Point-of-View: Mergers & Acquisitions

Last week ended with a boom in the beer world. The announcement was that Boston Beer Company, parent company of Samuel Adams Brewery, a Boston mainstay since 1988, had merged with Dogfish Head Brewing, whose early IPAs and Sours made it a pioneer of the modern craft beer movement as we know it.

The news was met with an immediate storm of speculation, critiques, applause, and the usual Tweet-flurry. Two of the largest names (and producers) in the Independent craft beer world joining forces is not only major fodder for beer enthusiasts, writers, and thought-leaders alike, but clear reinforcement, as if we needed it, that the landscape is dramatically evolving. You can cite various articles in order to gain a more comprehensive understanding of the $300M-valued deal. For the nuts and bolts of the transaction, I recommend starting here.  

In my opinion, the move is a smart one for both sides. Jim Koch, founder of Boston Beer Company and long-time champion of craft beer, has never publicly viewed the spike of small, fiercely-independent craft breweries as his competition. Although Boston Beer shipped over 4M barrels in 2018, that is still under the 6M cap that would officially place his company above its oft-defended Independent status.  

Rather than exceed the cap and place his beloved Samuel Adams Boston Lager, as well as its companions, in the same mental category as Budweiser or Coors, Boston Beer Company has found innovative ways to expand its product line --- including Angry Orchard Cider and Truly Spiked & Sparkling hard seltzer --- without letting its beer get ‘too big.’  

Koch knows that Samuel Adams is one of the trailblazers for craft beer, and has long viewed his place in this morphing industry as one of the protective patriarchs of everything independent craft beer stands for. Assuming this is how he wants the Boston Beer Company brand to be perceived, the merger with Dogfish Head makes sense on multiple fronts:

  1. It helps a fellow mid-sized company, struggling at times to surpass its historic excellence and remain relevant amidst the flurry of fresh, rotating beers from new breweries that are opening at a breakneck pace.  

  2. It secures two of the major independent players against the rising tide of beer conglomerates like AB/In-Bev, who continue to swallow more independent breweries in an effort to maintain market superiority.  

It’s also a smart financial decision for Dogfish Head. This merger allows it to pay off some sizeable investment loans and increase its presence on shelves. I hope it turns out to be as much of a win-win in reality as it appears to be on paper!