Craft brewer Vale up for a “reluctant sale”
Is this the Wicked Weed effect? In order to avoid a consumer backlash and thus the fate of US craft brewer Wicked Weed, South Australian craft brewer Vale Brewing has decided to disclose the sad circumstances which have forced the owners to seek a sale.
It was confirmed at the Australian Craft Brewers Conference (ACBC) in Adelaide on 26 July 2017 that financial adviser Deloitte is seeking expressions of interest for the sale of a controlling share in Vale Brewing, which is located in the McLaren Vale wine region, south of Adelaide.
As the blog Brews News has the story, Vale was established about ten years ago and has cemented its presence in Australia’s booming craft beer industry.
The brewery’s brand with the iconic vine logo is one of the most recognisable independent craft beer brands in Australia.
Vale became family-owned in 2015 when the Collin brothers bought out the other shareholders in the business. Director Tim Collin told Brews News that the reluctant sale is due to a change in family circumstances.
“My younger brother spent 2016 battling a brain tumour and as a result of that he is no longer allowed to drink alcohol for the rest of his life, which has severely taken the shine off owning a craft brewery,” he was quoted as saying. This has led to the decision to seek a partial or full exit from the business.
While these are certainly very sad circumstances, it’s even more sad that the Collins family felt compelled to share them with the public.
But insiders suspect that this is not the real reason for the disposal. They suspect that Vale’s sales have peaked and that the family wants out. This is alluded to by Mr Collin, who also said that while the company has lost some volume overall in recent years, improvements to its margin mix have kept its bottom line in good stead.
According to Deloitte, the company has a successful export business, with an established presence in several international markets for more than four years.
In a seminar at the ACBC, representatives from Deloitte admitted that mid-tier private equity firms are increasingly seeking out investments in the fast-growing craft beer sector in Australia and that it was only a matter of time before there would be a spate of buyout activity.
There is an obstacle, though: many of the 400-plus craft brewers are too small to attract much interest. Therefore, the spotlight is on those top craft brewers which produce more than 10,000 hl beer annually, or have an EBITDA of AUD four million.
Deloitte said that they could be valued at five times EBITDA, which represents an enterprise value of about AUD 20 million (USD 16 million).
Compare that with the enterprise value of craft brewer Little Creatures, which was put at AUD 381 million or 20 times EBITDA, when it was sold to Lion in 2012, and you will see that stories like Sierra Nevada’s or Boston Beer’s will not be written by the current lot of Australian craft brewers. Few craft brewers make real money here.
