$1000 a Barrel for Craft Beer?
JoeNatural posted on ABRW, American Brewing Companies IPO 90% share price crash. IPO price was $2.50, subsequently cratering to 0.30 cents.
Art Vandelay commented: "Here's Vandelay Industries' unbiased research.... Recent brewery acquisitions have priced craft brewers at more than $1,000 a barrel. From the prospectus, ABRW sells about 780 barrels/quarter, or 3,120 barrels/year. At $1,000/barrel, that means ABRW is worth $3,120,000 or less than $0.25/share. Joseph, since you feel like ABRW is worth $2.00/share..."
The link provided by Mr. Vandelay is to an WSJ article reporting recent AB Anheuser Busch/InBev acquisition of craft brewer Elysian and claims that recent craft brewer acquisitions have been at $1000 per barrel...
The Nattering One muses...
Me loves me craft brews and IPA... Nothin like a good hoppy IPA, Hop Stoopid it is... or a little sumpin sumpin, little sumpin extra, little sumpin wild... yum, yum. All from Lagunitas...
Joe, still love your missive... however regarding share price... and Mr. Vandelay, regarding $1000 a barrel for craft beer?
Elysian, sold more than 50,000 barrels in 2014. 10 Barrel (another AB craft brew acquisition) was expected to sell about 40,000 barrels in 2014. An important detail... Terms were not disclosed in either sale.
From the piece Mr. Vandelay linked to:
"Terms weren’t disclosed for Elysian.... Recent brewery acquisitions have priced craft brewers at more than $1,000 a barrel... In addition to the brewery, AB InBev also is acquiring the company’s four Seattle brewpubs.... in 2011, AB paid $38.8 million for Chicago-based Goose Island."
In 2011, AB acquired Goose Island Brewery. With additional capacity afforded by AB expansion and economies of scale, Goose expected to produce 230,000 barrels of beer in 2012, up from 127,000 barrels in 2010.
So, given the Goose island price, disclosed above.... 127K bbl 2010 production into $39 mln = $307 per barrel which as you will see, is a premium price.
After AB expansion costs and their marketing/shelf pull... and AB InBev resources are HUGE... 230K bbl 2011 production into $39 mln = $169 per barrel, not counting the expansion costs. One more thing... the Elysian acquisition per barrel price may consider the net from the operation of four brew pubs, critical as you will see.
Back on track... from Joe Natural's missive: "12 1/2 million O/S (outstanding shares of American Brewery) x $2.50 = slightly over $31 million."
From Mr. Vandelay: "From the prospectus, ABRW sells about 780 barrels/quarter, or 3,120 barrels/year. "
Well, alrighty then... 3120 bbl x $307 per = $960K, @12.5 million shares = 7.7 cents per share
And there you have it. Is American Brewery worth the cratered price of 30 cents a share? $2 a share? Only if a REALLY big fish comes along and swallows the guppy. But you never know, stranger things have happened. It is obvious, that these craft brewery acquisitions are being driven based upon future multiples calculated through economies of scale. So we can't stop now...
At $1000 per barrel, that would be $3.13 per 12 oz glass, not even a pint mind you. Does that cover the cost of overhead - energy, grain, hops, yeast, water, transportation, other consumables, marketing, sales and labor? That's a glass full of overhead, considering the retailer isn't going to get more than $4 to $5 in a bar for a pint, much less a 12oz glass. Remember a keg is a 1/2 barrel, which equals 15.5 gallons (165 12 oz beers), so DOUBLE everything by the barrel.
From Soundbrew.com:
A start-up production brewery may cost between $125 and $350 per barrel of annual capacity to build depending on quality of equipment, efficiency and other factors. Larger plants cost less.
Beer sold:
Brewpub retail by the glass $700-$1,000 per BBL
Local retail in bottles $300-$375 per BBL.
Wholesale kegs to distributors: $120-$150 per BBL.
Wholesale bottles to distributors: $145-$190 per BBL
Wholesale in kegs to accounts: $160-$200 per BBL.
Wholesale in bottles to accounts: $190-$250 per BBL
The most insanely expensive imported exotic beer would be around $300 per keg, so $300 per HALF barrel keg...which is $600 per barrel, is 2x what a retailer would pay for even the best most sought after exotic brand. Unproven brands usually need to target $100 per HALF barrel keg to even get in the game.
$1000 per barrel? Only if its retail by the glass in the brewpub, which helps AB's acquisition price (four brewpubs included), depending on volume. Bottom line, whoever is quoting this $1K per barrel number is not in touch with the realities of the business they are writing about or the people doing the acquisitions need to get a grip, on their beer that is.
Art Vandelay commented: "Here's Vandelay Industries' unbiased research.... Recent brewery acquisitions have priced craft brewers at more than $1,000 a barrel. From the prospectus, ABRW sells about 780 barrels/quarter, or 3,120 barrels/year. At $1,000/barrel, that means ABRW is worth $3,120,000 or less than $0.25/share. Joseph, since you feel like ABRW is worth $2.00/share..."
The link provided by Mr. Vandelay is to an WSJ article reporting recent AB Anheuser Busch/InBev acquisition of craft brewer Elysian and claims that recent craft brewer acquisitions have been at $1000 per barrel...
The Nattering One muses...
Me loves me craft brews and IPA... Nothin like a good hoppy IPA, Hop Stoopid it is... or a little sumpin sumpin, little sumpin extra, little sumpin wild... yum, yum. All from Lagunitas...
Joe, still love your missive... however regarding share price... and Mr. Vandelay, regarding $1000 a barrel for craft beer?
Elysian, sold more than 50,000 barrels in 2014. 10 Barrel (another AB craft brew acquisition) was expected to sell about 40,000 barrels in 2014. An important detail... Terms were not disclosed in either sale.
From the piece Mr. Vandelay linked to:
"Terms weren’t disclosed for Elysian.... Recent brewery acquisitions have priced craft brewers at more than $1,000 a barrel... In addition to the brewery, AB InBev also is acquiring the company’s four Seattle brewpubs.... in 2011, AB paid $38.8 million for Chicago-based Goose Island."
In 2011, AB acquired Goose Island Brewery. With additional capacity afforded by AB expansion and economies of scale, Goose expected to produce 230,000 barrels of beer in 2012, up from 127,000 barrels in 2010.
So, given the Goose island price, disclosed above.... 127K bbl 2010 production into $39 mln = $307 per barrel which as you will see, is a premium price.
After AB expansion costs and their marketing/shelf pull... and AB InBev resources are HUGE... 230K bbl 2011 production into $39 mln = $169 per barrel, not counting the expansion costs. One more thing... the Elysian acquisition per barrel price may consider the net from the operation of four brew pubs, critical as you will see.
Back on track... from Joe Natural's missive: "12 1/2 million O/S (outstanding shares of American Brewery) x $2.50 = slightly over $31 million."
From Mr. Vandelay: "From the prospectus, ABRW sells about 780 barrels/quarter, or 3,120 barrels/year. "
Well, alrighty then... 3120 bbl x $307 per = $960K, @12.5 million shares = 7.7 cents per share
And there you have it. Is American Brewery worth the cratered price of 30 cents a share? $2 a share? Only if a REALLY big fish comes along and swallows the guppy. But you never know, stranger things have happened. It is obvious, that these craft brewery acquisitions are being driven based upon future multiples calculated through economies of scale. So we can't stop now...
At $1000 per barrel, that would be $3.13 per 12 oz glass, not even a pint mind you. Does that cover the cost of overhead - energy, grain, hops, yeast, water, transportation, other consumables, marketing, sales and labor? That's a glass full of overhead, considering the retailer isn't going to get more than $4 to $5 in a bar for a pint, much less a 12oz glass. Remember a keg is a 1/2 barrel, which equals 15.5 gallons (165 12 oz beers), so DOUBLE everything by the barrel.
From Soundbrew.com:
A start-up production brewery may cost between $125 and $350 per barrel of annual capacity to build depending on quality of equipment, efficiency and other factors. Larger plants cost less.
Beer sold:
Brewpub retail by the glass $700-$1,000 per BBL
Local retail in bottles $300-$375 per BBL.
Wholesale kegs to distributors: $120-$150 per BBL.
Wholesale bottles to distributors: $145-$190 per BBL
Wholesale in kegs to accounts: $160-$200 per BBL.
Wholesale in bottles to accounts: $190-$250 per BBL
The most insanely expensive imported exotic beer would be around $300 per keg, so $300 per HALF barrel keg...which is $600 per barrel, is 2x what a retailer would pay for even the best most sought after exotic brand. Unproven brands usually need to target $100 per HALF barrel keg to even get in the game.
$1000 per barrel? Only if its retail by the glass in the brewpub, which helps AB's acquisition price (four brewpubs included), depending on volume. Bottom line, whoever is quoting this $1K per barrel number is not in touch with the realities of the business they are writing about or the people doing the acquisitions need to get a grip, on their beer that is.
Comments