GRAND RAPIDS — Founders Brewing Co. has partnered with its Spanish investors to acquire a majority stake in a Colorado-based craft brewery.
The deal for Boulder, Colo.-based Avery Brewing Co. marks the first acquisition for Michigan’s largest brewery. Founders partnered in the deal with family-owned Spanish brewer Mahou-San Miguel Group, which owns 30-percent stake in the Grand Rapids-based brewery.
The deal is “a perfect fit,” according to Mike Stevens, co-founder and CEO of Founders, and gives Mahou and Founders a controlling interest in Avery. Previously, Mahou invested in a 30-percent stake in Avery in 2017.
“Avery Brewing is a very highly respected brewery out west,” Stevens told MiBiz. “They’re one of the original craft brewers out there.”
Late last year, Founders announced that it would contract with Avery to produce the All Day IPA brand for distribution on the West Coast. Strategically, Stevens said the new deal could allow Founders to expand its own West Coast production even further, consolidate back of house functions with Avery, and “hone in” on best practices, sales, and marketing of non-competing brands — such as Avery’s White Rascal, a Belgian-style wheat beer.
“We’re going to go very slow, to be quite honest,” he said. “Our plan really is to get involved with each other and see where there are opportunities and prioritize those opportunities and tackle them one at a time.”
Avery, which was established in 1993, produces about 60,000 barrels per year and boasts a humble homebrewer origin story — allowing Founders the chance to somewhat to return to its roots. Nevertheless, Avery is coming off of its first decline in sales in 22 years, according to Stevens.
“Adam (Avery) is the first one to admit he got into this out of a love of home brewing, and not so much the business end of it,” Stevens said. “He’s smart in recognizing that, but unfortunately what had happened is they were just so focused on making quality beer, that the focus on selling the beer wasn’t 100 percent where it should be.”
Stevens added that the two breweries will “no doubt learn a lot from each other,” making both entities more efficient.
“We see a large opportunity because now we can help get in there and really develop a sales and marketing plan and build the infrastructure that the team needed to properly sell the product,” he said. “We have a pretty sophisticated system that can help us identify every address in America that doesn’t carry Founders that should. Now we can take those systems and hand those off to Avery.”
The deal also “strengthens the development of Mahou’s business in the United States” and “represents another step that will bring us closer to achieve the leadership of family brewers in the craft and Premium sector at national and international level,” Alberto Rodríguez-Toquero, general manager of Mahou San Miguel, said in a statement.
Founders’ exact ownership stake in Avery remains unknown, as Stevens declined to disclose the terms of the deal, citing a confidentiality agreement. However, he did confirm that the investment was used to pay the $30 million debt Avery incurred in building a 96,000-square-foot facility capable of producing as much as 150,000 barrels annually.
“A debt load like that can be obviously problematic cash-flow wise,” he said. “One immediate business efficiency gained is wiping out that debt and allowing that cash flow to free up so that we can then invest that back into the business in areas that need it — and that’s the plan.”
Founders is the 14th largest beer company in the U.S., according to an annual ranking by the Boulder, Colo.-based Brewers Association. Stevens said the company has seen the craft beer industry change significantly in the past decade, including a “frantic” pace of acquisitions.
“It all went through a purchasing time frame there and there was a lot of movement, a lot of things going on,” he said. “Things are settling down to a more consistent rhythm now, so opportunities out there are legitimate and real. It’s a good time to start to look at the U.S. marketplace and evaluate opportunities to continue to grow your business, and that’s what Founders is doing.”
Stevens said Founders’ ongoing acquisition strategy is based on the company’s more than 20-year knowledge of brands and generating operational efficiencies. Moreover, the company could look to acquire breweries that are producing beer “for the right reasons.”
“There’s room for people like us to participate at a much larger level and do great things with it because we come from this place,” he said. “I look to what the future of American beer could look like 10, 20, 30 years down the road and I ask our team, ‘Why can’t we become America’s next greatest brewery?’”
Overall, U.S. beer volume sales were down 1 percent in 2017, according to the Brewers Association, whereas sales of craft beer continued to grow at a rate of 5 percent by volume, reaching nearly 13 percent of the U.S. beer market. Craft production grew the most for microbreweries.
“The brands you know of today, I believe what they produce could look a whole lot different 20 years from now,” Stevens said. “And I think we have the opportunity to participate in that movement as well.”
According to Stevens, Founders is on the prowl for more partnership opportunities with “brewers that are dedicated to focus on legacy and quality” and “creating multi-generational breweries.” The company’s future deals will also be in combination financially with the 125-year-old Mahou, he said.
“It’s Mahou’s desire and Founder’s desire to create an entity that’s financially owned by both and to look at more opportunities in the U.S. marketplace,” Stevens said.
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Editor’s Note: This story has been updated to correct a typo.
