Rhinegeist on a Tear: Up 80 Percent

1 (7)Cincinnati’s Rhinegeist Brewery continued its impressive growth in 2016, increasing production more than 80 percent, to 56,500 barrels.

In a recent year-in-review, shared with Brewbound, co-founder Bryant Goulding said his company released 96 different offerings last year, including 24 pale ales and 17 IPAs.

More than half of the company’s volume came from its popular Truth IPA, while eight percent came from cider and another eight percent came from a rotating pale ale series that launched midway through last year.

“We are strong believers in Pale Ale and the growth we’ve seen here has affirmed our faith,” Goulding wrote.

Sixty percent of the company’s portfolio was self-distributed, Goulding said, even as the company filled out its Ohio footprint and added distribution throughout Massachusetts.

“The connection with our accounts and our ability to deliver customer service is tested each year and we have a great team that goes the extra mile to deliver our beer with a smile,” he wrote.

Those relationships, coupled with the addition of nearly 150 new employees – some of whom were hired to staff a new event space and rooftop bar – helped Rhinegeist stave off stiff competition from an influx of new brands in 2016.

“We’ve spent a lot of time looking for talented and impassioned people to join our team as well as investing in growing our people from within,” Goulding wrote. “We’ve learned that growth can come at the expense of support and communication and we’re aiming to enrich the lives of our employees by staying grounded and finding that level of growth that provides opportunity but doesn’t threaten quality of life or sanity.”

Looking ahead, Rhinegeist expects to produce 80,000 barrels in 2017 and will launch its first year-round imperial IPA, Knowledge, in 12 oz. canned 4-packs in early March. The company is also releasing its rose cider, Bubbles, under the Cidergeist label, in canned 6-packs in March.

“We have a long-term view on what growth and success look like and aren’t interested in grabbing quick or easy sales at the expense of brand strength,” Goulding said. “Penetration, relationship building, and investment in our people and quality is what we expect in 2017.”

Boston Beer CEO Roper to Retire

Boston Beer Company, the country’s second-largest craft brewery according to trade group the Brewers Association, recently announced that CEO Martin Roper would retire in 2018.

Roper, who has led the company since 2001, said in a press release that he informed the company’s board of directors of his plans to step down “a year in advance” to give the Boston Beer ample time to name a successor and to “assure a very smooth transition.”

“I remain fully engaged and committed to leading the business as CEO until a successor is found and a seamless transition is completed,” he said via the release. “I am incredibly proud of everything that the employees of Boston Beer have accomplished and believe our future is very bright.”

The announcement arrived approximately 20 days before Boston Beer Company is scheduled to report its full-year 2016 financial results.

During the third quarter of 2016, the company’s revenue declined 14 percent while shipments dipped 12 percent. Through October 8 of last year, Boston Beer had estimated a depletions decline of six percent from the comparable period in 2015.

2 (5)Nevertheless, founder and chairman Jim Koch praised Martin Roper’s performance since first joining the company as the vice president of operations in 1994.

“Our performance under Martin’s stewardship has been incredible, and I am very grateful for his leadership, partnership and friendship over the last 22 years, during which the Company has grown eight fold,” Koch said via the release. “With the strong leadership team he has built, we are set up for success, and I am confident we will find a very capable CEO to step into his big shoes and lead Boston Beer into the future.”

Roper was the second notable Boston Beer executive to announce a departure in the last two months. Alan Newman, who had been overseeing the company’s incubator, Alchemy & Science (now A&S Beer), retired at the end of 2016 after five years in that position.

Switchback Sells Back to Employees

Vermont’s Switchback Brewing Company, known throughout New England for its popular Switchback Ale, recently announced the establishment of an Employee Stock Ownership Plan (ESOP), transferring 100 percent of the company’s stock into a trust backed by GreatBanc Trust Company.

The company did not disclose specific financial terms of the transaction, but co-founder Bill Cherry told Brewbound that he, along with partner Jeff Neiblum and other minority investors, was able to participate in an immediate liquidity event after the company financed part of the transaction with a loan from People’s United Bank.

Cherry and Neiblum have simultaneously extended unsecured promissory notes to Switchback Brewing Company that will be paid back over a 15-year period, Cherry said.

In turn, current employees will take over ownership of Switchback Brewing Company and receive shares of the company based on individual salaries. Brewery workers who remain employed will continue to accrue company stock over time, Cherry said, and future employees who work 1,000 hours in a calendar year will also be eligible to participate in the ESOP.

“I haven’t even grasped it all yet, to be honest,” he said of the deal. “It’s definitely more than I would have ever dreamed of and, for the employees, it’s one hell of a retirement package.”

Cherry will remain with the company as brewmaster and president, according to a press release.

The decision to sell the company back to employees began about four years ago, Cherry said, noting that he spent time learning about succession planning from other brewery founders, like New Belgium’s Kim Jordan and Boulevard’s John McDonald.

“We have this wonderful business that has grown and I don’t have much money; I have buried it all back into the business,” he said. “This was a nice way of turning that value into cash while I am still young. Now we can spend the next 15 years preparing for when I am not around anymore.”

About 90 percent of the company’s sales come from its flagship product, Switchback Ale, which Cherry described as a beer designed to “fool everyone into having a much more complex flavor profile than they were used to.”

“The market has drifted around us in so many directions, and that 2002 flavor profile continues to be unique,” Cherry said. “As the newer breweries are pursuing extraordinarily hoppy styles, they have left mine alone.”

Distributed throughout Vermont, Maine, New Hampshire, Rhode Island, Western Massachusetts and parts of New York, Cherry said he expects the company to grow another 25 percent in 2017.

Switchback joins Odell Brewing, Harpoon Brewery (which also has a Vermont location), Deschutes Brewery, New Belgium Brewing, Left Hand Brewing and Alaskan Brewing as notable beer companies that have also established ESOPs.

In 2015, Oregon’s Full Sail Brewing exited its ESOP after selling to San Francisco-based private equity firm Encore Consumer Capital.

Too Crafty for Walmart?

A class-action lawsuit filed in Ohio claims Walmart used its private-label beer to deceive customers.

The lawsuit, filed in Hamilton County Court of Common Pleas claims the four beers produced for Walmart – Cat’s Away IPA, After Party Pale Ale, Round Midnight Belgian White and Red Flag Amber, which are sold in 45 states – do not meet the Brewers Association’s definition of “craft beer.”

The beers are being made at Rochester, New York-based Genesee Brewing, owned by Costa Rica’s Florida Ice and Farm Company, but the labels lack any mention of Walmart or the private label brand developer “WX,” which is named in Alcohol and Tobacco Tax and Trade Bureau filings.

The lawsuit asserts that Genesse Brewing “produces well over the prescribed amount that would be considered ‘small.’”

“Defendant’s Craft Beer has never been a ‘craft beer,’ nor has it been produced by a craft brewery,” the lawsuit states. “Rather, it is a wholesale fiction created by the Defendant that was designed to deceive consumers into purchasing the Craft Beer at higher, inflated price.”

The suit also alleges that by placing the private-label brands among other craft beers, Walmart “is further perpetuating the myth that it’s a Craft Beer.”

Walmart’s response: “We have not yet been served, but we take these claims seriously and will respond appropriately with the court.”

A federal judge dismissed a similar lawsuit last year, brought by homebrewer Evan Parent against MillerCoors, that claimed its Blue Moon Belgian White offering did not fit the definition of “craft beer.”

In that suit, Parent claimed that MillerCoors had falsely advertised Blue Moon as craft beer and required retailers to place the product on the shelf among other craft beers. However, the judge determined that Parent was unsuccessful in demonstrating that MillerCoors had misled consumers through its advertising and positioning of Blue Moon as a craft beer.3 (3)