Oregon’s Ninkasi Brewing has sold a majority stake to Legacy Breweries Inc., an upstart venture led by former Yakima Chief CEO Don Bryant, that aims to acquire U.S. craft breweries.
Specific financial terms of the deal, which will close at the end of April, were not disclosed.
Similar to Canarchy – which owns Oskar Blues, Cigar City Brewing, Deep Ellum, Utah Brewers Cooperative, Perrin Brewing and Three Weavers – or Artisanal Brewing Ventures – which owns Victory Brewing, Southern Tier and Sixpoint Brewery – Legacy Breweries Inc. hopes to establish “collaborative partnerships” with craft breweries, according Ninkasi co-founder Nikos Ridge.
Speaking to Brewbound, Ridge said he, along and co-founder Jamie Floyd and the company’s six investors, would “retain significant ownership” in the brewery.
“Ninkasi sold a majority stake to Legacy Breweries in order to create a new platform that can leverage our resources in conjunction with those of the Legacy team,” he said.
The long-term goal, according to Ridge, is to identify independent craft brewery owners who are interested in selling all or parts of their businesses.
“I think the ideal partner for us would be someone who is stronger in areas where we are not as developed,” he said.
For his part, Bryant said Legacy Breweries’ plan is to purchase two more “Ninkasi-sized” breweries in the Midwest and east regions of the U.S. Ninkasi, which the Brewers Association (BA) ranked as the 35th largest craft brewery in 2018, shipped more than 90,000 barrels last year.
As those “brewing hubs” are established, the company would also look to acquire 10 to 15 smaller breweries in those geographies. Those companies would be able to access expanded production and packaging capabilities and have better access to raw materials such as hops, malt, and cans.
The Legacy Breweries venture has access to two sources of capital, including funds from a family office called Blue Ocean. A second partner that came in on the deal with Ninkasi is EPR Properties, a specialty real estate investment trust (REIT) that has $6.8 billion worth of real estate investments, including 158 Megaplex theaters and 32 Topgolf complexes. EPR also plans to participate in future deals, Bryant said.
Bryant added that Legacy has access to nine figures worth of investment, and noted that Blue Ocean, which has committed to helping fund future acquisitions, did not participate in the deal with Ninkasi.
According to EPR director Spenser Becker, the company’s strategy is to purchase real estate from its partners, lease the land back and allow them to continue operating.
“It helps them cash out of the real estate they already have,” he said.
Ninkasi owns some of the land its brewing facilities and buildings are located on, but leases its office spaces, Ridge told Brewbound.
While specific details of the partnership among the three companies are limited, Ridge said he would continue to serve as CEO of the brewery and remain focused on Ninkasi’s day-to-day operations.
“As the platform evolves, we will support and assist them as needed,” he said.
The idea of a craft brewery rollup isn’t new, even though the subtle nuances of Legacy’s approach might differ from the ones that came before it.
Nevertheless, the model has been met with limited success in recent years.
In 2016, Storied Craft Breweries acquired a stake in Texas’ Deep Ellum Brewing, selling it two years later to the Fireman Capital-backed Canarchy Craft Brewery Collective. Since exiting that investment, the company has not announced any new craft beer partnerships.
Also in 2016, Stone Brewing founder Greg Koch announced the launch of “True Craft,” a $100 million fund for investing in food, beverage and craft brewing companies. Koch recently revealed on the Good Beer Hunting podcast that his plan to take minority stakes in those companies never materialized.
And in 2015, private equity firm Friedman, Fleisher & Lowe (FFL) acquired Abita Brewing and established Enjoy Beer LLC, a consortium that had plans of purchasing five craft breweries and going public. The platform has yet to announce any other acquisitions, and its website redirects to the Abita homepage.
The only newly formed control groups that have been able to make headway within the craft segment are the aforementioned Canarchy Craft Brewing Collective and Artisanal Brewing Ventures. Those companies, which have private equity and family office funding, ranked No. 8 and No. 11, respectively, on the BA’s list of top 50 U.S. craft brewing companies in 2018.
So what gives Bryant the confidence in a craft brewery rollup model in 2019?
“Valuations have come down to where most CPG industries are,” he said, adding that the goal is not to buy companies and “go national.”
“Our thought is to be really good in three geographies,” he added.
They’ll have their work cut out for them in the Pacific Northwest, where Ninkasi competes with other large, local craft beer companies, including the publicly traded rollup Craft Brew Alliance, as well as Deschutes Brewery, MillerCoors-owned Hop Valley and Anheuser-Busch InBev-owned 10 Barrel Brewing, among many others.
According to Ridge, Ninkasi depletions declined four percent last year. The company shipped 90,456 barrels, about 1,000 barrels shy of its 2017 output.
It is currently in the process of upgrading its canning line capabilities to be able to fill 100,000 barrels per year, and it has installed a new 5-barrel brewhouse for innovation initiatives, he added.
According to data from the Oregon Liquor Control Commission, Ninkasi shipped more than 50,000 barrels of beer in the state last year.
“We are very strong in our core region, but it gets more difficult away from home,” he said.
Nevertheless, both Ridge and Bryant are bullish on their future acquisition prospects.
“This is a different model,” Bryant said. “We are committed for the long term.”
Arlington Capital Advisors, which has worked on numerous craft brewery transactions, served as the exclusive advisor to Ninkasi on the deal.