Report: Magic Hat, Pyramid Breweries close to being sold to NAB

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(South Burlington, VT) – A major shakeup reportedly looms with two of the top 10 regional craft breweries in the mix.

[7/28 Update: More speculation from a Magic Hat employee: "IBU is selling because Basso Capital Management (the investment group that financed the purchase of Pyramid / formation of IBU) pulled out (this is my understanding of the situation, it may not be completely accurate) which means that we are selling out of necessity." More here.]


According to a Beer Business Daily report, “North American Brewers is days away from closing the deal to purchase IBU (Pyramid and Magic Hat), say sources…” Harry Schuhmacher is probably the most connected beer reporter in the country (and this rumor has been floating about for at least a couple weeks now) so this appears to be reliable material.

IBU (or Independent Brewers United) is the merger between Magic Hat and Pyramid Breweries that formed back in 2008. Together, the two breweries sold almost 350,000 barrels in 2009 (New Brewer May/June ’10) which would rank IBU as the eighth largest entity among all regional breweries (craft or non-craft). IBU made up 3.8% of all craft beer sales last year.

Who is the rumored buyer? That would be North American Breweries, Inc.:

“Headquartered in Rochester, NY, North American Breweries is a national platform for investments and growth in the beer and malt beverage industries. Formed in 2009, North American Breweries owns High Falls Brewing Company, one of the largest and oldest continually operating breweries in the United States, and is the exclusive marketer and seller of Labatt brand beer and Seagram’s Coolers in the United States. The company’s brands include the complete line of Labatt beers, including the flagship pilsner Labatt Blue and Labatt Blue Light; the Genesee line and the Dundee Ales & Lagers family, which includes the Original Honey Brown Lager; and Seagram’s Cooler Escapes and Seagram’s Smooth. It is also America’s exclusive distributor of several imports, including Steinlager from New Zealand, Toohey’s New from Australia, Thwaites from the U.K. and Imperial from Costa Rica; and a manufacturer of beer and other alcoholic and non-alcoholic beverages under contracts on behalf of other companies. North American Breweries is a portfolio company of KPS Capital Partners, LP.” – (KPS Capital Partners)

Going back to the statistics mentioned above, why are they important? There is the potential that these breweries will no longer qualify as “craft breweries” if sold to NAB though the specifics around how that plays out is better left to Brewers Association reps (who were unavailable for comment). As an example, some of the breweries involved with the somewhat recent formation of the Craft Brewers Alliance are no longer listed as “craft” and their production/sales figures excluded from craft beer charts.

One entity that certainly cares about whether this happens is the Brewers Association, an association that works for small brewers and cares a great deal about where our beers come from (see the Declaration of Beer Independence and BA Director Charlie Papazian’s small brewers poll). A lot has been made this year about legislation that could save Samuel Adams from being excluded from craft status once it reaches 2 million barrels in a year which could be in 2010. This is likely to concern the BA for those same reasons. Among the many goals that are possible for craft breweries to hit this year are ten million barrels brewed in 2010 and 5% volume market share domestically.

Otherwise, core craft beer consumers may be concerned because of the perceived quality hit that the brands could take under new ownership. A look at ratings on Beer Advocate, however, shows that Dundee, Magic Hat and Pyramid rate comparably. It goes without saying that being sold to a corporation doesn’t necessarily translate to lesser quality . . .

Be on the lookout for more on this story in the coming days and weeks.

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