This Can't Be Good News...

[Rich Pawlak]

From realbeer.com:

A-B BUYS STAKE IN OLD DOMINION

An Annapolis brewer teamed up with Anheuser-Busch Inc. to buy Old Dominion

Brewing Co. of Ashburn, Va. Fordham Brewing Co. and minority partner

Anheuser-Busch formed the new joint venture, Coastal Brewing Co., to purchase

the brewpub operator and brewer that distributes in the mid-Atlantic region.

Fordham will have a 51% ownership. As part of the deal, Coastal Brewing Co.

will assume ownership, sales and marketing responsibilities for both the Old

Dominion and Fordham brands, including Dominion Ale, Dominion Lager, Oak

Barrel Stout, Fordham Copperhead, Fordham Lager, Oyster Stout and others.

Coastal Brewing Co. also assumes ownership of the Old Dominion brewery and

Old Dominion Brewpub.

Discuss.

[BrentKulman]

I attended a Bell's beer tasting in Washington last night where Bob Tupper (of Tupper's Hop Pocket fame) spoke about this issue.

He said that OD will continue to contract brew the Tuppers beers (and noted, that had the ownership situation not been resolved, they would have been forced to find a new brewer for the Pils). He also said that 95% of the staff has been retained and that they have re-hired one of the former head brewers who had left a few years ago.

I'm more optimistic about the situation than I had been previously.

[Rich Pawlak]

And now, so am I!

[budrichard]

I wouldn't be. The first area to assess for increased profits in an acqusition is overhead. It may not be right now but eventually the 'bean counter's' will win.-Dick

[BrentKulman]

I wouldn't be. The first area to assess for increased profits in an acqusition is overhead. It may not be right now but eventually the 'bean counter's' will win.-Dick

←

That's not necessarily true. There are many different reasons to make an acquisition - access new markets; develop complementary product lines; integrate vertically; leverage buying power with suppliers. In sum, there are revenue-driven acquisitions and expense-driven acquisitions.

In an instance where you are acquiring a competitor in an existing market, you would be correct as that would be an expense-driven acquisition where the acquirer would focus on overhead. That is not necessarily the case here, as the acquiring entity has re-hired 95% of the staff and replaced the brewers who were dismissed with brewers who previously worked at OD. Bringing back the old brewers is the best sign that there will be a commitment to the OD brand.

Now, having said that, I would expect some changes to occur over time as OD faced a lot of business problems that are fairly well known in the industry. They made a couple of great brews, in my opinion - the Millenium (and its oak-aged cousin) and the Oak Barrel Stout (which was usually far better on tap than in the bottle). I had mixed experiences with the rest of the OD beers and, from a business perspective, they seemed to lack focus. It was weird that their contract brews seemed to be marketed better than their own brands. Also, the location of their brewpub was not optimal, either.

Time will tell and, as I said before, I am more optimistic than I was initially. That doesn't mean I am excited about this development at all.

However, OD was a business that could have failed (although I know nothing about their finances, the fact that one of the owners tried for a long time to buy it without success tells me something about the state of their finances) and, hopefully, the new owners will make it successful without decimating the brand.

Edited March 10, 2007 by BrentKulman (log)

[budrichard]

"That's not necessarily true. "

Wait! -Dick

[stevea]

Out here on the west coast, A-B several years ago invested in Red Hook Brewery of Seattle, and also took a position for a while in Widmer Brewing of Portland (I think Widmer eventually bought back that position). From what I can tell (not being an insider in either company), A-B did not interfere with the hands-on operations of those companies. However, the Widmer and Red Hook brands had much better distribution, especially at events where A-B had the exclusive rights to sell beer. Not only did these events serve the traditional A-B crap (er, product), but also good micros from Red Hook and Widmer. Hoopefully, this will be the case here too.

[cwdonald]

Out here on the west coast, A-B several years ago invested in Red Hook Brewery of Seattle, and also took a position for a while in Widmer Brewing of Portland (I think Widmer eventually bought back that position).  From what I can tell (not being an insider in either company), A-B did not interfere with the hands-on operations of those companies.  However, the Widmer and Red Hook brands had much better distribution, especially at events where A-B had the exclusive rights to sell beer.  Not only did these events serve the traditional A-B crap (er, product), but also good micros from Red Hook and Widmer.  Hoopefully, this will be the case here too.

←

Was the Red Hook a distribution agreement or an investment? I remember that as a result Red Hook did start brewing on the East Coast too (New Hampshire?). My impression was distribution of the brand went up, but variety of beers went down.

My fear with an OD acquisition would be that they look to use this to increase their marketshare in Micro market by pushing it through distribution channels but cutting back on smaller boutique brands like the Oak stout.