The Bruery Announces Private Investment by Castanea Partners

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The Bruery Announces Private Investment by Castanea Partners

Postby Justin H on Sat May 20, 2017 11:56 pm

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Re: The Bruery Announces Private Investment by Castanea Part

Postby indianajns on Sun May 21, 2017 4:06 pm

Is this a , "We need a partner to help us grow and become efficient enough for a ABInbev to buy us?" play?
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Re: The Bruery Announces Private Investment by Castanea Part

Postby Justin H on Sun May 21, 2017 9:03 pm

Maybe. Not exactly what I was thinking, but I don't think it's unfathomable. I hope this is their alternative to the big buyout as opposed to a transition towards one. I more posted it because the article said very little and I thought there might be some interesting options out there.
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Re: The Bruery Announces Private Investment by Castanea Part

Postby indianajns on Mon May 22, 2017 8:49 am

Whatever happens I'm sure they will continue to make great beer.
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Re: The Bruery Announces Private Investment by Castanea Part

Postby ctninh on Sat May 27, 2017 1:49 am

Disclaimer: This is all my point of view (especially considering how I am in the beer business).

Overall: good for them! It will surely help in their expansion projects (Terreux) and make them a better company.

If you check out http://goodbeerhunting.com/blog/2017/5/5/watch-the-hands-not-the-cards-the-magic-of-megabrew (a unbiased and fantastic beer blog, by the way), it tells of what bigger companies are looking for. In a not-the-best metaphor, the blog hints of buying brands as a way to keep tabs on the market. It allows consumers to buy a nicely (from a budget point of view) priced IPA while others are selling $1-2 higher per 6 pack. Sure, the big company gets some cash and business is a lot about cash flow. It's like playing a game of Risk and keeping some troops in a continent you don't want to prevent others from benefitting too much. Hey, that’s business.
There’s also the breweries that will gripe about the big guys pushing them off the shelves. I can only say “Deal with it.” Why would breweries that survived Prohibition make it easier for competition to rise up. In a business sense, that’s stupidity. Honestly, I wonder how many brands are on the ABI distribution network. You will be surprised to know that you very likely drank a beer carried by the distribution network ABI worked to create. I would bet cash.

From ABI's acquisitions, it looks like they have total buy outs in the past. I see no concern about ABI ad the Bruery since Golden Road is already in the High End. Also ABI may not like sharing.
I have to be straight and say that most naysayers of investments/buyouts don't understand business and money. I think (I THINK) those people grew up with a sickening opinion that money is all bad. However, I want you to walk in your local craft brewer and pay attention a bit more. Look around. Check for ear plugs and dust masks. A brewery is a dangerous place and most breweries skimp on safety. That’s a sad mentality of the business. I am given a shuddering "OK" to go on tours since I wear glasses. I have no need for actual eye protection since glasses are "good enough" for them. Prescription glasses are not safety glasses. That's the kind of mentality that is damning to the industry. Money puts good things into a brewery.

Sure, money gets safety equipment. Money gets better equipment, better facilities, attracts talent, pays leases, ect. Easiest way to put it: people need resources (like money) to run a business. Investors have the money to put into a business. People somehow adopt this mentality that money is Satan's vomit. I lived with a minimum wage brewery job for a bit and that was almost Hell. I had to consider if risking doing the job was worth breaking a finger or smashing a toe. That expense I cannot have without a good cash flow. Hell, a $4 beer was a lot compared to rent or eating food. When it comes down to it, money is good. The issue is what people do with the power of money on a (separate) ethics standpoint.

Good for the Bruery for getting some help in business. We have seen Firestone Walker with Duvel Moortgat. Hieneken has Lagunitas 100% now. MillerCoors (with Saint Archer) and ABI (with Golden Road) are here in So Cal. If you have not heard me say it yet, So Cal is open waters for beer and an "interesting" age will come to this region. Honesty, a bastion such as the Bruery would drown out in what (I hope) to come. I am hoping since it will push beer makers to be more considerate in the business and technical side (yes, bad beer exists) since the game will up its status. Also, anyone heard of what happened to Speakeasy in San Francisco? They almost closed down due to not paying their loans after some expansion projects. Good thing some investors (who have $$) are keeping that place floating until someone swoops them up.

Well, that’s a tad bit from me to continue this thread. May be more to come.
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Re: The Bruery Announces Private Investment by Castanea Part

Postby lexuschris on Wed May 31, 2017 11:15 pm

Hey Calvin, did not realize you were in the brewery biz... where at? what role? That's cool! :thumbup:

I think most folks lament the 'selling out' of a small craft brewery, because of the changes that inevitably come down to their operation. Some of it quality or style selection... although, being able to find decent beer at more venues (ie. better distribution) is a huge plus! I think we all just want to root for the local guy against the big conglomerate, but you do bring up some interesting points.

We also don't want to see our favorite brews watered down, or otherwise made more 'efficient'. Kinda like going to a favorite dining spot, only to find the new owners have replaced the peppercorn sauce on your steak with the same brown sauce they use on their roast. Efficient yes, but tasty? .. meh..

As for small business guys cashing in, I'm all for it. At some point, the bills, the headaches, etc. can be traded for a multiplier (hopefully!) on your past years of blood, sweat and tears. Its a great opportunity, and I get why many go there. For others, content with a lifestyle biz, where the day-to-day is fun, and they make enough money to keep it going and enjoy their lifestyle, I admire them too! Both are great ways to run a business!
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"A woman drove me to drink, and I hadn't even the courtesy to thank her." – W.C. Fields
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Re: The Bruery Announces Private Investment by Castanea Part

Postby bwarbiany on Thu Jun 01, 2017 9:28 am

I think of it this way.

And bear in mind that I have *zero* knowledge of Patrick's financial situation or his running of the business. I'm discussing this in a completely abstract way based on how I would imagine a small businessman might behave in this situation.

1) Opening a brewery is a very capital-intensive process. Just to get off the ground, I would assume that there were "investors" of some sort. That could be wealthy friends/acquaintances, it could be family members, or it could be taking one's life savings and putting it into the business. But SOMEONE put a whole bunch of money into the brewery, and expected a return on that investment at some point.

2) The Bruery has embarked on quite an ambitious (and capital intensive) growth strategy throughout its entire history. Building a big barrel-aging facility. Buildout of a big, expansive tasting room. The experiment with Provisions. There have been a lot of things that they've done. I assume that a lot of that was done either by reinvesting the profits of the company into those expansions, and *possibly* even with added debt.

3) The result is that after ~10 years of operation, Patrick has built up a significant brand and a significant operation that is worth a lot of money. And wants to keep building. But he's put his blood, sweat, and tears into this project and all of the "wealth" in the company is paper valuation. There may even have been times he might have skipped paying himself to make sure the company operated (a lot of small business owners face this decision), or at the very least all his hard work hadn't yet given him the "payoff" that we all often think owners of successful businesses are raking in.

So after 10 years, his initial investors might want to cash out. Any additional debt that he has taken on to fund previous expansions might need to be paid off. And despite the fact that he's got a lot of "paper" wealth in the business, that's just paper until he cashes it in. He is probably selling off enough of his own personal stake to give him and his family financial security for the rest of their lives.

Oh, and I know I might be in the minority, but I happen to think this craft beer boom has a bit of a rocky future, and taking care of that financial security piece right now is just prudent risk mitigation if suddenly craft drinkers aren't willing to shell out the sort of high prices Bruery beers command in the future.

So I can imagine a BUNCH of reasons why this makes sense for him, for his initial investors, and to fund the future growth of The Bruery.

The question is what the new investors want? Every investor has an exit strategy. For example, when I joined a startup in 2007, most of the people I trusted in the company said that the people who invested in the business had a history of building and then selling their businesses. That was what they did. So it wasn't a shock in 2009 when we were acquired by a much larger company.

I'm not going to speculate on what Castanea Partners wants out of this deal, but they ain't investing for free. It's possible that they see a growing craft beer business and want it to generate income in perpetuity. It's possible that they want to grow it and sell it for a lot more in 3-4 years. It's possible their exit strategy is some other option that I'm not considering. But they're investors, and they have an exit strategy. Most likely that investment strategy involves *growing* the business so there's no reason for them to water down the product and ruin the brand equity of what they just bought. But what the expectation is 3-4 years from now, we don't know.

Either way, I congratulate Patrick, who has most likely secured the financial future of his family for the rest of their lives, and who I assume retains enough ownership of the business to not only continue to control its future, but to experience a true windfall if it sells for much more money in 3-4 years.
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