Sheehan Family Companies has reached an agreement to acquire some of the assets of Everett, Massachusetts-based Night Shift Distributing (NSD), including the distribution rights to Night Shift Brewing’s portfolio in Massachusetts and Connecticut, beginning October 18.
Speaking to Brewbound, co-founder Rob Burns said getting NSD to the “next level” was becoming “harder and harder” and requiring “more resources to amplify it” as the competitive landscape evolved.
“Night Shift Brewing came to the conclusion that they needed more muscle and more horsepower and deeper penetration into the marketplace, because we really believe we’re still just scratching the surface on what Night Shift could be in our home base, and just economies of scale and just logistics, we can’t really get it that much further doing it ourselves,” Burns said.
Night Shift co-founder Michael Oxton added that the company can now “double down on focus” of the craft brewery for the first time in five years.
“We’re at this point now where it’s like, ‘What can we be most successful at focusing on going forward?’ and it just feels like the brewing and the brand side of it just makes the most sense for us, and that’s where we can have the best impact, as a company,” he said.
“There’s a reason why wholesalers are consolidating across the country,” Burns added. “It is a game of scale. It is a game of maximizing trucks and dollars per drop and logistics, and we are not going to be able to match that. We’re just not going to be able to get there. There’s too much market pressure. When craft was growing double digits, it was a lot easier to see a pathway to get there, or to at least be a force in the market for a longer time.”
Burns said in the back of his mind that the company would eventually come to the point, however, those conversations only began taking place over the last three months.
Night Shift explored what it would need to do to provide better service as a distributor — doubling its salesforce, adding warehouses in western Massachusetts or on Cape Cod, purchasing more trucks — but all those solutions would have required a significant capital investment.
“Are we really raising equity or taking on debt to become a better wholesaler?” Burns asked. “Are we really at this point now trying to reinvent the wheel when there’s already better options out there?”
In joining Sheehan in Massachusetts, Night Shift gains the benefit of a partner with fresh eyes and a broader perspective of the market, an external view that was sometimes lacking in internal conversations.
“When you’re trying to ideate and have someone beat up an idea because that’s how you get to the best one, if you’re just talking to yourself, often you end up feeling like you’re in an echo chamber,” Oxton said. “How do we get perspective from an outside party on our biggest, most important market, which is Mass? Talking to ourselves maybe isn’t the best solution for growth over the next two to three years.”
Still, Oxton and Burns said that self-distribution and independent wholesalers will remain important for the growth of craft breweries, particularly small ones.
“It worked great for us, or easier for us, back when we didn’t need to be in all of Massachusetts because that wasn’t part of the business,” Oxton said. “I think you could really succeed if you were like, ‘I want to just distribute within Metro Boston and that’s going to be my market.’
“I see no problem with that and we’d probably do fine if that were the goal, but the investment it takes to get to the volume we want to be at now is you start having to make sacrifices and choices,” he continued. “Do we get a new fermenter or do we get a new truck? It really starts to change the future of your business when you’re on this kind of scale.”
Enter the Sheehan Family Companies, one of the largest distributors of craft beer in the nation, with 17 distributors in 12 states and Washington, D.C.
In Massachusetts, Sheehan operates three wholesalers: Craft Massachusetts, with a territory covering Boston and central and western Massachusetts; L Knife & Son, covering southeastern Massachusetts; and Seaboard Products Co., covering northeastern Massachusetts. In Connecticut, the company’s Craft Connecticut offers statewide coverage.
Burns estimated that Sheehan’s sales reps each call on an average of 50 accounts, which they visit weekly. Compare that to NSD reps, who have about 250 accounts that they’re able to visit about once every two months.
NSD, founded in 2016 and first took on other brands in March 2017, positioned itself as not just a self-distribution business for the Everett, Massachusetts-based craft brewery’s offerings, but as an independent wholesaler for craft beer, wine and spirits brands.
The distribution arm covered eastern Massachusetts and north central and southwestern Connecticut in full. It offered “distribution in most areas” in central Massachusetts. NSD also offered pickup for accounts in western Massachusetts and seasonal service to Martha’s Vineyard and Nantucket.
Over the last five years of operation, NSD distributed more than 2.4 million cases of beer, wine and spirits from 35 supplier partners to 2,000 accounts.
NSD made its partners the following promises:
- “A complete cold-chain life-cycle for every bottle, can, and keg;
- No lifetime contracts – archaic franchise laws will be ignored;
- An oath that NSD will not partake in pay-to-play, illicit discounting, or anything that might be termed the ‘gray area’ of legal.”
NSD’s portfolio includes offerings from New England-based craft breweries (67 Degrees, Aeronaut, Mast Landing and Widowmaker) as well as breweries from across the U.S. (Torch and Crown, Destihl, Trophy). The wholesaler also sells non-alcoholic offerings from Athletic Brewing, Spindrift and HOP WTR.
Sheehan has expressed interest in taking on several of the suppliers, pending their approval, Burns said. He added that those decisions are expected to be made within the next three weeks and he’s hopeful that NSD’s suppliers won’t experience market disruptions.
NSD’s 40 workers may also find a home with Sheehan, as its warehouse drivers and members of its sales staff not being transitioned to roles with the brewery will have opportunities to interview for roles with Sheehan, Burns said.
Sheehan is also in talks to purchase NSD’s fleet of refrigerated trucks, Burns said. However, the company will have to figure out how it winds down its other infrastructure, such as warehouses, or repurposes them for storage.
Earlier this month, NSD and sparkling hard tea maker Loverboy resolved a legal dispute over the FMB brand’s attempt to terminate the wholesaler without paying fair market value. Both parties issued statements saying the lawsuit was amicably resolved. NSD’s strained relationship with Loverboy did not factor into the eventual decision to offload the distribution business, Burns said.
As for Night Shift Brewing’s business, Burns described 2021 as “a roller coaster of a year,” not unlike many other breweries. 2021 has been a “slightly down year” in Massachusetts for Night Shift so far, he said, attributing the results so far to a shift in package type, moving into lower priced 12-packs versus 16 oz. 4-packs; challenges in securing workers; and the slowdown of the company’s hard seltzer business.
“We’re still happy with our Hoot performance, generally speaking, this summer, but not exactly the results we’re delivering,” he said. “The biggest success so far this year certainly has been Whirlpool [IPA], which we launched in 12-packs. That SKU is on fire for us, and that’s the one that’s growing double digits for us.”
Burns expects Night Shift Brewing to finish 2021 slightly below 2020 volumes. Night Shift’s beer division produced 36,483 barrels last year, according to production data from the Brewers Association. Burns said the company produced around 5,000 barrels of hard seltzers last year, pushing the company’s overall volume above 40,000 barrels. This year, he expects the company’s volume to be in the high 30,000s.
The focus moving forward will be on meeting demand for Night Shift’s products in Massachusetts and Connecticut, Burns said. However, when asked about aligning Night Shift’s distribution footprint in other states where the brewery distributes that Sheehan operates, he said the company is more excited about new market expansions in Sheehan territories.
“We’re really excited about this giving us a great off ramp of future growth — like a nice pipeline — to work with one company to really scale across the East Coast,” Burns said. “So Virginia, Maryland, D.C., New Jersey, New Hampshire, Vermont, Rhode Island, Kentucky, Wisconsin — you know, those last two are maybe a little bit further down the road as far as priorities. So that’s our main focus.”
Nevertheless, any expansion is still a year or two out, driven by Sheehan’s subsidiaries’ needs in those markets along with chain requests and authorizations. Vermont and Rhode Island, though, are the most likely holes to fill sooner, Burns said.
Burns believes that the Sheehan network could help Night Shift become a 100,000-barrel brand in time.
“I really believe that with this partnership that’s a real, attainable thing for us,” he said.
By shedding NSD, Night Shift also frees up capital it could potentially use to invest in more brand-building investments, such as new taprooms and the potential to revisit an expansion project in Philadelphia.
Editor’s Note: This story has been updated to clarify that Sheehan is acquiring the brand rights to Night Shift Brewing and other suppliers in the NSD portfolio, and not the distribution company.