calagione said in a blog post. "While neither of those strategies appealed to us, we did realize that Dogfish Head would be a stronger company with the support of our friends at Boston Beer, and vice-versa."
In their blog post, Koch and Calagione went to great lengths to underscore that even after the deal closes, the new company will still be classified as a craft brewer as defined by the Brewers Association. Craft, which has been a bright spot in the beer space, has attracted the interest of AB InBev, Molson Coors, among others, many of whom have seen falling demand for their classic brews. Despite its size and nearly $4 billion market cap, Sam Adams has long been viewed as quintessential craft brewer.
AB InBev, the world's largest brewer, has gobbled up craft breweries in recent years — including Wicked Weed, Devils Backbone and Karbach Brewing. In 2015, Constellation Brands bought Ballast Point, and that same year Lagunitas sold a 50% ownership stake to Heineken before selling the other half two years later. Molson Coors also has purchased several craft players.
The deal for Dogfish appears to have been struck to make the combined company more competitive amid signs that additional deals in the craft segment are on the horizon. Boston Beer CEO Dave Burwick seemed to hint in a statement that his company won't hesitate to add more brews to its portfolio.
"We expect that we'll see more consolidation in the craft industry over time, and we'll be in the best position to take advantage of those changes," Burwick said.
It's no wonder Burwick sees more deals. There were an estimated 7,450 breweries in the U.S. in 2018 with 7,346 of them being craft, according to the Brewers Association. Craft players are increasingly finding that clever names or simply being craft isn't enough to succeed with the many choices for consumers to chose from and Big Beer playing a bigger role in the segment.
In recent years, Boston Beer has moved to diversify beyond beer into other alcoholic beverages. Boston Beer has introduced Angry Orchard hard cider, Twisted Tea and Truly Hard Cider — reducing its dependence on Sam Adams for 42% of sales in 2015 to 27% a year ago, according to financial magazine Barron's.
Still, the same cider and teas that helped give Boston Beer an edge while other beer companies floundered are now being copied by their competitors who are introducing their own similar lines of products. The purchase of Dogfish shows while Boston Beer may have diversified beyond the popular beverage in an effort to meet changing consumer tastes, it hasn't given up on the signature product that has come to define the New England company. For Dogfish, the deal enables the brewer, which expects sales of about $115 million this year, the chance to tap into Boston Beer's nationwide reach and expansive distribution system.
Calagione told Brewbound the deal was struck over pints in February during a beer festival in Boston. The merger combines Boston Beer, the second largest craft brewery, with Dogfish, the 13th biggest, and will give the combined company a diverse product selection in IPAs, lagers, sours, tonics, spirits and teas along with deeper brewing, distribution and retailing capabilities.