Artisanal Brewing Ventures—a partnership created between Victory Brewing and Southern Tier Brewing—announced this week it will purchase Brooklyn's Sixpoint Brewery. While latest barrel production levels aren't available, the move will push the trio of Northeast breweries well over the 300,000-barrel threshold, making their combined effort the third largest in the region, behind only Yuengling and Boston Beer, which both make more than two million BBLs annually.
In announcing the move, Artisanal Brewing Ventures (ABV) said the new partnership would provide a "strong presence" in New York City and give the company "a leadership position in six of the country’s top 50 markets for craft beer," which also includes major metro areas like Cleveland, Pittsburgh, and Philadelphia.
Sixpoint founder Shane Welch, who will now “focus exclusively on a host of other craft beer related businesses, including an innovative app for direct to consumer engagement and e-commerce,” according to a press release, says his new role will still allow him to stay involved with the brewery.
“I am no longer with the company as a direct employee or stockholder,” Welch tells GBH. “However, I own 100% of the app technology, and the app is a large part of the future of Sixpoint Brewery. By being able to focus 100% on the app, it allows me to still be a part of Sixpoint and also develop this great technology that was a main passion of mine.”
ABV noted that Sixpoint will gain access to its production facilities, brewers, and distribution. As part of the deal, Sixpoint will also open its first taproom and a production facility in Brooklyn to act as an innovation brewery and HQ.
Terms of the deal were not disclosed.
As with so many things in beer these days, the echoes of own-premise importance ring throughout ABV's announcement. The new, physical space will be a "much-anticipated location where consumers can experience the Sixpoint brand as well as sample and celebrate Sixpoint beers." Which is marketing speak, for sure, but also a certain reality. Drinking at taprooms isn't just en vogue, it’s a permanent part of today's industry that now drives about 10% of Brewers Association-defined volume.
The specifics of the deal might sound familiar to an oft-implemented strategy used by Craft Brew Alliance, which has long seen a regional hub-and-spoke effort to strategically place its breweries in key geographic points where they can act as epicenters of sales for the company.
“Adding Sixpoint to the ABV family is consistent with our strategy of working with successful regional brands that have great local market penetration, passionate fans, and opportunity to grow,” John Coleman, CEO of Artisanal Brewing Ventures, said in the announcement. “Our resources, expertise in craft beer, and high operating standards can unlock Sixpoint’s growth potential, improve its productivity, and allow their team to focus on what makes Sixpoint special and successful: brewing great beer, creating strong local relevance and building an authentic brand.”
In 2016, when Victory, Southern Tier, and Sixpoint shared their production estimates with the Brewers Association, the three tallied about 310,000 BBLs. Sixpoint didn't report numbers to the BA in 2017, but founder Shane Welch did tell GBH last year that the company’s goal was to hit 90,000 BBLs, a 20% jump from 2016. That would put the trio at almost 346,000 BBLs combined in 2017, a growth rate of 12%, more than twice the entirety of craft's own year-to-year gains.
Expect the number of ABV's barrels to grow considerably in coming years, though, as Sixpoint begins use of a larger production space. Welch says the new production space, but especially the ABV partnership, will aid Sixpoint in selling beer outside of Brooklyn.
“It’s almost like Newton’s universal law of gravitation,” Welch tells GBH. “The further you get from the center of gravity (your home base), it gets exponentially harder to sell your beer in today’s environment. ABV brings a suite of resources that are necessary in today’s world if a brewery wants to be competitive beyond their immediate and proximate sphere of influence.”
That suite, he says, includes the company’s “access to capital, [which] exceeds my own ability to secure capital. Beyond that, though, there is strength in scale. Pooling resources together for raw materials, sales forces, marketing support, etc., creates great scale economies.”
Selling beer outside of New York is a problem that’s plagued Sixpoint for years, a former brewery employee who spoke on condition of anonymity tells GBH. And when those sales didn’t come, jobs become a casualty as well.
“Outside of Brooklyn and NYC the markets were tightening similar to many national and regional breweries at the time,” the former employee says. “Overall, most numbers were flat as the company was investing in more sales reps. As the numbers did not increase with investment, they started thinning the sales team.”
Perhaps most importantly for ABV, Sixpoint offers a new entry into categories in which Victory and Southern Tier may not find as much strength. According to IRI-tracked volumes from grocery, convenience, and other stores, Victory's Golden Monkey Tripel and Southern Tier IPA were far and away the two leading off-premise brands for Artisanal Brewing Ventures. Both offer success in more classic styles, while Sixpoint's Resin DIPA or Bengali Tiger IPA both lead the way for the Brooklyn company. Meanwhile, Crisp Pilsner is Sixpoint's third best-selling brand in IRI stores.
But what could really help bring ABV into beer geek's minds is Sixpoint's more recent foray into New England IPA. In August 2017, the company hired Trillium’s head brewer Eric Bachli and tasked him with “taking innovation, R&D, and Mad Science to the next level.” There was also the launch of Welch’s app, meant to end waiting in line for beer, which also displayed Sixpoint’s commitment to using technology and data as a means to better connect with consumers and run their business. Announcement of the Victory-Southern Tier-Sixpoint partnership specifically referenced how the three companies will “leverage their collective consumer data and insights to build an impactful innovation program and marketing approach, while also creating a unique selling structure and go-to-market strategy.”
What that means outside the vagueness of the press release is open for interpretation, but in general intent, it would seem that Artisanal Brewing Ventures sees it necessary to explore all avenues as a means to safely expand in a slowing market for craft beer. Seeing acquisitions more as partnerships in business model—not just terms to use in M&A announcements instead of “buy” or “sell”—portend what could be a safety net for U.S. craft beer makers.
The majority of growth for Brewers Association-defined craft comes from companies making 10,000 BBLs or less, while returns are decreasing for breweries at 100,000 and above—a spot that Sixpoint could very well find itself soon, if it’s not already there. Efficiencies in geography, distribution, sales, and economy of scale not only offer protection against market winds, but insight and experience of the 1s and 0s of data provide advantages needed in 2018 that weren’t necessary just five years ago. This ABV partnership could be the very thing that Sixpoint needs to thrive in the five years ahead and beyond.
—Bryan Roth and Austin L. Ray