More $1000 a Barrel For Craft Beer?
Regarding yesterday's missive, $1000 a Barrel For Craft Beer? Art Vandelay comments,
"It's pretty well known that we're in a craft beer bubble right now.... it wouldn't shock me if breweries were being taken out at 3x the prices of a few years ago."
The Nattering One muses... Belgium's Duvel Moortgat (which also owns Brewery Ommegang) purchased Boulevard Brewing back in October 2013 for an estimated $100 million. Industry publication Beer Business Daily estimated the sale price exceeds $100 million. At the time of acquisition Boulevard produced 180,000 beer barrels annually. Source: Food Republic and St. Louis Post Dispatch.
As of Feb 2014, Anheuser-Busch InBev has agreed to buy Long Island's Blue Point Brewing for an estimated $24 million. Blue Point produced about 60,000 barrels in 2013. AB didn’t disclose financial terms of that deal, either, although some industry observers pegged the price tag at around $25 million. Source: WSJ and Food Republic.
From that same WSJ piece: "Recent M&A deals have priced some regional U.S. craft brewers at more than $1,000 a barrel, according to a person familiar with multiples."
Of late, post Goose Island, terms of sale on major acquisitions have not been disclosed. Without full disclosure of the actual terms of sale on any of these deals, estimated prices by industry observers, publications and a person "familiar with multiples" quoting $1000 a bbl are at best, guess-timates.
Putting credence in guess-timates is like trusting a seller's or listing realtor to accurately represent market pricing or conditions, then making an offer at or above asking price, without being presented with any actual closed or factual sales data that is recent and relevant, AKA shooting in the dark and overpaying.
If someone can provide reliable sourcing for confirmed recent sales and production data, then we will have what are known as "closed comps" to prove the price levels per barrel. Until then, I am lacking any empirical data to confirm this media narrative $1000 bbl pricing. As for the bubble, read below.
"I think you're a bit confused on the $1,000/barrel price."
The Nattering One muses.. There is no confusion as the numbers speak for themselves. I cited metrics from industry operations experts which clearly delineate that $1000 a barrel is the highest tier of retail pricing as in, by the glass in a brewpub. With overhead, if the brewpub is charging $4 to $5, they cannot afford to pay a cost of $3.13, per 12 oz glass ($1000 bbl) and survive. Logically following, if brewpubs cannot survive at this retail price point, then none of the lower pricing tiers can either. All discussion of "bubbles" in the craft brewery business aside, $1000 per barrel does not work for the business model at any level or pricing tier. In support of that assertion, and based upon the data provided by the subjective "guess-timates" quoted in the media narrative:
Blue Point production 60K bbl into $24 mln = $400 bbl
Boulevard production 180K bbl into $100 mln = $555 bbl
These "unsubstantiated" prices are half and nowhere near the urban legend $1000 bbl price from a "certain person familiar with multiples" who keeps getting quoted by parroting members of the 4th Estate . Should we call this source ETDT? Or just plain old, dry hopped Deep Throat? IMO, much like NAR's Chief Economist Lawrence Yun's dubious real estate industry cheer leading metrics, someone is blowing bubbles out their ass, and the journalists have been eating their parrot food.
"$1,000/barrel implies about a 5x multiple of revenue (assuming the breweries sell their kegs for $100 a pop to the distributors). Again, that seems awfully high, but it could conceivably make sense depending on the growth rate."
The Nattering One muses... I concur with the latter and IMO $300 bbl for Goose Island in 2011 was awfully high, much less $400 (Blue Point 2014) or $500 bbl (Boulevard 2013). With the caveat that the guess-timates are accurate, although breweries are not yet being taken out at 3X, it would seem that Vandelay's statement "It's pretty well known that we're in a craft beer bubble right now." may be supported by a 66% per barrel acquisition price increase over a three year span.
In closing, $1000 bbl is simply inconsistent with logic and business sense. As stated yesterday "It is obvious, that these craft brewery acquisitions are being driven based upon future multiples calculated through economies of scale." And that is the only way the big fish can begin to justify paying $300 bbl which is the upper retail price limit, to swallow the little guppy, as was the case when AB acquired Goose Island in 2011. As for guess-timated prices of late, $400 or $500 bbl, with the same caveat stated above, time will tell whether these current price points were exorbitant, as brewing is a business of scale. Hoppy trails to you, until we meet again.
"It's pretty well known that we're in a craft beer bubble right now.... it wouldn't shock me if breweries were being taken out at 3x the prices of a few years ago."
The Nattering One muses... Belgium's Duvel Moortgat (which also owns Brewery Ommegang) purchased Boulevard Brewing back in October 2013 for an estimated $100 million. Industry publication Beer Business Daily estimated the sale price exceeds $100 million. At the time of acquisition Boulevard produced 180,000 beer barrels annually. Source: Food Republic and St. Louis Post Dispatch.
As of Feb 2014, Anheuser-Busch InBev has agreed to buy Long Island's Blue Point Brewing for an estimated $24 million. Blue Point produced about 60,000 barrels in 2013. AB didn’t disclose financial terms of that deal, either, although some industry observers pegged the price tag at around $25 million. Source: WSJ and Food Republic.
From that same WSJ piece: "Recent M&A deals have priced some regional U.S. craft brewers at more than $1,000 a barrel, according to a person familiar with multiples."
Of late, post Goose Island, terms of sale on major acquisitions have not been disclosed. Without full disclosure of the actual terms of sale on any of these deals, estimated prices by industry observers, publications and a person "familiar with multiples" quoting $1000 a bbl are at best, guess-timates.
Putting credence in guess-timates is like trusting a seller's or listing realtor to accurately represent market pricing or conditions, then making an offer at or above asking price, without being presented with any actual closed or factual sales data that is recent and relevant, AKA shooting in the dark and overpaying.
If someone can provide reliable sourcing for confirmed recent sales and production data, then we will have what are known as "closed comps" to prove the price levels per barrel. Until then, I am lacking any empirical data to confirm this media narrative $1000 bbl pricing. As for the bubble, read below.
"I think you're a bit confused on the $1,000/barrel price."
Blue Point production 60K bbl into $24 mln = $400 bbl
Boulevard production 180K bbl into $100 mln = $555 bbl
These "unsubstantiated" prices are half and nowhere near the urban legend $1000 bbl price from a "certain person familiar with multiples" who keeps getting quoted by parroting members of the 4th Estate . Should we call this source ETDT? Or just plain old, dry hopped Deep Throat? IMO, much like NAR's Chief Economist Lawrence Yun's dubious real estate industry cheer leading metrics, someone is blowing bubbles out their ass, and the journalists have been eating their parrot food.
"$1,000/barrel implies about a 5x multiple of revenue (assuming the breweries sell their kegs for $100 a pop to the distributors). Again, that seems awfully high, but it could conceivably make sense depending on the growth rate."
The Nattering One muses... I concur with the latter and IMO $300 bbl for Goose Island in 2011 was awfully high, much less $400 (Blue Point 2014) or $500 bbl (Boulevard 2013). With the caveat that the guess-timates are accurate, although breweries are not yet being taken out at 3X, it would seem that Vandelay's statement "It's pretty well known that we're in a craft beer bubble right now." may be supported by a 66% per barrel acquisition price increase over a three year span.
In closing, $1000 bbl is simply inconsistent with logic and business sense. As stated yesterday "It is obvious, that these craft brewery acquisitions are being driven based upon future multiples calculated through economies of scale." And that is the only way the big fish can begin to justify paying $300 bbl which is the upper retail price limit, to swallow the little guppy, as was the case when AB acquired Goose Island in 2011. As for guess-timated prices of late, $400 or $500 bbl, with the same caveat stated above, time will tell whether these current price points were exorbitant, as brewing is a business of scale. Hoppy trails to you, until we meet again.
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