Independent Brewers United sold: more insight and details

Digging a bit deeper into the sale and the companies that North American Breweries just purchased . . .


North American Breweries, part of the KPS Capital Fund group, announced that it acquired Independent Brewers United yesterday for an undisclosed amount. With the acquisition of Pyramid Breweries costing IBU $25.7 million back in 2008 (Rochester Biz Journal), this deal, with the addition of Magic Hat, very well may have toppled the $50 million mark.

In a statement sent to industry colleagues this afternoon, Magic Hat Co-Founder and President, Alan Newman, said the following:

“I presume most of you know by now that our financial partner, Basso Capital, has sold their majority share of Magic Hat/IBU to North American Brewers/KPS – and with that transaction, I have stepped down from the organization to pursue other activities.

While I suspect this will bring continued change to our past business, and the beer business in general . . . I remind you all that change is hardly a new concept for us. We have built our business on constant evolution.”

News first surfaced with a Beer Business Daily report two weeks ago. [Ed. note: Check out my own analysis at the time here.] After news of the sale leaked, Newman confirmed with a local Vermont TV station that Basso was considering giving up its stake in the company. Basso signed on with Magic Hat in early 2006.

A source close to IBU said that when the first reports came out that IBU was selling to NAB, he was not surprised. “IBU was purported to be seeking capital and NAB was purportedly seeking additional volume to better utlilize their Rochester Brewery capacity, a national sales organization and West Coast brewing capability/capacity.”

As Newman alluded, change has been an undercurrent that has driven IBU since its formation. North American Breweries CEO, Rich Lozyniak, says of Newman, “I made a pledge to him we’d try to keep the culture intact.” The sentiment online in forums such as Beer Advocate, however, reveals that core beer drinkers feel that the Magic Hat and Pyramid brands have lost their culture and identity. Beer Advocate Co-Founder, Jason Alström, asks, “How many great beers have been axed to bring forth middle of the road drinkable ales?”

Pyramid Breweries went from 30% year-to-year growth in 2005 to an 8% decline this past year (New Brewer May/June). To be fair, the Pyramid brand, in 2005, was coming off of some weaker trends earlier in the decade and made some good marketing moves in 2004. Some of the recent dropoff is being driven by double-digit sales declines in its flagship brand, Pyramid Haywire Hefeweizen in certain channels.

IRI grocery sales figures reveal an 18% drop in case sales year-to year for much of Q1 2010. A former employee says, “The philosophy that the marketing dept had in regard to always changing and reinventing the line-up was a mistake in my eyes. It caused confusion at retail. A prime example is what happened with Pyramid Hefeweizen. Changing its name to Haywire was its undoing. Sometimes they just tried to be too clever.” Pyramid introduced new branding around its products in 2009.

Magic Hat has been faring better than its sister company over the past few years. The brewery has gone from 29% growth in 2006 to 21% this past year, paced by growth in its flagship, Magic Hat #9. Growth was at 16% at the supermarket level for much of Q1 according to IRI data. However, this declining growth comes at a time when the company has entered several new markets: Wisconsin, Illinois, Georgia, Minnesota, Florida, Texas and California.

Some former employees blame the underperforming growth to a lack of leadership: “The biggest change was that Mike Brown moved from Sales Manager of Magic Hat to President of Pyramid. Mike was the guiding force that kept the boat steering in the right direction. He gave a great sales perspective to the marketing and art department. Once he left, they went crazy with changes.”

The deal certainly marks the end of an era for Magic Hat and Pyramid. Harry Schuhmacher, who originally reported the rumored deal, reported yesterday that in addition to Newman, Magic Hat CEO, Martin Kelly, is also out as part of the acquisition. Newman, who went by the title of Conductor of Cosmic Symphonies (even in official gov’t documents), co-founded Magic Hat in 1994. Kelly, meanwhile has served as the President, Chief Executive Officer and Director of Magic Hat since 2004. Kelly was previously an executive for Pyramid from 1999-2004.

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2 thoughts on “Independent Brewers United sold: more insight and details

  1. Thanks for changing to the correct name; Independent Brewers United, I was afraid I was going to have to drag this site through the mud!

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