Pabst Brewing Company has inked its first official U.S. craft partnership, announcing plans today to invest in the marketing, sales and distribution of products from New Holland Brewing.
Specific financial terms of the deal, which was signed this morning and is slated to begin during the first quarter of next year, were not disclosed.
Newly appointed Pabst CEO Simon Thorpe confirmed that his company would not be taking an equity stake in the Michigan-based craft brewery and said there were no “put and call” options in place.
“This is as pure a partnership role as you can get in that sense,” Thorpe said.
For his part, New Holland president Brett VanderKamp said the deal with Pabst, which first began taking shape in April, would allow New Holland to “remain 100 percent independent with a completely separate ownership structure.”
The partnership — which Thorpe described as a “creative solution” and likened to the relationship importers have with foreign brands — will give New Holland access to Pabst’s nationwide distribution network and allow the small craft brewery to tap into the larger company’s robust sales organization in exchange for a percentage of sales profits.
“We have constructed an arrangement where we get compensated as sales and distribution grow,” Thorpe said.
Both Pabst and New Holland have also agreed to co-invest undisclosed sums into a dedicated sales and marketing fund. It will be used to build New Holland’s presence in new and existing markets through brand activation and marketing activities, as well as coordinated sales initiatives, Thorpe said.
“We will win and lose together,” VanderKamp added.
A primary focus of the partnership will be on expanding distribution of New Holland offerings throughout the country, VanderKamp and Thorpe told Brewbound. The Michigan brewery currently distributes beer to more than 30 states, VanderKamp said, and approximately “80 percent” of New Holland products are already sold via Pabst wholesalers.
Pabst has no intentions of transferring the distribution rights of the New Holland brand in markets where it is not aligned with a Pabst wholesaler, Thorpe added.
“It can be important, but the world doesn’t stop revolving if you are not perfectly aligned,” he said. “There are a few wholesalers where we are not aligned, and a couple of them are very important, but it is not a priority to change.”
Last month, New Holland began distributing in the Pacific Northwest via Columbia Distributing, a Pabst wholesaler.
There are also currently no plans in place for Pabst to invest in additional brewing capacity at New Holland, the pair said, but the partnership arrangement does contemplate the opportunity for expanded production of New Holland brands at facilities where Pabst already has contract brewing agreements in place, Thorpe said.
New Holland, which will produce about 35,000 barrels of beer in 2016, said its facility is capable of expanding production to 100,000 barrels.
About 50 percent of New Holland’s top-line revenue comes from Dragon’s Milk, an 11 percent ABV bourbon barrel-aged stout that initially attracted Pabst to the company and will be a major focus moving forward, the pair told Brewbound.
“New Holland is arguably one of the real diamonds out there at the moment,” Thorpe said. “Dragon’s Milk is a hot brand and, if you listen to the way wholesalers talk about it, there is something there.”
There is additional language in the agreement related to sale and distribution of New Holland’s line of craft spirits, but Thorpe said that would not be a primary focus for Pabst.
The agreement comes just two weeks after Pabst chairman Eugene Kashper laid out his approach to craft dealmaking at the Brewbound Session in San Diego
“We want to pursue quite a different strategy than some of the major brewers, because we don’t really believe that if we just roll a craft brand into Pabst, that that is long term a sustainable approach,” he said at the time.
“What we are looking for are people who don’t want to sell,” he added.
In some ways, the new agreement furthers an ongoing strategy at Pabst.
The company recently announced an exclusive import agreement with Mexico’s oldest craft brewery, Cerveza Minerva. It also has similar distribution and sales-orientated partnerships with Vermont Hard Cider Company and Small Town Brewery, which Kashper and other Pabst executives own a stake in.
Earlier this year, Pabst struck a brewing arrangement with Craft Brew Alliance that brought production of a new Rainier product, Rainier Pale Mountain Ale, back to the Pacific Northwest for the first time in 13 years. Pabst is also producing limited quantities of the Small Town Brewery “Taproom” line of products with CBA.
Pabst’s press release announcing the partnership with New Holland is below.
HOLLAND, Mich. – Dec. 15, 2016 – New Holland Brewing Company (New Holland) Founder and President Brett VanderKamp and Pabst Brewing Company (PBC) Chairman Eugene Kashper announced today that the two companies will enter into a long-term partnership agreement, effective first quarter 2017. The partnership will focus on the national distribution and sales of New Holland’s full portfolio of craft beer.
“This partnership allows us to distribute our beer brands to more consumers throughout the country by leveraging PBC’s robust sales and distribution platform,” said VanderKamp.
Once the partnership is fully implemented, PBC’s sales force will sell all of New Holland’s beers to wholesalers nationwide as part of PBC’s high-end portfolio. New Holland, entering its 20th year, will remain independent and will continue to manage all other business functions for its beers, including production, marketing, and finance. All beers will continue to be brewed in Holland, Michigan, and New Holland’s spirits, restaurant and retail operations will continue to operate as they currently do.
“We are excited to be joining forces with Pabst as we combine the strengths of two great American companies,” said VanderKamp. “Pabst’s management of our wholesale network will help us accelerate growth and drive success at the shelf.”
The partnership will increase market share for New Holland’s award winning Dragon’s Milk year-round bourbon barrel stout, which will help it become a truly “unlimited release.”
“We are thrilled to be working with Brett and New Holland,” said Kashper. “Brett is a passionate brand owner who knows his business. He is programmed with the DNA of New Holland’s brands and is committed to using our platform’s capabilities to maximize success. This is a true long-term partnership on both sides.”
The partnership also allows PBC to increase its varied product offerings and strengthen the company’s participation in the craft beer segment.
“Five minutes into my first conversation with Eugene, I could tell I was going to like this guy. He is very entrepreneurial and Pabst has a very unique view on partnerships,” said VanderKamp. “He understood our desire to remain independent while finding ways to insure our long term success. We quickly found that we share similar visions on building successful brands and being creative in a rapidly changing industry.”
About New Holland Brewing Company:
New Holland Brewing Company’s deep roots in the craft industry go back to 1997. Our role as an integral member of the artisan approach is something we take seriously, yet engage in lightheartedly. We believe the art of craft lives in fostering rich experiences for our customers, through creating authentic beer, spirits and food while providing great service. Recognized for our creativity and artistry, our mission to improve the lives of craft consumers everywhere is seen in our diverse, balanced collection of beer and spirits. New Holland’s beers include Dragon’s Milk, a year-round bourbon barrel stout, which has won several industry awards; Ichabod Pumpkin Ale; The Poet Oatmeal Stout; Mad Hatter IPA, and Hoptronix Double IPA. For more information, please visit: www.newhollandbrew.com.
About Pabst Brewing Company:
Since 1844, Pabst Brewing Company has been American-owned and operated, and is North
America’s largest privately held brewing company. Pabst’s portfolio includes iconic brands with deep ties to America’s heritage, such as its flagship Pabst Blue Ribbon and others such as Ballantine IPA, Lone Star, Rainier, Schlitz, Old Style, National Bohemian, Stag, Stroh’s, and Old Milwaukee. For more information about Pabst, please visit: www.pabstbrewingco.com.