Boulder Valley brewers ponder the future after New Belgium sale

BOULDER — Hours after New Belgium Brewing Co. dropped a surprise announcement about its sale to an Australian beer conglomerate, a handful of Boulder Valley brewers gathered at BizWest’s Boulder Valley Brewing CEO Roundtable and debated what that means to the craft brew industry at large.

The New Belgium-sized elephant in the room

New Belgium did not disclose how much the deal was worth, or why exactly its ownership decided to sell. That led to some speculation about what was going on at the fourth-largest craft brewery in the U.S. in the run-up to the sale.

Participants in BizWest’s Boulder Valley Brewing CEO Roundtable. From left: Dale Reeder, Railsend Beer Co.; Drew Mattox, Plante Moran; Davin Helden, Liquid Mechanic Brewing Co.; Bob Baile, Twisted Pine Brewing Co.; Mark Changaris, Berg Hill Greenleaf Ruscitti; Abigail Intolubbe-Chmil, Asher Brewing Co.; Jeffrey Green, Very Nice Brewing Co.; Chad Melis, Turn It Up Media; Shawnee Anderson, Colorado Brewers Guild; Michael Memsic, Sanitas Brewing Co.; Dale Katechis, Oskar Blues Brewing. BizWest/DanMika.

Shawnee Adelson, executive director of the Colorado Brewers Guild, said the recent trend of major breweries in the state selling to beverage conglomerates, like Breckenridge Brewery to AB InvBev (NYSE: BUD) and Avery Brewing Co.’s minority stake sale to a Spanish group, shows there’s pressure on regional breweries stuck between the profitability of maintaining taprooms and trying to reach a wider audience.

“If you think about it in terms of how many breweries are opening up, that has to be across all of our small breweries, so some of our regional breweries aren’t growing as fast as they used to,” she said.

Liquid Mechanics Brewing Co. CEO Davin Helden pointed to a line in New Belgium co-founder Kim Jordan’s letter announcing the deal that suggested some of the fundraising options it had available weren’t congruent with being an independent brewer, and it’s possible New Belgium sold to get the capital it needed to survive.

“I think a lot of larger breweries that are also getting bought up are also in the same boat,” he said.

Bob Baile, owner of Twisted Pine Brewing Co., suggested co-founder Kim Jordan and other family members decided it was time to exit the industry, particularly at a time where competition is stronger than ever before.

“I like to tell people when they ask how business is or how the craft beer industry is going, I tell them the pie is getting bigger… but your slice is not growing proportional to what the pie is.”

 

Finding the magic and scaling up

So with three major brewery acquisitions in the past few years, has the craft brewing market shifted to the level where it’s not sustainable to operate as a mid-size regional brewery?

Dale Reeder, founder of Railsend Beer Co., said his company’s financial modeling shows the return on investment for selling a batch of beer in distribution pales in comparison to selling it in a brewery’s own taproom.

“The price you’re able to sell it for doesn’t scale the same in my opinion,” he said. “If you can take a full batch of beer in a taproom, you can make almost $20,000 on that, but outside? About $2,500 when you factor in labor, self-distribution, van costs, keg costs, everything. So why are we working so hard for $2,500?”

Oskar Blues Brewing founder Dale Katechis said it’s possible to strike a balance between being a small brewer and a national craft player, despite revenues not scaling up proportionally when a small brewery looks to create beers that are more expensive or tries to start its own distribution.

“At the end of the day, it comes down to trying to figure out what magic you have and the next guy doesn’t have,” he said.

Sanitas Brewing Co. owner Michael Memsic agreed, but said that success is more dependent than ever on a slew of factors out of the hands of an owner.

“I think it can happen, but you have to have everything right,” he said. “You’ve got to be well-funded, you’ve got a killer team and you’re part of a community that is really thirsty for you. It can still happen, but it’s going to be a lot harder to make that happen, harder to hit home runs in this next era than it was to hit home runs 10 years ago.”

But Jeffrey Green, owner of Very Nice Brewing Co. in Nederland, said there’s plenty of space for small brewers to set up shop in underserved areas, but doesn’t see how a brewery can both maintain its charm to locals that go to taprooms that serve exclusive brews while expanding its taproom or distribution radius.

“In this time and place, I’m not saying lightning (cannot) strike… but is it scalable? Is it linear? You’re this size and you’ve still got that magic? Can you then create a nationwide distribution of that magic, if you will? Or are you lessening that by not being as unique anymore, not being as local?”

 

Selling out and community pride

The brewers also lamented a strange attitude in the craft industry, where owners are labelled “sell-outs” for selling a popular brewery to a large conglomerate, while that would be considered a successful exit for almost any other industry.

Memsic said he still “gets a cringe” whenever he hears of a craft brewery that sells to AB InBev, but other than that, he believes there’s plenty of valid reasons to sell a brewery, especially fatigue after years of building a company.

He also doesn’t think beer drinkers don’t care all that much about whether their beer was made by an independent, and that realm is more important to the craft beer-obsessed.

“We’re all sitting here talking about New Belgium and being like ‘oh my gosh, this is nuts,’ but does Joe Sixpack give a (expletive)? He’s going to buy a six-pack of Blue Ranger tomorrow and enjoy it,” he said.

However, craft brewing is a different beast than other industries because of the pride it generates in the community it’s based in. Adelson said Breckenridge residents were concerned about the fate of Breckenridge Brewery after it was nearly evicted from its taproom over the summer, despite most of its actual brewing being done in Littleton and being owned by AB InBev.

Chad Melis, founder of marketing firm Turn It Up Media, said that community pride is especially strong in small towns where brewing startups are setting up.

“The brewery becomes part of the social fabric, and that’s where people meet and tell stories,” he said. “… Sometimes people feel like you sold out or whatever because it’s like a personal place for them and their community, which is part of the beauty of getting to do this, is we get to be that social fabric.”

Even then, becoming part of a conglomerate isn’t necessarily a death knell to people dedicated to a brand. Abigail Intolubbe-Chmil, operations manager at Asher Brewing Co., said nearby Avery Brewing’s renovation from its first taproom to a “beer castle” doesn’t dilute the goodwill customers have for the beer itself.

“If someone wants Maharaja (IPA) from Avery, they’re still going to go to Avery and get that beer because they love it,” he said. 

 

Cost of business pressures

While New Belgium’s sale has shaken the state’s craft beer landscape, Adelson said there are currently just over 400 active breweries in Colorado and that figure has steadily risen.

However, the cost of doing business is also increasing, which is forcing owners to figure out how much they can charge for a beer or a burger at their establishments, especially if other nearby competitors aren’t raising their prices for a comparable meal or beverage.

“I will have to challenge the consumer to pay more,” Katechis said.

That’s further complicated by the state’s increasing minimum wage, which will reach $12 per hour next January and be adjusted for inflation in the following years. Denver is proposing to raise that minimum to $15 per hour, which drew a lawsuit threat from the Colorado Restaurant Association late last month.

While tipped employees are only paid a base rate of $8.98 per hour, Memsic said his bartenders can make upward of $40,000 a year in tips. That means a lot of potential employees are asking for bartending jobs instead of back-of-house jobs.

“No one wants to be a brewer, because you don’t make as much as you do selling the beer that was just brewed,” Memsic said.

BOULDER — Hours after New Belgium Brewing Co. dropped a surprise announcement about its sale to an Australian beer conglomerate, a handful of Boulder Valley brewers gathered at BizWest’s Boulder Valley Brewing CEO Roundtable and debated what that means to the craft brew industry at large.

The New Belgium-sized elephant in the room

New Belgium did not disclose how much the deal was worth, or why exactly its ownership decided to sell. That led to some speculation about what was going on at the fourth-largest craft brewery in the U.S. in the run-up to the sale.

Participants in BizWest’s Boulder Valley Brewing CEO Roundtable. From left: Dale Reeder, Railsend Beer Co.; Drew Mattox, Plante Moran; Davin Helden, Liquid Mechanic Brewing Co.; Bob Baile, Twisted Pine Brewing Co.; Mark Changaris, Berg Hill Greenleaf Ruscitti; Abigail Intolubbe-Chmil, Asher Brewing Co.; Jeffrey Green, Very Nice Brewing Co.; Chad Melis, Turn It Up Media; Shawnee Anderson, Colorado Brewers Guild; Michael Memsic, Sanitas Brewing Co.; Dale Katechis, Oskar Blues Brewing. BizWest/DanMika.

Shawnee Adelson, executive director of the Colorado Brewers Guild, said the recent trend of major breweries in the state selling to beverage conglomerates, like Breckenridge Brewery to AB InvBev (NYSE: BUD) and Avery Brewing Co.’s minority stake sale to a Spanish group, shows there’s pressure on regional breweries stuck between the profitability of maintaining taprooms and trying to reach a wider audience.

“If…