Bruery sells majority stake to private equity firm

[girlscantell]

Some good discussion here. However, private equity does not invest "from the startup phase". That's venture capital. The next stage is growth equity, once companies start generating real revenue. Then there's private equity. Private equity invests in mature businesses with consistent revenue, and preferably positive cash flow. And yes - the investment is to make money on an eventual exit, either through a sale or public offering.

Castanea probably got a pretty good deal - that is, likely bought into the business at a lower multiple than what ABI and other big boys have been paying - and I'm sure has ideas on how to expand the business (internationally, for example), not just cut costs. But they will probably do that, too. Guessing they'll be doing some heavy research on what works (intersection of what consumers buy most and highest margin SKUs) and what doesn't, which will probably result in a culling of current money-losing labels and a reduction of their more experimental releases. Doesn't hurt that Tom First, one of the founders of Nantucket Nectars (who sold to Cadbury Schweppes), is an operating partner at Castanea.

I'm sure they did the analysis on "most likely eventual targets for a strategic acquirer in a consolidating industry" and the Bruery bubbled up to the top. Good size, well-known brand (which Castanea hangs their hat on), unique offerings. There were probably other candidates, maybe they looked at Founders as well.

Either way they're likely hoping for 1-3 year max hold and then sell to a strategic, who typically pay much higher multiples than financial buyers (SYNERGIES, MAN!). No shortage of exit partners, the ones we all know. ABI, Heineken, Duvel, etc.

 

[hornydevil]

Some good discussion here. However, private equity does not invest "from the startup phase". That's venture capital. The next stage is growth equity, once companies start generating real revenue. Then there's private equity. Private equity invests in mature businesses with consistent revenue, and preferably positive cash flow. And yes - the investment is to make money on an eventual exit, either through a sale or public offering.

Castanea probably got a pretty good deal - that is, likely bought into the business at a lower multiple than what ABI and other big boys have been paying - and I'm sure has ideas on how to expand the business (internationally, for example), not just cut costs. But they will probably do that, too. Guessing they'll be doing some heavy research on what works (intersection of what consumers buy most and highest margin SKUs) and what doesn't, which will probably result in a culling of current money-losing labels and a reduction of their more experimental releases. Doesn't hurt that Tom First, one of the founders of Nantucket Nectars (who sold to Cadbury Schweppes), is an operating partner at Castanea.

I'm sure they did the analysis on "most likely eventual targets for a strategic acquirer in a consolidating industry" and the Bruery bubbled up to the top. Good size, well-known brand (which Castanea hangs their hat on), unique offerings. There were probably other candidates, maybe they looked at Founders as well.

Either way they're likely hoping for 1-3 year max hold and then sell to a strategic, who typically pay much higher multiples than financial buyers (SYNERGIES, MAN!). No shortage of exit partners, the ones we all know. ABI, Heineken, Duvel, etc.

Excellent synopsis. For those scoring at home, the bits in bold are the bits that are bad.

 

[Barroomhero]

That's stupid.


Private Equity interest is worse than beer interest in beer.


Completely different landscape opening up here.

Yeah, well you're ugly, so there.

Also wrong.

Private equity investment only cares about and influences the breweries said equity invests in. AB-Inbev moves effect all of beer.

Really though explanation wasn't necessary.

 

[hornydevil]

Yeah, well you're ugly, so there.

Also wrong.

Private equity investment only cares about and influences the breweries said equity invests in. AB-Inbev moves effect all of beer.

Really though explanation wasn't necessary.

Come on, dude. Do you really not see how that particular situation is much worse than what ABI has been doing with breweries? Private Equity Firms come into breweries. They make them maximally profitable by stripping them down to the bare bones in both supply and production. Then they sell them to the highest bidder.

How is this scenario good for the quality and creativity of craft beer?

 

[Stubs]

Come on, dude. Do you really not see how that particular situation is much worse than what ABI has been doing with breweries? Private Equity Firms come into breweries. They make them maximally profitable by stripping them down to the bare bones in both supply and production. Then they sell them to the highest bidder.

How is this scenario good for the quality and creativity of craft beer?

Also, they cut labor as much as possible.

How's that good for the you and me types?

 

[Stubs]

Some good discussion here. However, private equity does not invest "from the startup phase". That's venture capital. The next stage is growth equity, once companies start generating real revenue. Then there's private equity. Private equity invests in mature businesses with consistent revenue, and preferably positive cash flow. And yes - the investment is to make money on an eventual exit, either through a sale or public offering.

Castanea probably got a pretty good deal - that is, likely bought into the business at a lower multiple than what ABI and other big boys have been paying - and I'm sure has ideas on how to expand the business (internationally, for example), not just cut costs. But they will probably do that, too. Guessing they'll be doing some heavy research on what works (intersection of what consumers buy most and highest margin SKUs) and what doesn't, which will probably result in a culling of current money-losing labels and a reduction of their more experimental releases. Doesn't hurt that Tom First, one of the founders of Nantucket Nectars (who sold to Cadbury Schweppes), is an operating partner at Castanea.

I'm sure they did the analysis on "most likely eventual targets for a strategic acquirer in a consolidating industry" and the Bruery bubbled up to the top. Good size, well-known brand (which Castanea hangs their hat on), unique offerings. There were probably other candidates, maybe they looked at Founders as well.

Either way they're likely hoping for 1-3 year max hold and then sell to a strategic, who typically pay much higher multiples than financial buyers (SYNERGIES, MAN!). No shortage of exit partners, the ones we all know. ABI, Heineken, Duvel, etc.

Are you a wizard?

 

[Barroomhero]

Come on, dude. Do you really not see how that particular situation is much worse than what ABI has been doing with breweries? Private Equity Firms come into breweries. They make them maximally profitable by stripping them down to the bare bones in both supply and production. Then they sell them to the highest bidder.

How is this scenario good for the quality and creativity of craft beer?

Who cares? In this specific case, it only effects one brewery that, tbh, only diabetics care about anymore.

No impact whatsoever on the craft beer landscape as a whole.

You're aware that ABI actually OWNS distributors, yeah? The guys that actually get beer into stores?

Casta-whatever brothers PE firm own any distributors? Nope?

 

[Barroomhero]

dude.

dude.

srs.

 

[Lutter]

All these PE joints are looking to make their best ROI.

ABI has billions of dollars... and can grow PE breweries even larger with their lucrative supply chains and distribution.

PE firms are an intermediary for selling out.

 

[CornAndBeer]

Good size, well-known brand (which Castanea hangs their hat on), unique offerings. There were probably other candidates, maybe they looked at Founders as well.

Not that it really matters but Founder's is something like 20 times the size of the Bruery. Bruery only brewed 15,000 barrels last I read. Even smaller than I expected

 

[matedog]

Bumping this thread after listening to Tyler King on Full Pint podcast. He made general comments about breweries selling to private equity firms as essentially bail outs for breweries that are not doing well financially (he also used the term "sell out"). Reading between the lines, I'm assuming this is referring to the Bruery. I believed the sale was initially thought of as Rue and co. selling out to make a **** ton of money vs. what King was suggesting which was that the Bruery's financials weren't in such good shape and this was a necessity to keep things afloat.

Not sure if anyone else has insight, but I found it to be an interesting spin.

 

[beerindex]

Bumping this thread after listening to Tyler King on Full Pint podcast. He made general comments about breweries selling to private equity firms as essentially bail outs for breweries that are not doing well financially (he also used the term "sell out"). Reading between the lines, I'm assuming this is referring to the Bruery. I believed the sale was initially thought of as Rue and co. selling out to make a **** ton of money vs. what King was suggesting which was that the Bruery's financials weren't in such good shape and this was a necessity to keep things afloat.

Not sure if anyone else has insight, but I found it to be an interesting spin.

That's an interesting thought, but I wonder how true it generally is. PE firms are only going to invest where they think they can make a tidy profit. Sometimes that is with distressed assets, but that isn't the norm for most firms, and seemingly isn't the approach the biggest player in the brewing space (Fireman) takes. Back when they bought Wasach & Squatters they were doing 20% year over year growth. Can't say I know enough about Castanea to say what their buying strategy is, so it's certainly possible.

 

[jivex5k1]

On the other hand, Fireman seems to have done nothing objectionable with its acquisitions. So I do think it is worth taking a wait and see approach rather than assuming the worst.



I would if I were anti-buyout, and I'll start to care if they ruin the Bruery, because they're one of my absolute favorite breweries. But since I don't think there's much reason to expect change for the worse in the next several years, at least change that is attributable to the acquisition, I'm indifferent.

Oh damn it's Fireman again. They snatched up CCB a little while back and also have Oskar blues iirc.

 

[beerindex]

Oh damn it's Fireman again. They snatched up CCB a little while back and also have Oskar blues iirc.

And a local of mine, Perrin. And I guess Oskar Blues was the first one (and went well given their distro expansion) since until last month their holding co was Oskar Blues Holdings, now named CANarchy.

 

[FATSH1TTY]

I think with the expansion to east coast, more distro, and what appears to be a real investment in Bruerys societies this year, they are doing well and have some plans to execute.

Doesn’t appear all fire and brimstone, and it appears they now have more freedom to try some things.