Duvel Moortgat buys Boulevard Brewing Company
Will Boulevard remain a craft brewer now that it has been sold to Belgium’s brewer Duvel Moortgat? Don’t they have anything more important to worry about at the Brewers Association? Julia Herz, craft beer programme director at the Brewers Association, has ruled on the matter: “Yes, Boulevard is still a craft brewer meeting all three pillars of our definition even with new parent company Duvel ownership.”
The more pertinent question to us is really: does Duvel Moortgat have the money to fund such a pricey takeover?
The deal was announced on 17 October 2013. According to Beerinsights.com, the brewer of Duvel beer will pay an estimated USD 110 million for Kansas-based Boulevard Brewing Company, which makes it the most expensive deal in the craft brewing industry yet.
Beerinsights says on its website: “Belgian brewer Duvel Moortgat, which also owns NY craft brewer Ommegang and high-end importer Duvel Moortgat USA, has a deal to buy Boulevard, creating a new U.S. based company. Deal price is reportedly between USD 110-120 million we hear, though that’s unconfirmed by either party officially.”
Previous deals in the craft brewing industry have been much smaller in terms of financial outlay, although the owner of New Belgium Brewery, Kim Jordan, sold her 59 percent stake in the company for more than that last year (valued at perhaps USD 260 million). AB-InBev bought Chicago’s Goose Island Brewery for USD 38.8 million in 2011, while Magic Hat bought the similarly sized Pyramid Brewery in 2008 for USD 25 million plus USD 10 million in debt, and Fireman’s Capital bought the majority of Utah Brewers Coop for USD 35 million in 2012.
It remains to be seen if Duvel Moortgat can really afford the price tag. In 2012 it had an estimated turnover of EUR 180 million and profits (EBIT) of EUR 30 million. This year turnover could reach EUR 200 million (USD 240 million). That seems like a lot for a relatively small brewer. However, when the Moortgat families bought out the other shareholders in 2012 and took the company off the stock exchange, it cost them about EUR 35 million. Two years previously, they had paid an estimated EUR 35 million in cash for Antwerp’s De Koninck brewery. That adds up to about EUR 70 million in three years. And now USD 100 million are piled on top of this.
Duvel and the breweries in the group produce about 870,000 hl of beer annually, about 50 percent of which is sold in Belgium. By comparison, Boulevard sells about 220,000 hl a year, 30 percent of which is sold in the Kansas City area.
Both companies are a natural fit as Boulevard brews Belgian-style beers too.
Its founder John McDonald, who set up the brewery in 1989, decided to sell his majority stake in the company because he wanted to make sure succession went smoothly. “I just turned 60 this year, and a couple of years ago I woke up and started thinking that I needed to figure out what I was going to do with the brewery long term,” Mr McDonald told U.S. media. “Since then, we've been down a lot of different paths, talked to a lot of different people and looked at a lot of opportunities.”
Mr McDonald found the family owners of Duvel Moortgat receptive to acquiring his company. Sources say, he agreed to reinvest some or most of his proceeds from the sale in the newly merged company and will take a seat on the board. He will remain involved with the operations in Kansas City. Management and employment at Boulevard will remain intact.
Although Duvel’s own brewery in the U.S., Ommegang and Boulevard will continue to operate separately, the merger will double the size of the combined U.S. sales force, allowing Boulevard to enter into new U.S. markets - presently, Boulevard is distributed in half of the U.S. states and overseas, including Europe and possibly China.
The deal could also speed up investment plans at Boulevard. It was reported that Boulevard has been planning a USD 15 million to USD 20 million expansion of its fermentation capacity in about a year or two.
What could Duvel get out of this? A flexible plant in Kansas, where they could brew all kinds of beers if they wanted to. More likely, they will use Boulevard’s clout in the market to push their own U.S. brands brewed at the Ommegang plant.
We find this deal interesting as it shows that you do not have to be a big brewer to expand internationally through acquisitions. Duvel Moortgat buying Boulevard can be interpreted as a sign that medium-sized brewers can also walk down this road and enjoy the benefits of faster and possibly easier growth than through exports. The Duvel brand may be well known amongst beer lovers all over the U.S., but after 20 years of various export activities, the brand only sells an estimated 25,000 hl through straight exports. In comparison, its U.S. brewery Ommegang will sell about 45,000 hl this year.
