To Sell or To Buy: The Brewer’s Consolidation Conundrum

When planning for succession, brewers face the conundrum of deciding whether to sell their business or buy out smaller competitors to maintain a competitive edge. The decision hinges on a careful analysis of key factors, the potential for cost-saving synergies, and the long-term sustainability and profitability of the business. The investment banking and advisory experts at SC&H dig into the decisions that matter when navigating oversaturated markets.

Selling Doesn’t Make You a Sellout

Prolific growth in the American craft brewing industry has created a saturated market that makes it difficult to stay competitive, especially when planning for succession. Selling your craft brewery to a larger company offers a way to protect your legacy.

“There is a perception amongst some brewers that selling makes you a sellout,” said Matt LoCascio, principal of investment banking at SC&H. “But selling to the right partner — a like-minded operator that values your brand, customers, and employees — is a healthy succession plan that can ensure long-term profitability.”

In a volatile market, joining forces with a larger business can provide stability and mitigate risk. And selling doesn’t mean your role in the business is diminished. Founders often remain in key roles — typically returning to the tasks they enjoyed when they started the business — while benefiting from the scale, efficiency, and market expansion a larger buyer offers.

The question is: Are you ready to sell? Is your brewery big enough to attract interest from potential buyers, or do you need to acquire smaller breweries to reach a capacity and revenue that will catch their eye?

Key Factors to Consider

Making the decision to sell and attracting potential buyers is influenced by a few key value drivers:

• Size: High production capacity, large market shares, and powerful brand recognition attract interest from buyers that want to expand operations and stay at the forefront of the industry.
• Revenue mix: A wide range of products and beer styles is more appealing to buyers looking to diversify their offerings or cater to a broader customer base.
• Geographic distribution: Buyers are typically more interested in breweries that enable them to enter new markets and extend distribution reach. For example, a brewery that distributes 10,000 barrels of beer across multiple states is significantly more appealing than a brewery that distributes the same amount but only locally.
• Demonstrated growth: Your business needs to demonstrate both historical year-over-year growth, as well as an upward growth trajectory for the future.

As a small business owner, assessing these factors can be a challenge. An experienced investment banking team can evaluate your unique situation and help ensure the best possible outcome for your succession plan.

DuClaw Brewing: Asset Sale Success Story

Lacking a developed succession plan, Maryland-based DuClaw Brewing engaged SC&H’s team to find a buyer that would allow the owner to step back from business operations to spend more time with his family.

“The key here was finding the right partner to continue DuClaw’s legacy as an innovative and beloved brand,” LoCascio said.

The resulting sale to New Jersey’s River Horse Brewing Company allowed production to be relocated and streamlined while maintaining the DuClaw brand. Owner Dave Benfield will remain actively involved and can focus on his passion for strategy and sales over daily operations.

“The operations side of brewing is challenging, and I was taken away from driving the brand the way I wanted,” Benfield said. “This partnership will allow me to focus on what I do best.”

Professional Guidance for Long-Term Success

From certified business valuations to effective negotiations, an investment banking and advisory team can be instrumental in navigating the sale of your craft brewery. An experienced team can provide the guidance and expertise you need to determine the best next steps—and most importantly, help you find the right buyer that will value your brewery’s strengths and unique identity.

Matt LoCascio is a Principal with SC&H Capital specializing in M&A advisory to private company business owners. He can be reached at mlocascio@schgroup.com.