Craft brewers warm to Wall Street investors

The $19.6 bn US craft beer market grew by 18% in 2014

Craft brewers warm to Wall Street investors

Brooklyn Brewery, the craft beer maker operating from New York City’s most populous borough, resisted taking money from investment firms for almost three decades, according to co-founder and Chairman Steve Hindy. Now the brewer of Brooklyn Lager is having second thoughts.

Hindy, who sold control of the brewery three years ago to one of his early backers, the wealthy Ottaway family, said the company needs capital to expand its business and meet rising demand for its beer.

So it’s considering selling some equity with the help of investment banks, becoming one of more than a dozen US craft brewery companies thinking about accessing the deep pockets of institutional investors.

“We want to stay independent,” said Hindy, 66, a former reporter who keeps a piece of shrapnel at his desk as a memento from his time in Beirut, in an interview at his Brooklyn office.

“But we are looking at building a very large brewery in New York City, which will probably cost in the neighbourhood of $150 million.”

The craft beer industry is booming, buoyed by deregulation and the increased buying power of its largely millennial customer base. The $19.6-billion US craft beer market grew by about 18 per cent in barrel volume in 2014, according to the Brewers Association. By contrast, the US beer industry as a whole saw volumes rise by only by 0.5 per cent in 2014.

“These are fascinating times in US craft beer, and like many of our brethren, we talk to many different people who are interested in participating in this dynamic business,” said Robin Ottaway, president of Brooklyn Brewery, who said the new brewery will likely be in Staten Island.

The list of those vying to participate in the business includes private equity firms, family investors and large alcohol brands. Some of these investors are hoping it will include the public market as well.

Investor gold rush

Investors’ interest has already become apparent in some of the prices paid for entry. When Oskar Blues Brewery, the Longmont, Colorado-based maker of Dale’s Pale Ale, was sold to an affiliate of investment firm Fireman Capital earlier this year, it was valued at as much as 20 times its 12-month earnings before interest, tax, depreciation and amortisation (EBITDA).

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