By Ezra Johnson-Greenough
For the Oregon Beer Growler
It’s the end of an era. Full Sail Brewing’s employees and founders voted in March to sell to Oregon Craft Brewers Co., which is a local investment group formed by Encore Consumer Capital, a San Francisco-based private equity firm. “The votes were returned confidentially to our ESOP attorney. It passed nearly unanimously,” said Full Sail founder and CEO Irene Firmat.
While this news is sure to not make as big a splash as the recent sales of 10 Barrel Brewing and Elysian Brewing Company, it is in many ways more important. Full Sail has been one of the industry’s pioneers and produced more beer (115,000 barrels) in 2014 than 10 Barrel (40,000 barrels) and Elysian (50,000 barrels) combined, making it the 25th largest craft brewer in the country.
Both 10 Barrel and Elysian are also examples of quick growth in a very short period of time, which may have been one of the reasons 10 Barrel was in a difficult financial position and willing to sell. Full Sail has experienced its ups and downs, but has largely avoided pitfalls and continued on a steady stream of growth by going its own direction. Ignoring trends like barrel aging, fresh hops, double IPAs and sour beers (for the most part, though the brewery certainly has dabbled); Full Sail instead focused its energy on recreating the craft lager and session beers, a move that was way ahead of its time. Full Sail’s location in Hood River is also undoubtedly responsible for the explosion in the number of breweries in the town and the entire Columbia River Gorge. Former Full Sail brewers have opened favorites like Double Mountain, Logsdon Farmhouse Ales, pFriem Family Brewers and Everybody’s Brewing.
Full Sail’s growth has not always been smooth. In 1999 the company transitioned into an ESOP (Employee Stock Ownership Plan) rather than be put up for sale. That model has worked well, with other breweries -- most notably New Belgium -- following in Full Sail’s footsteps. Then in 2012, Full Sail lost its Henry Weinhard’s beer contract, which it had held for 10 years with SABMiller. That investment allowed Full Sail to reinvest in its brewery, keep debt low and sustain growth. Full Sail was making so much Weinhard’s beer that the Weinhard’s brand alone was ranked as the seventh largest in Oregon. At that time I worried for the future of Full Sail, but the company re-upped its No. 1 in-house brand, Session.
The Session beer brand by Full Sail may have been the smartest and most successful product launch of any Oregon brewery since the start of the craft beer revolution. Short, stubby, highly-recognizable bottles of cheap (but still craft) tasty, light lager were a huge seller. And the brand has sustained with spin-offs Session Black, Session Fest and recently Session IPA. When growth started to go flat, Full Sail launched the beer into new markets and took Session beer to bar taps for the first time in a move the company said would never happen.
The pessimist might suspect the recent huge expansion of the Session brand was in anticipation of putting the brewery up for sale, driving up production numbers and the value of the company. Though Full Sail Chairman Irene Firmat says that the brewery was approached unsolicited last September, that doesn’t mean the brewery was not preparing for a buyer. Anheuser-Busch paid an estimated $400 per barrel times the annual 60,000 barrel production of Blue Point Brewing when it purchased that company in February of 2014. Given those figures, Full Sail’s estimated value would be $46 million.
As I mentioned before, a pessimist might also suspect that the Full Sail employee vote on approval of the sale was a formality and the sale was a foregone conclusion. Leaving the decision to the employees who own an estimated 58 percent of the company makes for a terrific PR move. Though that is a solid majority, founders Jamie Emmerson and Irene Firmat own 42 percent and would only need a small percentage of employees to agree to the sale. But according to Firmat, “The employee vote was not a sure deal. Jamie and I don’t have a majority position, so even though we felt that this was a very good offer for all our shareholders, it was not a sure thing until the votes were counted. We did an early reveal because once notices went out to 78 employees, we thought confidentiality would be difficult to maintain and it would be better to have the facts out to minimize speculation.”
Still, it would seem the deal was done since Firmat and Emmerson could reverse any “no” decision by the employees as they are the two sole trustees of the ESOP. Not that the deal is a bad thing for the employees who, based on their time at the company, will likely earn four to five figures in the buyout as well as keep their jobs. The other good news is that Full Sail would still be counted among the “craft” brewers as defined by the Brewers Association by selling to an equity firm rather than a macro brewer like Anheuser-Busch.
The bad news is that brewery sales to private equity firms might have a worse track record than those sold to SABMiller and Anheuser-Busch. While the previously mentioned companies’ business is at least making and selling beer, both are only concerned with making money. However, an equity firm will quickly sell off companies to make a buck and has no interest in continuing the products. That seems to be the case here. The formation of a new company called Oregon Craft Brewers Co. distracts from the fact that the real owners are Encore Consumer Capital, a group that holds no other breweries or beverage companies. Oregon Craft Brewers Co. is a brand new formation that also has no history in the industry. While Full Sail posits that its buyer’s lack of experience guarantees the current employees jobs (which may be true), it also underscores a potential turn toward primarily profit-driven endeavors. That could mean cutting costs and raising profit margins on products and perhaps launching into more states or countries.
After raising the value further, Full Sail could be sold off again, following the path of Portland Brewing/MacTarnahan’s, which has been bought and sold a few times and is now owned by a Costa Rican conglomerate. Encore Consumer Capital has an established track record of buying and selling companies a few years later. It has been alternately reported that Emmerson and Firmat would either plan their immediate exit or stay with the company. Firmat clarified this: “We have committed to stay a year to insure that this transition goes smoothly. After that we will see.” After seeing Full Sail through the transition, I think we can expect little substantial change immediately, but I worry what will happen in a few years after they continue to develop the Session brand. Will we see a day in the future where a craft brewery on the East Coast is contract brewing Full Sail beer as it becomes a version of the formerly-prestigious Henry Weinhard’s?
Firmat admits, “It is what they do, but they have a track record of holding on to companies for a longer period of time and, in the meantime, they invest to grow it. Our distributor alignments make a purchase by a big brewer very difficult and more expensive and they are very aware of that.”
Let’s hope she is right. At the very least, Firmat and Emmerson have followed through with their commitment to employee owners, giving them a nice bonus to their 401Ks while making a happy exit for themselves. That is much better than what Anheuser-Busch is offering to the casualties of its acquisitions.
This article originally appeared in The New School.
By Gail Oberst
Oregon has nearly 140 craft breweries. But Nov. 5, when officials from one of those breweries announced they are selling to international brewing giant Anheuser-Busch/InBev, Bend-based 10 Barrel Brewing Company set social and traditional media on fire. The sale will be final by the end of the year.
The announcement by owners and founders Chris and Jeremy Cox (twin brothers) and Garrett Wales was followed by “expert” opinions locally and nationally. Wall Street experts sought to advise investors on what A-B/InBev was up to. National statistic geeks tried to ferret out trends reflected in the sale. Fellow business owners suggested 10 Barrel’s owners were just being smart. Others felt betrayed.
The owners indicated 10 Barrel’s success since they began in 2006 exceeded their own expectations – and management abilities. In a video announcing the sale of 10 Barrel, Wales and the Cox brothers admit they are good at making and drinking beer. But they said they are not good at a lot of things that a growing brewery needs, some of which includes administrative functions from packaging and distribution to employee benefits and making quality videos.
Despite recent administrative struggles, 10 Barrel’s brewers continued to produce award-winning beers. Most recently, the brewery won three medals at the renowned Great American Beer Festival for its Cucumber Crush (gold) and bronze medals for both Amber Waves and P2P.
A-B/InBev officials have deferred to 10 Barrel’s former owners, who responded to questions about the impact of the purchase on brewery jobs in Oregon, on plans to expand to Portland, and on the quality of 10 Barrel beers that inspires passionate reaction from fans.
10 BARREL’S FUTURE
Portlanders have been anxiously watching construction of 10 Barrel Brewing’s new Portland brewery and pub in the Pearl District, but does the sale of the brewery put this on hold? Absolutely not, said Wales: “We're on track for a mid-winter opening for the Portland pub,” he said. The 6,229-square-foot space at 1411 N.W. Flanders St. will have seating for 150 people and will reportedly employ more than 80 people. Nov. 7, the brewery announced it was hiring Whitney Burnside to be the Portland location’s brewer. Burnside has been Pelican’s specialty brewer.
Jeremy Cox also said that there won’t be any personnel changes at the Bend or Boise facilities in the near future. “The team is staying the same,” he said.
Might there be an increase in production at any of the 10 Barrel facilities in the future? Jeremy Cox said that keeping up with current expansion plans is about all they can handle. "It's business as usual for us right now. We've been growing fast over the last few years and we're staying focused on continuing our growth while keeping our distribution focus here in the Pacific Northwest,” he said.
Meanwhile, the affiliation with the larger company will have its advantages for the brewers. "You tell Jimmy, Shawn and Tonya that they have access to unlimited hops and the best of the best malt and see their faces light up. We're really excited about the opportunities this partnership will provide for all our team,” said Garrett Wales.
Cox had a few words for those who fear that 10 Barrel will lose its Northwest quality and flavor. "We're still brewing our beer here in Bend, our families are here in Bend, our employees all live and work here in the community and we're not going anywhere. We definitely still consider ourselves a local Bend brewery,” he said.
A-B/InBev is a Belgian-Brazilian multinational brewing company headquartered in those two countries. Although it is most often affiliated with Budweiser products in the U.S., A-B/InBev’s international owners claim a brewing history back to 1366 through its Belgian merger with Artois, as in Stella Artois. A series of mergers created InBev, the world’s largest beer company in 2004. In 2008, InBev bought Anheuser-Busch, further expanding its holdings. Today, nearly half of all beer products sold in the U.S. are owned by A-B/InBev. Bud, Corona, Michelob and Beck’s are all part of the A-B/InBev family.
Despite the craft beer craze (which it has apparently joined), the company is doing well. According to New York Stock Exchange reports, as of mid-November, its stock was listed at $87 per share, up from $35 per share four years ago. For the quarter that ended in October this year, the company earned $12.24 billion – times that by four for an approximate annual income, and you’re talking real money.
Even with climbing profits, the company is not selling more beer, according to A-B/InBev’s October report to its shareholders. Volume had dropped last year throughout the company’s holdings by nearly 3 percent, and this quarter, volume sales were nearly flat worldwide. The biggest volume drops among company labels recently were in North America and Europe, where small craft brewery beer sales are climbing. But is a drop in volume a problem for the company that sells nearly a third of the world’s beer? Stock prices in November took a tiny dip, but in the long run, probably not.
Owners are reassuring, but fears abide that small breweries bought up by large corporations often disappear. Macro Trend Investor writer Charles Sizemore, a self-described proponent of these kinds of buyouts, suggested 10 Barrel’s brand could go the way of George Killian’s Irish Red and Shiner Bock, both bought out by large beer companies before they disappeared.
“Could BUD and the rest of Big Beer take a page out of Warren Buffett’s playbook, buy a craft beer brewery outright but leave its management in place and maintain a low profile? Maybe. But it’s hard to see regional microbrews having much of an impact on the bottom lines of companies with tens of billions in annual sales,” said Sizemore.
Paul Gatza, director of the Brewers Association, sees the purchase as a sign of the times. “With middle-of-the-country Goose Island, Long Island’s Blue Point and now Bend and Boise’s 10 Barrel part of the portfolio, it looks like A-B is developing its own version of a regional-brand footprint strategy,” he said in a blog post. “I am thinking about why these deals don’t happen more often,” he said.
Eric Sterling, Andy Steinman and Lisa Marcus are the owners of DigitalPour, a digital beer board now installed in dozens of Oregon breweries, bars and this one, at Growlers Hawthorne in Portland.
Photo by Emma Browne
By Gail Oberst
You might mourn the old chalkboard that lists what’s on tap at your favorite bar, but not for long. Some taphouses and brewpubs are replacing the dusty bar feature with digital beer boards -- banks of flat screens that can enlighten you on everything from the color of the beer to the latest tweet about it.
DigitalPour – an Oregon company whose owners developed the software in 2011 – is not the only company providing these services. Although the San Diego-based TapHunter and other companies have some boards in Oregon, homegrown DigitalPour is elbowing its way onto the walls of your Oregon watering hole. Since the company opened, it has placed DigitalPour software in 120 locations – most in Oregon, but many across the U.S. and internationally.
Easy Beer Education
You don’t have to be a beer geek to appreciate the information DigitalPour’s software provides. Let’s say you are in the mood for a porter you haven’t tried before. On the screen, you would look for a dark brown glass or growler icon, read the info next to see if it’s a porter, and then ask for a taste to see if you like it. Viola! Pour power. Some drinkers don’t need much more than that little bit of help. Some digital feeds – especially those at brewery-based pubs – actually look like a chalkboard, listing just the beer, the international bittering units (IBUs) and the alcohol by volume (ABV) for visitors.
Want more? Of course you do. In addition to the basics listed above, your taphouse feed might include the name of the beer and brewery, the cost per unit, whether it’s on nitro or CO2, where it was brewed, and when the keg was tapped. If you need further info, you might watch the Twitter, Foursquare and Untappd feeds roll across the board as people check into the brew you are thinking of buying. Don’t want to stand around your local beer purveyor before you make your decision? Some of bars and growler filling station subscribers put their DigitalPour feeds right on their websites, including access to a mobile application.
Better Business Beer
Jim Hillman, owner of the relatively new 40-tap Growlers Hawthorne in Portland, said this sort of system was a logical choice for him. “First of all, we’re two Portland start-ups,” Hillman said. Second: “It’s easy to use.” Hillman can easily update his own tap information, which appears on the board, but his employees are also trained to do it as well. The software not only tells customers what’s on tap, but also inventories the back room – from beer levels in the kegs to suggesting price per pint or growler depending on mark-up rates. “I’m awestruck,” Hillman said. Analytics included in the software can track beer performance with up-to-the-minute profit reports on individual beers, breweries, styles and other trends.
Software subscriptions start at $99 per month with a $298 basic set-up fee. The downloadable software does not include the monitors, which are simply flat screen televisions hard-wired to a computer – all standard equipment that business owners can purchase on their own. Depending on the owner’s desires, equipment might cost around $1,800 for a bank of three monitors.
About the Owners
Lisa Marcus, CEO, Andy Steinman, COO, and Eric Sterling, CTO, at first glance, are unlikely partners. But as with all entrepreneurs, serendipity had a lot to do with their partnership. Lisa and Eric, for example, met on a dating website. “We quickly realized we were better at doing business together,” Lisa laughed. They both put some energy into WineSlingr software, a wine-based version of DigitalPour, but it was Eric’s favorite pub, Bailey’s, in Portland, that turned their attention to beer. Eric, a software developer who inherited the innovation bug from his dad, Jeff, was having a beer at Bailey’s, staring up at the pub’s hand-scribbled listings on the mirror, when the thought struck him. He could put the beer list on a television screen.
“I’d intended to put a one-off up for Bailey’s and that would be that,” Eric said. Instead, he took the idea to Lisa, who ran with it.
Andy Steinman, the company’s Chief Operations Officer, came into the business through Lisa’s wine and restaurant connections at Little Bird, a sister restaurant to LePigeon, and Walter Scott Wines. Steinman brings financial and business management experience to the mix. “This will always be a dynamic business,” Steinman said. Customers will decide the future of the business.
“I think it’s gonna get really weird,” said Lisa. New technology will be incorporated into the software. The bartender may be able to use his phone as a remote control, or expanding on menu items to answer customer questions.
Above, Ninkasi launched its yeast aboard an amateur rocket hoping to activate it in space. Due to faulty tracking devices, it was not retrieved from the Black Rock Desert in time to find the yeast viable. Mission One was a learning experience. Ninkasi is now planning Mission Two.
Photo courtesy of Ninkasi Brewing Co.
By Anthony St. Clair
On July 14, Eugene-based Ninkasi Brewing launched the Ninkasi Space Program (NSP). An amateur rocket packed with 16 strains of brewer’s yeast was launched high into the atmosphere. Ninkasi was hoping to later retrieve the yeast and brew a batch of “space beer.”
Twenty-seven days after launch, the payload was retrieved from Nevada’s Black Rock Desert. Due to a lengthy search time, the result of the failure of tracking devices, the yeast was not viable for brewing.
“This was an opportunity that came about through a combination of relationships and timing,” says Ninkasi co-founder Nikos Ridge. “The mix of science, engineering, rockets, yeast, and space has been a really cool experience. Watching a rocket launch into space is actually cooler than you expect. We thought it would be fun, it turned out to be amazing. There is something pretty deep about reaching out beyond the earth. This was only the second amateur rocket ever launched into space, and set a host of new records for amateur space flight, such as speed, height, and first amateur picture taken in space.”
While the first launch did not result in viable yeast, Ninkasi already has plans for a second attempt. “We will have the opportunity to launch again in late October,” says Ridge. “After learning from some of the experiences from the first launch, we hope to get back viable yeast.”
Updates about the Ninkasi Space Program can be found at nsp.ninkasibrewing.com or on Ninkasi’s Facebook page.
Northwest Canning’s Justin Brandt displays his faster new Cime Careddu canning line.
Photo by Alethea Smartt LaRowe
By Alethea Smartt LaRowe
Opportunities for small breweries to distribute their beer have grown significantly over the past few years with the introduction of companies that specialize in mobile canning and bottling. Wild Goose Canning in Boulder, Colo. was the first U.S. firm to manufacture a canning line that was specifically designed to be hauled around to different breweries. In the Pacific Northwest, the first company to invest in one of their lines was Northwest Canning, started by Justin Brandt and a business partner in late 2011. A few months later, in June 2012, Owen Lingley debuted Craft Canning. Both are based in Portland.
An avid outdoorsman, Brandt had noticed the limited availability of canned craft beers while purchasing supplies for a day on the river. He quickly did some market research and put together a business plan, opening Northwest Canning less than a year later. With work experience as a financial advisor and with a degree in biology, Brandt said he “can really help the breweries we work with from a financial standpoint, but I also understand beer on a molecular level.” Now the sole owner of the company, Brandt has four other full time employees and hires part-time labor as needed while traveling into parts of Idaho and all over Oregon and Washington.
Owen Lingley’s work experience at Wyeast Laboratories, where he provided retail support by educating customers all about yeast, required extensive travel. As he visited brewers around the country, he saw the shift to cans coming. Anticipating the need of established breweries to increase volume, he saw an opportunity to use his knowledge of packaging and product handling to serve them in the fast-growing market of mobile canning and bottling. Operating within a three-hour radius of Portland, Craft Canning now has nine employees.
Northwest Canning started out with a small two-head filler, the Wild Goose MC-50, which could can about 20 cases per hour. As business increased, Brandt later purchased a three-head filler with a capacity of 40 cases per hour. Even that proved to be insufficient for his ever-growing list of clients and he recently invested almost $1 million in a fully-automated rotary system made by Cime Careddu of Italy that is capable of canning 160 cases per hour. The high-end line is installed in a custom-built 40-foot trailer, which also houses an on-board generator that supplies all of the power, a depalletizer, a filling unit, an inspection unit, and a packaging unit made by PakTech in Eugene.
Craft Canning currently operates a Wild Goose MC-250 canning line which Lingley hauls around in a 16-foot box truck. The system has to be offloaded and assembled then taken apart and reloaded after every job. Lingley estimates the line has produced three million cans of beer and is now averaging 1200-1500 barrels per month. The line is usually in operation for nine days in a row, then Lingley schedules one “spa day” for equipment maintenance. He also has a Meheen 6-head bottler capable of bottling eight barrels per hour.
One of the key benefits of working with mobile canning and bottling operations is cost. “For a brewery to purchase a modest canning system, you’re looking at around a $200,000 investment,” said Brandt. And that’s before paying the employees and allocating enough space to house the line and store the empty cans and bottles.
Both companies are working hard to keep up with demand. According to Brandt, “Northwest Canning has almost tripled our sales since opening. We’re doing 20,000-25,000 cases a month, so we’re busy. We’re just focused on hiring and training people right now.” Lingley said that Craft Canning has experienced 140% growth this year and is projecting 100% growth next year. “We just purchased a second bottling line and have our second canning line on order, and we’re already looking at a third of each.” Lingley also has plans to start a yeast lab, can their homebrew yeast, and do more QA testing for clients.
Owner: Justin Brandt
Craft Canning + Bottling
[a] 17252 NE Sacramento St., Portland
Owner: Owen Lingley
Stories from the print edition of the Oregon Beer Growler.