Craft brewer Dogfish Head partners with private equity firm LNK

Dogfish Head, the popular Delaware craft brewer with a cult following, has succumbed to the lure of Wall Street money by giving the New York private equity firm LNK a 15 percent stake in the company. On 28 September 2015, Dogfish’s founder Sam Calagione, 46, who only a few days previously had been feted by Vanity Fair magazine as one of the U.S. “celebrity brewers”, shared the news with his employees.

Whatever Mr Calagione’s reasons were for taking private investors on board, the move certainly implies that private equity is seeing craft brewers as a safe financial bet. Given the recent valuation of craft brewers at USD 1000 per barrel (or more), the stake could be valued around USD 40 million.

Dogfish ranked 13th largest craft brewer in the U.S. in 2014, according to the Brewers Association. Having recently completed a USD 52 million expansion of its brewing facilities, Dogfish is on track to brew 253,000 barrels beer (300,000 hl) this year, U.S. media say. Dogfish’s CEO Nick Benz was quoted as saying that carefully planned “low double-digit growth” will bring the company to its eventual goal of 600,000 barrels beer.

Founder and President Sam Calagione started the company in 1995 with his wife, Mariah Calagione, who has served as Vice President since 1997 and oversees marketing. Mr Benz took over as CEO of the Dogfish Head from Mr Calagione in October 2014. Dogfish Head has 225 employees or “co-workers” as they call them at the company.

Mr Calagione was quick to point out to his employees – who probably leaked the internal document to the trade publication Beer Business Daily – that this deal was not a path towards an IPO, majority ownership or any other position that would run counter to his commitment to remain a family-controlled and family-led company. As Beer Marketers Insights, a trade publication, understands it, Mr Calagione plans to buy that stake back someday and keep the company in the family.

“Bottom line, this means that at the Dogfish Board of Directors level there will be one representative joining who will bring some diversity of thought and experience to that group,” Mr Calagione added.

According to Reuters, in the past two years, six craft brewers sold stakes to private equity firms:

• Sweetwater Brewing (sold minority stake to TSG Consumer Partners, 2014);

• Abita Brewing (sold to private equity-backed Enjoy Beer LLC., 2015);

• Oskar Blues Brewery (sold stake to Fireman Capital, 2015);

• Full Sail Brewing (to Encore Consumer Capital, 2015);

• Southern Tier Brewing (sold partial stake to Ulysses Management, 2014);

• Uinta Brewing (sold partial stake to Riverside Capital, 2014).