Tilray Brands is acquiring eight craft brands from Anheuser-Busch InBev in a blockbuster all cash deal announced today.
Tilray – the Canadian cannabis firm that is quickly shedding that standalone image – will acquire the following brands once the deal closes later this year:
- Shock Top;
- Breckenridge Brewery (Littleton, Colorado);
- Blue Point Brewing Company (Patchogue, New York);
- 10 Barrel Brewing Company (Bend, Oregon);
- Redhook Brewery (Seattle, Washington);
- Widmer Brothers Brewing (Portland, Oregon);
- Square Mile Cider Company (Portland, Oregon);
- Hiball Energy (which A-B discontinued in May).
“The purchase price to be paid to AB at closing is equal to $85 million in cash, subject to working capital and other adjustments,” according to an 8K filing by Tilray. The deal is expected to close by the end of September 2023.
The transaction will encompass “current employees, breweries and brewpubs associated with these brands,” Tilray said in a press release.
Those companies will join an existing craft beer portfolio that includes SweetWater Brewing, Montauk Brewing, Green Flash, Alpine Beer Co. and the newly created Good Supply lager brand, as well as Breckenridge Distillery.
Once completed, the sales volume of Tilray’s craft portfolio is expected to make it the fifth largest craft brewery in the U.S., with 5% share of the market, the company said. Pro forma revenue for Tilray’s craft beer portfolio is projected to top $250 million.
Four of the expected-to-be-acquired brands – Shock Top, Breckenridge, 10 Barrel and Blue Point – produced a combined 495,000 barrels of beer in 2022, according to the Brewers Association (BA). Production data for Widmer Brothers, Redhook, Square Mile and Hiball were not broken out separately.
The deal is expected to “triple” the size of Tilray’s beer business, from 4 million cases to 12 million cases annually, Ty Gilmore, president of U.S. Beer at Tilray Brands, said in the release.
“Looking ahead, we will further capitalize on the potential of these brands through product innovation, retailer partnerships and expanded distribution into key markets, including the Pacific Northwest and California,” he continued.
Tilray will exit the deal with production facilities in Portland and Bend Oregon; Littleton, Colorado; and Patchogue, New York. The deal will also include brewpubs in:
- Seattle, Washington;
- Bend, Oregon (x2);
- Portland, Oregon;
- Boise, Idaho;
- Littleton, Colorado;
- Breckenridge, Colorado;
- Patchogue, New York.
Tilray CEO and chairman Irwin D. Simon has been bullish about the company’s prospects within the craft brewing industry. He reiterated those comments in today’s deal announcement, saying the transaction “solidifies our national leadership position and share in the U.S. craft brewing market and marks a major step forward in our diversification strategy.”
“Tilray is fully committed to invest in and champion the future of the U.S. craft beer industry by fueling new innovation that excites and further accelerates the growth of its consumer base,” Simon said.
Simon added that the company plans “to drive both revenue and cost synergies, while significantly expanding national distribution to coveted markets across the U.S. and internationally.”
“In a matter of three years, Tilray has solidified its leadership position in the craft beer industry, and we fully intend to be that change agent that reinvigorates the sector,” he continued. “Upon federal cannabis legalization, we expect to leverage our leadership position, wide distribution network and portfolio of beloved beverage and wellness brands to include THC-based products and maximize all commercial opportunities.”
Andy Thomas, president of A-B’s High End craft division, indicated in a press release that Tilray inquired earlier this year about “purchasing these brands and breweries.”
“The talented people behind these brands and breweries, along with our significant investments in them over the years, have positioned them for a bright future with Tilray Brands,” Thomas continued. “We are committed to working with Tilray Brands over the coming months to ensure this is a smooth transition for the people who are working every day to get these amazing beers and beverages to consumers across the U.S.”
Tilray is expected to share additional details during a webcast at 4:45 p.m. ET today.
A-B’s Changing Craft Strategy
As for Anheuser-Busch, the divestiture will trim the company’s craft beer portfolio to some of its largest craft beer brands along with smaller brands acquired in its 2020 merger with Craft Brew Alliance (CBA):
- Goose Island (495,000 barrels)
- Elysian (305,000 barrels)
- Golden Road (215,000 barrels)
- Karbach (155,000 barrels)
- Four Peaks Brewing (140,000 barrels)
- Wicked Weed (115,000 barrels)
- Devils Backbone (75,000 barrels)
- Platform (20,000 barrels, ceased operations in Ohio; lives on as three IPAs)
- Cisco Brewers (N/A)
- Omission (N/A)
- Veza Sur (N/A)
- Wynwood Brewing (N/A)
“Winning in craft remains a key pillar of our strategy to lead and develop the Premium segment,” Thomas added in a statement shared with Brewbound. “We remain committed to the amazing craft brewery partners in our portfolio and focused on working with them to lead growth in the segment.”
In a separate transaction, A-B announced internally that it has sold Virtue Cider to founder Greg Hall. The Virtue transaction is also expected to close in 2023, pending customary closing conditions. Although Virtue will exit A-B’s portfolio, Hall will remain a consultant with Goose Island.
“It’s been a great five years with Anheuser-Busch, and I want to thank my colleagues and fellow craft brewery founders for believing in Virtue Cider and helping us create some of the best cider in the world,” Hall said in a statement. “Moving forward, we’ll continue to focus on what we’ve always done: making world-class ciders that are fit for the table, being great stewards of the environment, and helping more people discover Fennville and all that Southwest Michigan has to offer.”
The question of what A-B would do with its craft portfolio has been in question since the company merged with CBA , as the portfolio swelled to around 20 brands.
A-B’s craft brands produced a collective 2.625 million barrels in 2022, making the company the largest producer of non-BA-defined craft beer. A-B’s craft brands collectively declined -4% year-over-year (YoY), down from the more than 2.7 million barrels produced in 2020 and 2021.
Within A-B’s Brewers Collective, just two craft brands posted YoY growth: Goose Island (+6%, to 495,000 barrels) and Wicked Weed (+19%, to 115,000 barrels).
In February, A-B ceased operations of Platform Beer Co. in Ohio. However, the brand lives on as a trio of IPAs produced at other A-B facilities. Layoffs followed at other A-B owned craft breweries.
In May, two of the founders of Appalachian Mountain Brewery and Cidery agreed to purchase the Boone, North Carolina craft brewery from A-B.
The Health of Tilray’s New Brands
The majority of the brands headed to Tilray’s portfolio have been in decline, some for several years. Here’s a look at the numbers:
Shock Top
Shock Top is the largest beer brand in the mix, producing 170,000 barrels of beer in 2022, according to the BA. The more than 17-year-old craft brand has posted production declines every year since at least 2017 – when it produced 600,000 barrels of beer (-8% versus 2016) – and double-digit declines since 2018 (then -24%, to 555,000 barrels).
In the last 13 weeks (ending June 17), total dollar sales for Shock Top declined -23.2% YoY in NIQ-tracked off-premise channels, according to data shared by 3 Tier Beverages. Brand volume declined -29.2% YoY in the period.
Shock Top Belgian White Ale, Shock Top’s leading brand, is A-B’s No. 41 brand overall by dollar sales in Circana-tracked off-premise channels (multi-outlet plus convenience), according to data shared by the market research firm. Dollar sales for the white ale declined -18.6% year-to-date (YTD), thru July 16, while volume declined -14%.
The brand makes the top 30 craft brands list in the food channel, ranking No. 26, despite dollar sales declining -18.6% and volume declining -24% YTD in the channel.
Shock Top’s next two top brands overall in Circana-tracked off-premise channels have posted major declines YTD:
- No. 2 Shock Top Twisted Pretzel dollar sales -72.9%, volume -78%
- No. 3 Shock Top Zest Squeeze the Day dollar sales -95.3%, volume -95.2%
Breckenridge
A-B acquired Breckenridge in 2016. The 33-year-old craft brewery reached its peak production in 2019 at 110,000 barrels, according to the BA. After a brief decline in 2020, the brewery returned to 110,000 barrels in 2021, but recorded a -9% decline in 2022, to 100,000 barrels.
In the last 13 weeks, the brewery’s off-premise dollar sales declined -11.4% YoY, while volume declined -14.5%, according to NIQ data shared by 3 Tier Beverages.
In Circana-tracked off-premise channels, dollar sales for Breckenridge’s No. 1 brand, Vanilla Porter, have declined -13.4% YTD, while volume declined -18.2%. Breckenridge’s next two brands, Good Company Hard Seltzer Variety Pack (dollar sales -22.2%, volume -26.4%) and Vista Variety Pack (dollar sales -23.3%, volume -28%) also posted double-digit declines YTD.
Blue Point
Blue Point’s annual barrelage was flat in 2022, at 75,000 barrels, after four consecutive years of declines. The brewery recorded its peak annual production in 2017, with 105,000 barrels.
In the last 13 weeks, the brewery has declined dollar sales -21.6% YoY and volume -29.6% in NIQ-tracked off-premise channels.
Dollar sales for Blue Point’s No. 1 brand, Imperial Sunshine blonde ale, are down -30.8% YTD in Circana-tracked channels, while volume is down -37.2%. No. 2 Toast Lager is also down (dollar sales -22.4%, volume -37.3%). No. 3 Summer Ale increased dollar sales +4.9%, but volume declined -2.2% YTD.
10 Barrel
10 Barrel’s annual production declined -4% in 2022, to 120,000 barrels. It was the first decline for the company after several years of steady increases, which peaked in 2021 at 125,000 barrels.
Unlike its counterparts, 10 Barrel increased dollar sales (+8.9% YoY) and volume (+3.2%) in the last 13 weeks in NIQ-tracked channels.
10 Barrel’s top brand, Pub Lager, is also on the rise, with dollar sales increasing +23.6% YTD in Circana-tracked channels, while volume increased +16.8%. Its No. 2 brand, Apocalypse IPA, is down (dollar sales -10%, volume -15.1%), while No. 3 All Ways Down double IPA is up (dollar sales +24.1%, volume +15.1%).
Redhook and Widmer Brothers
Redhook and Widmer Brothers were a part of the CBA. Because of this, the BA does not separate production data for the brands. CBA’s total production declined -3% in 2022, to 640,000 barrels, although the majority of that volume is Kona on the mainland.
In the last 13 weeks, Redhook brands increased dollar sales +14.9% and volume +10.3% YoY in NIQ-tracked channels. Widmer Brothers’ brands recorded a -12.7% decline in dollar sales and -16.7% decline in volume.
Two of Redhook’s top three brands have grown YTD in Circana-tracked channels: No. 1 Big Ballard imperial IPA (dollar sales +16.3%, volume +8.8%) and No. 2 Hazy Big Ballard imperial IPA (dollar sales +64.8%, volume +44.8%).
All three of Widmer Brothers’ top three brands are in decline YTD: No. 1 Widmer Brothers Hefeweizen (dollar sales -10.6% YoY, volume -14.8%), No. 2 Deadlift imperial IPA (dollar sales -4.3%, volume -15.1%) and No. 3 Drop Top amber ale (dollar sales -3.3%, volume -11.5%).
Square Mile Cider
Square Mile Cider is also a part of the CBA’s portfolio. The brand has recorded the strongest recent growth out of all the brands that are a part of Tilray’s acquisition, with dollar sales in the last 13 weeks increased +138% and volume +108.6% YoY, in NIQ-tracked off-premise channels. However, that growth is on a much smaller base than the other brands.
Square Mile’s No. 1 brand, Imperial Blackberry Pie, is up +838% YTD in Circana-tracked channels, with volume +782.6%. However, its flagship Original brand is down (dollar sales -25.2% YTD, volume -33.1%). Its No. 3 brand, Imperial Apple Pie, was just released this year.