Updated 1 p.m.
In one of the most momentous business deals ever in American craft brewing, Dogfish Head and Boston Beer on Thursday announced a merger valued at $300 million.
The move brings together two of the country’s largest craft beer producers (No. 13 and No. 2, respectively) in an era of widespread corporate consolidation for the industry, and also comes on the heels of new legislation expanding the definition of craft breweries in Dogfish Head’s home state.
Boston beer’s large size — last year the Sam Adams maker shipped 4.3 million barrels of beer, compared to Dogfish’s 300,000 or so — hints at why Delaware House Speaker Peter Schwartzkopf sponsored a bill to increase the production volume threshold for in-state craft brewers from 2 million to 6 million barrels. It also allows Delaware “microbreweries” to be affiliated with out-of-state brewers while retaining their current license privileges.
The new legislation was approved by the Delaware Senate at 3 p.m. on May 9, just hours before the Boston Beer merger was made public.
The deal also brings together two of the industry’s best-known craft brewing celebrities, both of whom have strong ties to the Philadelphia region.
“Personalities drive the beer industry,” said Tom Kehoe, who founded Yards right around the same time as Calagione launched Dogfish, “and these are two of the biggest coming together. It’s amazing.”
Sam Calagione, the irrepressible Dogfish Head founder who with his wife Mariah pioneered the use of unusual ingredients in their company’s “off-centered” beer and helped introduce IPAs to American drinkers, has credited the Philly beer scene with kickstarting his success.
“I don’t think we would be in business today if Philly hadn’t bought so much of our beer,” Calagione said in 2016.
Jim Koch, the naturally-gifted marketer who founded Boston Beer in 1984 and subsequently turned Samuel Adams brand into a household name, also has connection to Pennsylvania brewing. Though his company is headquartered in Massachusetts, a large percentage of its beer is produced near Allentown — so much that it’s one of the commonwealth’s most prolific brewers. (Only Yuengling makes more.)
The deal’s been in the works for months. According to Brewbound, Koch and Calagione thought it up over pints at a beer festival in February while chatting about how challenging their industry has gotten.
More than 7,000 brewing operations now exist across the nation. As beer drinkers are flooded with choices, going has been rough for mid-sized breweries. They don’t have the hip cachet of hyperlocal brewpubs or nanobreweries, but also lack the marketing muscle of the global giants behind Bud, Miller, Coors and their affiliated brands.
Other regional breweries have responded to the pressure by selling to investors — like Downingtown-based Victory, for example — or by pivoting to contract brewing, like Easton’s Weyerbacher, which is currently undergoing a bankruptcy restructuring.
Industry insiders think the deal makes a lot of sense.
“Dogfish was kind of like the last bright, shinny penny in the fountain for some multinational to scoop up,” said Gene Muller, founder of New Jersey’s Flying Fish Brewing. “It’s better to hear than some big brewery from another part of the world buying them and imposing their will on the local beer scene.”
The two company’s product lines are extremely complementary, without much overlap.
Dogfish Head’s roster of brands focuses on hoppy IPAs — its 60 Minute, 90 Minute and 120 Minute are considered defining for the style — and sessionable sours, like the ultra popular SeaQuench Ale.
That’s very different from the Sam Adams stable of solid, hearty lagers, and from the rest of Boston Beer’s portfolio, a good portion of which is now made of what the company calls “beyond-beer” products like Angry Orchard hard cider, Truly Hard Seltzer and Twisted Tea.
Financially, the deal is more of an acquisition than a “merger,” the term used in the official announcement.
When it closes at some point in the second quarter, the Calagiones will receive approximately 406,000 shares of Boston Beer stock, according to a joint statement, a portion of which they plan to use to start a charitable foundation. Dogfish Head shareholders will also receive $173 million in cash.
So basically, Boston Beer bought Dogfish. But there’s another way to look at the situation, said Yards founder Kehoe.
“If you think about it, Sam Calagione is going to be the second biggest shareholder next to Jim Koch,” Kehoe said. “It’s almost like Jim has taken Sam Calagione and made him his successor.”