Valuation for US craft brewers in decline

USA | How much is a craft brewer worth? AB-InBev’s recent takeover of Craft Brew Alliance (CBA) valued the group at USD 290 per barrel beer sold. That is more than what AB-InBev paid for the Chicago craft brewer Goose Island in 2011: USD 250 per barrel.

But it is a far cry from the heady days, about four years ago, when valuations soared to an average of USD 1,000 per barrel. The high point must have been Constellation Brands’ purchase of San Diego’s craft brewer Ballast Point in 2016. Constellation forked out USD 1 billion for a brewer which had sold 290,000 barrel (340,000 hl) beer in 2015. The math worked out to roughly USD 3,500 per barrel.

An industry in transition

As growth in the craft brewing industry has slowed to just 4 percent in 2018, after enjoying double digit rates for several years, brewery valuations have taken a beating.

No doubt, AB-InBev got a good price for Craft Brew Alliance just by waiting for a few months. But its bargain purchase of Craft Brew Alliance could be taken to mean that Boston Beer overpaid for Dogfish Head. The brewer of Sam Adams paid USD 300 million for Dogfish Head earlier this year, valuing it at roughly USD 1,000 per barrel.

Did Boston beer overpay for Dogfish Head?

This has brought out the nigglers. A commentator on the website nasdaq.com says that “Boston Beer produced over 4.6 million hl of beverages in the first nine months of 2019, meaning that Dogfish Head will make a negligible contribution to the brewer’s sales. It may give Boston Beer some extra capacity, but the company’s main struggle has been in producing enough hard seltzer to meet demand. Sales of its flagship Samuel Adams beer brand are dwindling. The brewer actually produces more seltzer than beer these days.”

It will be remembered that Constellation was forced to write down the value of Ballast Point last year, as the craft brewing industry’s slowdown continued. Having paid such an elevated price for Dogfish Head, it would not be surprising, says nasdaq.com, to see Boston Beer eventually take charges related to its acquisition.

The naysayers are forecasting a hangover for Boston Beer. Let’s hope they are wrong.

Read more about the takeover in Ina's recent article on that topic.