In the late afternoon hours on Thursday, May 9, an announcement spread like wildfire across media outlets and social platforms alike.
Two of the craft beer world’s most notable icons, Jim Koch and Sam Calagione, announced that their respective companies, The Boston Beer Company, maker of Sam Adams, and Dogfish Head Brewery, had signed a definitive merger agreement that would bring the two companies together under one American-owned platform.
Insert gasp here.
That’s right. Two of the world’s most notable craft beer brands, Samuel Adams and Dogfish Head, are now one and the same.
To this writer, the scope of this deal is second only to the Disney-Star Wars alliance—and yes, I use that word intentionally.
But it’s a big deal to many, and for a variety of reasons, both good and bad.
Though the company will maintain its status as an independent craft brewery, as defined by the Brewers Association, it definitely has some raising an eyebrow as to what exactly this will all come to mean, not only for these brands and breweries, but for the craft brewing industry as a whole.
Will quality change? What about the offering of tried-and-true favorites? How will this hit personnel and staffing? Will it alter availability and pricing? And what effect will this have on other independent brewers and the American craft-beer market?
Some are clamoring that it’s the beginning of the end, but we propose that it’s just the end of the beginning.
While there are more American craft breweries than ever before, there is also more confusion as to what truly qualifies as a craft beer.
Other corporate mergers and acquisitions as well as questionable promotional tactics have left consumers lost in a sea of suds, searching for some form of transparency and realness in their beer, which is often only found in their local small-batch brewery.
Gains in the craft segment have slowed significantly, and it’s time for the industry to evolve into its next phase of existence to truly make a stand against the larger corporations that control around 80% of the beer sales and distribution channels.
There’s so much more at stake than just the deal itself, which is valued at around $300 million.
To clear things up a little, we sat down with Calagione and Koch the morning after the big announcement to get the skinny on what this Voltron-esque formation of a super-craft company means to them and for the American beer drinker.
Over a few beers, naturally, here’s what they had to say.
So guys…. Um, what’s up? [laughter] Seriously, this is huge. Tell me how this all came to be?
Sam Calagione: Well really, I would say we’ve known each other for like 20-something years. We’ve served on the Brewers Association board together for a good chunk of that time, we, you know, Capitol Hilled it together, got to know each other as we worked on tax relief for indie craft brewers, and then I think about 10ish years ago, we collaborated on a beer, that was really getting to know each other even better. And then, recently, we were drinking beers at the Extreme Beer Fest in February and that’s kind of where this discussion amplified.
February of this year or last year?
Jim Koch: This year.
This year! So you turned this around that quickly?
Sam: We had some chats right at the end of last year, like, maybe we should explore something, but really sitting on the floor and drinking each other’s beers and looking at how complementary they were and that neither of them were in the exact same category…
Jim: That’s basically right. It happened very quickly, because it was easy. I mean, we’ve known each other for decades, we’ve worked together on lots of important things to us, we share the same passions for independent craft beer and that made everything easy.
So same goals, same directives. What changes?
Jim: Yeah, same cultures, same management styles. We’re both pretty crappy managers, but we have great teams and we try to be good leaders if we’re not good managers. And I’ve known many of Sam’s coworkers over the years, too. And they’re in the mold of Sam and Mariah [co-founder of Dogfish head].
Sam: We have people at Boston Beer that used to be at Dogfish that are super excited because they love both cultures. Like their brewer Bob up in Massachusetts used to be our brewer Bob, and now he is our collective brewer Bob!
He’s everyone’s brewer Bob!
Sam: He is, and I can’t wait to hug it out with him on Monday, because Jim and Dave [Burwick], the CEO [of Boston Beer Company], [and] one of those leaders Jim mentioned who really accelerated this deal and did the hard work of leading on the transnational side, so me, Dave and Jim are going down to host a fireside chat with our coworkers tonight in Delaware.
And then on Sunday, Mariah and I go up [to Massachusetts] and hang out with our coworkers in Boston on Monday. But you asked what changes…
Yeah, the business deal is what it is, but what I and I think many people really care about is what this means for them and how it affects them. So, what does this mean for them?
Jim: Well first, it means it’s going to be easier for them to find their favorite Dogfish Head beer, because we’ve got a bigger sales force so we can help Dogfish Head get into places that they aren’t now, but where there are Dogfish Head drinkers that just can’t get a Dogfish Head.
So we can do that for them. That’s a benefit. I think there’s going to be some brewing synergies, because we each have techniques we’ve innovated, brewing practices that we’ve elevated, and I know that they know stuff that we don’t know.
So better distribution and better availability. What about the beers that currently exist within each brand’s portfolio? Any messing with that?
Jim: Are you kidding?! That was one of the reasons that we were very attracted to joining forces with Dogfish Head is there wasn’t anything to mess with! We have nothing but respect and admiration for Dogfish Head beers, so, I would be an idiot to commit 300 million dollars and then mess with something that doesn’t need to be messed with.
Sam: We’ve talked about the complementary culture, the complementary portfolio and now where we can hit on all these different cylinders from ales to lagers to ciders to spirits to tonics.
But I’d say also complementary facilities. Like, there are beers that can never leave Delaware, which is awesome cause it means the jobs will never leave Delaware, like our continually hopped beers.
But a beer like Slightly Mighty that’s growing at eight times what we budgeted,…a beer that doesn’t need a continual hopping machine, so maybe someday, it could go into one of our other facilities and maybe someday we could take Boston Lager and do a version of a continually hopped lager in our [Delaware] facilities.
Those are the kind of things we’re just having early discussions about.
To pillars of the craft beer industry as involved as you two are, what do you think this merger means for the bigger picture of the craft or independent beer industry moving forward?
Jim: We’re hoping that it will strengthen and improve the future for indie craft beers. Sam and I have both been continuous and very loud advocates for just the specialness of an independent craft brewer at a time when, as Sam said, the big corporate brewers are trying to grab our mojo. We hope that this combination sets an example or a high standard for transparency, because we both committed that we are not going to hide the association with Boston Beer Company. We want consumers to know who makes their beer, both Sam and I are proud of both of our companies, so the Dogfish Head beer will have the Boston Beer Company name on there where you state who makes it. We would like to see transparency become the industry norm.
Sam: The only thing I’ll add to that is, we know that one of the first opportunities we have to address together is better aligning our distribution footprint. About half of our beers are already in the same network, but that means our thought is we want to be fully aligned everywhere it makes sense in America.
This is also going to be an interesting moment for our company to engage with the independent distributor network across this country because we all know beer generally is flat in America. And it’s awesome that there’s excitement on the tasting-room brewery front. We both have “tasting room breweries,” where we get to engage with our customers and grow our brand in a very intimate, human scale. But for both of our companies, 99% of our sales go through the three-tier system, and we want this to be a positive experience of working with the distributors across the country to allow our brands to align where it makes sense, because the three-tier system, frankly, is under siege to some degree for beer. Beer is not growing.
To a large degree, those international players who have the majority of the market share aren’t reinvesting in brand beer in America to a degree that it’s, you know, brewers first and business people second. We are all in on the vibrancy of the American craft beer community, and so we hope the distributors will say this is something we need to champion, because we need strong mid sized breweries in our portfolio that are American-based, not just foreign, international companies that make beers that they market as if they’re little American breweries.
That’s the most interesting strength, to me, of this play. Beer has become so hyperlocal, I believe largely as a result of the flooding of those types of companies and beers dominating the distribution channels and retail space. Just to give a little context, combined, what do you guys now represent within the greater beer industry?
Jim: About 2%.
Sam: All of us, collectively, the indie/craft breweries, have less than 14% of market. As ubiquitous as craft beer seems, we are still Davids up against a few, really fourish, big-ass Goliaths.
So, trying to bring authentic indie beer to the people in a real, sustainable way. I love it. Any sneak peek as to some exciting ideas for beers in the works?
Jim: We’re trying to figure out what’s going to be our first collaboration. We just started talking about it two hours ago…
I don’t believe that for a second.
Jim: No, it’s true!
Sam: It really is!
Jim: In the car, on the way here, over a beer. But you know we can’t tell you anything about that yet.
You guys have to keep a few more tricks up your sleeves, I suppose. Well, good luck with the brainstorming, and we’re all eager to see what you two come up with next. Cheers!