THE GIST
At long last, Pabst Brewing has jumped into the craft discussion. Beginning in 2017, the 172-year-old brewing institution will take New Holland nationwide, plugging the Michigan brewery’s portfolio throughout its own vast distribution network. Per terms of the “long term partnership,” effective the first quarter of next year, Pabst will sell all of New Holland’s beer as part of its own high-end collection. In a joint statement, the two companies said New Holland will “remain independent” and continue to manage “all other business functions for its beers, including production, marketing, and finance.”
Speaking with GBH, New Holland vice president Joel Petersen says that no equity or ownership transactions were involved. “Zero percent,” he says. “That was the absolute key lynchpin of the deal.”
WHY IT MATTERS
From a purely logistical standpoint, the partnership makes plenty of sense: New Holland is available in 30-plus states, and the vast majority of its beer is already sold through Pabst distributors.
“We put the overlap map up there and it was like, shoot, you know, this is already very much in place,” Petersen says. “I mean, 80% of our volume is traveling through shared wholesalers, which makes this very easy.”
But the deal is about more than mere convenience and a pre-existing wholesale alignment. With help from Pabst, New Holland specifically hopes to position its flagship Dragon’s Milk as the nation’s top Bourbon Barrel Stout, in both its existing and forthcoming markets.
“That’s the brand that got us to where we are right now,” Petersen says. “And it affects how we operate, how we build our brewery, what type of people we bring in. I think what this allows us to do, with a brand like Dragon’s Milk, we can establish it as the leading nationwide Bourbon Barrel Stout. That’s where we feel that brand can be.”
That’s not to say New Holland will be available in all 50 states overnight—led by an 11% ABV barrel aged stout, no less. The company initially plans to dig in deeper where it already sells before building out a national footprint in 12-24 months.
“With a product as labor intensive as Dragon’s Milk, we have to manage the roll outs strategically. Initially, it’s ‘let’s build out our existing footprint,’” Petersen adds. “That’s our number one priority. Then we’ll do a slow and measured rollout as we have the capacity to do so.”
The arrangement has been in the works for some time now (since March by Petersen’s account), but the timing of the announcement itself is worthy of remark, as it comes just two weeks after news broke that Simon Thorpe would join Pabst as CEO.
Thorpe, of course, previously held the reins at Duvel Moortgat USA, where he spearheaded the company’s acquisition initiatives, including the purchases of Boulevard and Firestone Walker. Given that Pabst had long sat on the sidelines during the craft gold rush led by moneyed forty-niners like AB InBev, Thorpe’s appointment led to immediate speculation that the company would soon be pinning its blue ribbons to businesses in the craft space.
To reiterate, Pabst isn’t acquiring New Holland (“zero percent” equity). The deal more closely resembles that which it arranged with Small Town Brewery, when it agreed to take its viral Not Your Father’s Root Beer brand national. With New Holland, Petersen says, Pabst is incentivized based on the incremental growth it’s able to drive. No less, New Holland also serves to bolster the Pabst portfolio from a quality perspective. And while it may be the first real high-end play from the company, it likely won’t be the last.
“The timing with our particular deal and Simon coming on board is coincidental,” Petersen says. “But Simon coming on with Pabst and wanting to pursue these kinds of partnerships? Not coincidental.”
—Dave Eisenberg