Brewscape: The Latest Craft Beer Brand News

 

Boston Beer and PepsiCo Partner to Create ‘HARD MTN DEW’

Boston Beer Company and PepsiCo Beverages have formed a partnership to produce “HARD MTN DEW.”

Launching in the U.S. in early 2022, the 5% ABV flavored malt beverage will be developed and produced by Boston Beer, while PepsiCo has set up a new entity to sell, deliver, and merchandise the product, according to a press release.

“We know that adult drinkers’ tastes are evolving, and they are looking for new and exciting flavorful beverages,” Boston Beer CEO Dave Burwick said in the release. “The combination of our experience in brewing and developing the best-tasting hard seltzers and hard teas, and Mountain Dew, a one of kind multi-billion dollar brand, will deliver the excitement and refreshment that drinkers know and love.”

While Hard Mountain Dew will have similar branding to the Mountain Dew soft drink, the new product will have no caffeine and no sugar, according to a Boston Beer spokesperson. A final calorie count is not yet available because the recipes are still in final development stages. It will be available in original, black cherry and watermelon flavors, with a soon-to-be-named fourth forthcoming, the spokesperson said.

Hard Mountain Dew will be available in 24 oz. single serve cans and variety 12-packs of 12 oz. cans.

“For 80 years MTN DEW has challenged the status quo, bringing bold flavors and unmatched beverage innovation to millions of fans,” Kirk Tanner, PepsiCo Beverages North America CEO, said in the release. “The Boston Beer Company partnership combines two recognized leaders in our respective industries to address the changing tastes of drinkers and we are thrilled at the opportunity to create HARD MTN DEW that maintains the bold, citrus flavor fans know and expect.”

For now, the partnership is only focused on Mountain Dew-branded offerings.

“As part of our collaborative work, we will be looking for opportunities to innovate together, but currently we do not have any plans to share involving other brands,” the spokesperson told Brewbound. “We’re looking forward to getting HARD MTN DEW on shelves first and then will go from there.”

While the partnership between the two companies is new, their connection through Burwick goes back decades. Before taking the reins at Boston Beer in 2018 following the departure of longtime CEO Martin Roper, Burwick’s career included 20 years at PepsiCo, where he last served as chief marketing officer in 2009.

This new partnership is the second time Boston Beer has blurred lines beyond its heritage as an early craft brewery. Last month, Boston Beer announced a joint venture with spirits behemoth Beam Suntory that will cross categories for both companies.

Early products expected to come from the JV include Truly Hard Seltzer-branded spirits, which Beam Suntory will produce, and Sauza Tequila-branded flavored malt beverages, which Boston Beer will produce.

The release follows several other partnerships between breweries and non-alcoholic beverage producers.

Boston Beer previously dabbled in hard soda in 2015 with a line under its Coney Island Brewing brand, but those fizzled out when the hard root beer fad ended.

HOP to Add Beer, Wine to Menus in San Diego and New Mexico

Noted pancake purveyor IHOP is soft launching its “Bubbles, Wine & Brews” menu in three of its restaurants in San Diego and New Mexico, with additional locations in New York, Rhode Island, Maryland and Ohio, among others, to follow.

The addition of beer, wine and champagne to the menus of those stores is part of the 62-year-old diner chain’s effort to “pilot, test and learn” how well those offerings are received by guests and gain “feedback to optimize the menu rollout and new offerings more broadly.”

In a press release, IHOP president Jay Johns said the company’s recent “Drinks and Dining Survey” — conducted in July by Toluna, surveying 1,000 adults ages 21-70 — revealed that 66% of recent IHOP guests and 58% of guest ages 21-34 said they want alcoholic beverages to accompany their IHOP meals.

“As we continue to focus and expand on our daytime and evening menu options, adult beverages offer a terrific innovation and evolution to enjoy IHOP for every occasion,” he added.

Unsurprisingly, the initial beer list includes offerings from major producers: Bud Light (Anheuser-Busch), Blue Moon (Molson Coors) and Corona (Constellation Brands). However, “locally sourced beers” will also be included. How deep IHOP will go into local craft for its menus remains to be seen. Notably absent from the menus are hard seltzers.

In addition to beer, IHOP is adding mimosas and wines by the glass from E.& J. Gallo Winery, including Barefoot brands Bubbly Brut, Bubbly Chardonnay and Cabernet Sauvignon.

Alcoholic beverages will only be available for dining in, with prices varying by store.

The Nation’s Restaurant News reported that IHOP’s dalliance with alcoholic beverages follows moves by First Watch and Cracker Barrel to add alcoholic beverages to their menus last year. Other fast-casual restaurants have tested and added beer and alcoholic beverages to their menus. That doesn’t mean programs such as this are always successful. In early 2017, Starbucks scrapped its “Evenings” program, which included craft beer, wine and small plates.

Still, with 1,772 restaurants worldwide, there’s a good chunk of business with IHOP to be had for those who can claim it, should the program expand.

Lone River Rolls Out First National Campaign

Six months after its acquisition by Diageo Beer Company, Texas-based Lone River Beverage Company has tapped into the marketing resources of its parent company with the launch of its first ever national campaign.

The 60-second commercial at the center of the “Follow It West” campaign, starring Oscar- and Grammy-winning singer songwriter Ryan Bingham, can’t get any closer to the brand’s origin story — it was filmed on Calamity Creek, the West Texas ranch where Lone River founder and CEO Katie Beal Brown’s family has worked the land for generations.

“We started Lone River with a simple story, a story 100 years in the making,” Beal Brown said in a press release. “This was always a long play for us, to build a legacy that celebrates the culture connected to Ranch Water. A culture emblematic of the American West.

“We knew the only way to share this story with a national audience was to give people a taste of the real deal – out on our family’s ranch in Far West Texas with the cowboys, cowgirls and ranchers from the area,” she continued.

Beal Brown founded Lone River in 2019 based on the traditional recipe for ranch water, a classic Texas cocktail of tequila, soda water and lime juice, but with hard seltzer as a base. Diageo acquired the brand in March, and it was the best selling ranch water in the U.S. at off-premise retailers in the 52 weeks ending August 14, according to NielsenIQ data cited in the release.

In addition to the original cocktail, Lone River Ranch Water is also available in Spicy, Rio Red Grapefruit and Prickly Pear. Each 12 oz. can checks in at 80 calories and 4% ABV. It is available in 48 states and will add Utah and West Virginia to complete nationwide distribution by the end of September, according to a spokesperson.

In addition to the commercial, which depicts Bingham and “real cowgirls and cowboys from West Texas” on horseback, the campaign includes “a large investment” in the fourth session premier of the Paramount Network’s Yellowstone, in which Bingham has a recurring role. Bingham and Lone River have signed a one-year partnership that includes appearances and performances, the spokesperson said.

“When I think of ranch water, I’m instantly reminded of my time spent in West Texas and the way of life out there,” Bingham said in the release. “I think of days working cattle, nights writing songs and a cold beverage at the end of a long day. Lone River is a success because it’s as authentic as it gets. We are on a ranch, we are working cattle and we are building fences — this campaign is the real deal.”

“Ryan Bingham felt like such a natural partner to help us tell our humble story on a grander scale,” Beal Brown added. “His music has been the soundtrack that has inspired so much of our journey, and we immediately connected through our shared roots in Far West Texas.”

The campaign will also include digital, social, audio and out-of-home advertising, as well as point-of-sale support, and “a sizable presence” at the Wrangler National Finals Rodeo in Las Vegas in December.

Rhinegeist Names Mike Parks as Next CEO

Cincinnati’s Rhinegeist Brewery has named Mike Parks as its next CEO, company founders Bob Bonder and Bryant Goulding announced in a letter to employees in mid-August.

Parks most recently served as CEO of TNT Crust, which makes pizza crusts and is “nearly twice the size of Rhinegeist, with many similarities in its range of departments and employees,” Bonder and Goulding noted.

The need for new leadership comes as Rhinegeist embarks into employee ownership, a change that was first announced in October 2019. Bonder and Goulding wrote that as the business transitions, they wanted to ensure that the brewery and its employees “are set up for success.”

“[W]hen stepping back and reflecting about what we need to achieve that, it became clear that it’s time for some new leadership,” they continued. “As co-founders, we want to step away a bit and take time for ourselves, but frankly, we just aren’t as good at running a 300-person business as we are at being entrepreneurs. All the employees who are becoming owners deserve a leader who knows how to navigate this stage in a business’s life with passion and experience. Someone who knows how to lead with empathy, empowerment, and a habit of putting employees before themselves.”

Bonder and Goulding say they’ve found that in Parks, following a four-month search and interview process that included numerous Rhinegeist employees from multiple departments.

“Mike brings the balance of experience and compassion to lead through whatever this wild obstacle course brings next,” they wrote.

“We’re all looking forward to what he will bring to the table as a leader and co-owner,” they added. “It’s been a wild and wonderful eight years, and we’re confident that we’re set up for many more with Mike on the team.”

Parks will relocate to Cincinnati from Baltimore with his family.

Although Bonder and Goulding are stepping back, they said they will remain “co-owners alongside the employees for the next 15+ years.” They will also chair the brewery’s new board “to ensure that the business stays uniquely employee owned, and a part of the community that has supported it since its inception.”

“Thank you to our employees and to the community,” they wrote. “We’ve steered the ship, but you all have really built Rhinegeist. It’s been an incredible journey so far, and we can’t wait to see where this next stage takes us all.”

Rhinegeist finished 2020 as the 24th largest craft brewery by volume in the U.S., according to the Brewers Association.

Production Begins at City Brewing’s California-Based Irwindale Brew Yard

Production has begun at City Brewing’s Irwindale, California-based facility, five months after the brewery’s acquisition from Pabst Brewing, the company announced in mid-August.

“With IBY now operational, City is in an even better position to serve the needs of our current and future customers as demand for their products accelerates,” City CEO Ross Sannes said in a press release.

Both City, the country’s largest beverage alcohol co-packer, and 40-year-old Irwindale Brew Yard (IBY) have been subject to several financial transactions in recent years.

One year after announcing it would shift its production to City facilities, Pabst struck a deal to acquire the Irwindale Brew Yard from Molson Coors for $150 million in November 2020. That same month, rumors of City’s sale swirled following an anonymously sourced report in Bloomberg news, which then-CEO George Parke III shot down.

A murky picture became clearer in March 2021 with the announcement of City’s acquisition by a consortium of investors. That group includes Charlesbank Capital Partners, Oaktree Capital Management, City management, and Blue Ribbon Partners — “a new investment platform focused on the beer and beverage industry in the U.S.,” according to a press release about the deal. Pabst co-owner Eugene Kashper is the chair of Blue Ribbon Partners, which also owns Pabst Brewing Company and holds “a significant ownership interest in City Brewing,” according to the release.

City’s new ownership acquired IBY as part of a $630 million investment program announced in March that aims “to accelerate the company’s growth and fund its capacity expansion program to meet growing demand from key customers,” according to the release.

IBY has already launched one production line and will add another this month, City said in the release. A third will come online in January 2022, which will increase the facility’s capacity to 55 million case equivalents annually. Within the next five years, City expects capacity to reach 110 million case equivalents. City’s other three facilities — in Latrobe, Pennsylvania (formerly the Latrobe Brewing Company’s brewery); Memphis, Tennessee (a former Schlitz brewery); and LaCrosse, Wisconsin — produce about 130.8 million case equivalents combined.

City has hired 120 employees to staff IBY, which the company said will be “the largest full-service, low-alcohol beverage contract production facility in the western United States,” once it becomes fully operational. By the middle of next year, the brewery will employ 150 workers and eventually 400 as City follows its plans to build out the facility, a company spokesperson said.

“We have a talented team that is committed to maintaining and building on Irwindale Brew Yard’s storied brewing legacy while ensuring we are capitalizing on the tremendous market opportunity in the alcohol beverage marketplace through a tireless focus on quality,” Sannes said in the release.

The brewery’s output will include hard seltzers, flavored malt beverages, beer, craft beer, non-alcoholic beverages, and spirit-based, ready-to-drink offerings. IBY will offer automated variety pack capability, which is key for hard seltzer producers, as the majority of the segment’s dollar sales flow through variety packs.

IBY’s geographic location is a boon to City customers, including Boston Beer Company, which relies heavily on City facilities to produce Truly Hard Seltzer. Boston Beer founder and chairman Jim Koch explained that contract production at IBY and at Red Bull maker Rauch’s Arizona-based facility will help improve the company’s margins in the second half of the year during a conference call about the company’s Q2 earnings report last month.

“All of those freight costs will be reduced as we begin to supply the western half of the United States from western breweries,” Koch said.

New Glarus CEO Vows to Fight Minority Shareholders’ Lawsuit

New Glarus Brewing co-founder and CEO Deborah Carey called a lawsuit filed in August against her and her Wisconsin craft brewery by three minority investors “slanderous,” and she said she plans to file a counter complaint.

“These things are so egregious and so ridiculous, they’re going to be easy to defend, easy to prove,” Carey told Brewbound. “I’ve got the slander suit all lined up.”

The three original investors in New Glarus claim in their lawsuit, filed in Wisconsin’s Dane County Circuit Court, that Carey breached her fiduciary duties and the company has oppressed minority shareholders.

“Deb Carey operates the company with no regard for established corporate rules and instead exercises complete autocratic control with no personal accountability,” the complaint reads.

The plaintiffs — Steven Speer of Camas, Washington; Roderick Runyan of Lawrence, Kansas; and Karin Eichhoff of Middleton, Wisconsin, who inherited her shares after the 2015 death of her husband Dierk Eichhoff — have owned shares, currently amounting to 12.46% of the craft brewery, since its founding in 1993.

According to the complaint, Speer owns 1.71% of the company’s voting shares and 3.85% of the overall business; Runyan owns 0.46% of the voting shares and 0.91% overall; and Eichhoff owns 3.41% of the voting shares and 7.7% overall. Eichhoff and Speer are the third- and fourth-largest shareholders, following Carey (50.48% of the voting shares and 37.98% of the company) and its Employee Stock Ownership Program (ESOP), which holds 26.6% of the voting shares and 20% of the overall business.

In the lawsuit, the plaintiffs claim that New Glarus has “compiled $100 million in retained earnings and $40 million in cash, and repeatedly refused to distribute any of those profits and reserves beyond the tax distributions that are specified in the shareholder agreement.”

Carey disputes those claims.

“There they are, sending out a press release that no dividends have been paid and Deb’s taken $100 million from the brewery,” she said. “I just got audited by the state, a two-year audit. They started out thinking I was going to owe them this huge amount of money. They owed us at the end over $100,000. You think they wouldn’t have noticed that I pilfered $100 million?”

The lawsuit also alleges that “although the brewery has become extremely successful over time, the defendants have thwarted the reasonable expectations of sharing in the profits and have instead operated the brewery for the benefit” of Carey and her husband, Dan Carey. New Glarus is the nation’s 12th largest craft brewer by volume, according to the Brewers Association. It produced 206,302 barrels of beer in 2020 — all sold within the borders of its home state of Wisconsin.

“Where you see the oppressive conduct is that Deb Carey has given herself more and more control of the brewery, and she gets to decide where the money goes and what’s done with it,” Kevin Palmersheim, the attorney representing Speer, Runyan, and Eichhoff, told Brewbound. “The last straw was this recent shareholder agreement she’s proposing.”

In June, New Glarus proposed a new shareholder agreement that would allow the company to offer shareholders “an annually fixed internal price that could be substantially lower” than offers made by third parties to purchase their shares, and give the company the ability to purchase some, but not all of a shareholder’s shares, which would allow it to selectively acquire more voting shares, according to the complaint.

The proposed agreement also specifies that shareholders are only permitted to donate their shares to New Glarus’ Only In Wisconsin Giving, Inc., a non-profit foundation Carey set up this year, according to the lawsuit, and adds a clause that reads “all parties agree that it is in their mutual interests ‘to preserve local ownership of the brewery.’”

According to Carey, the company presented the proposed agreement with shareholders more than a month before the June meeting and advised them to consult their personal attorneys and come prepared with questions. During the meeting, Speer opposed the changes to the shareholder agreement.

“Steve in particular was upset, and we were like ‘OK, we’ll put a pause on this — let me make these changes that you’re asking for and we’ll send it to you to review and make commentary and see if we can find some middle ground,’” Carey said. “He said he wanted to work with us and was supportive of what I was doing.

“Where in this is oppression?” she asked. “They say, ‘She changed it.’ No, I did not change it, I want to change it. I talked to you about changing it. You don’t think in 30 years, I’m going to propose some changes?”

Carey, her family members and the ESOP that New Glarus instituted in 2015 are not beholden to the shareholder agreement, and Carey does not intend to sign an agreement herself.

“Well, there’s really no reason to,” she said. “I am the founder and the president; my initial contract with the brewery was for three years, and I have worked there for almost 30, so I have given my life and an enormous amount of time and energy to building this business. These people invested a few thousand dollars and stay at home and collect checks. Now, why should I have the same agreement they have?”

Speer — a neighbor of the Careys in Fort Collins, Colorado, before they relocated back to Wisconsin — and Eichhoff’s late husband assisted in the brewery’s formation, according to the complaint. Speer helped the Careys write a business plan and Eichhoff recommended the village of New Glarus as a location for the brewery, “given its old world European charm [that was] suitable for Dan’s beer styles, and a community that would be supportive of the new business, combined with the advantages of the close proximity to the larger Madison metropolitan area,” according to the lawsuit.

In 1993, Speer invested $25,000, which “represented virtually his entire savings” that he had “inherited from his deceased father.” Dierk Eichhoff invested $12,500 and acquired additional shares as the company grew, according to the complaint.

In 2019, the plaintiffs sold some of their voting class shares to New Glarus, which allocated 40 shares acquired from Runyan to the ESOP, but not the 1,250 and 625 it purchased from Eichhoff and Speer, respectively.

“Upon information and belief, the reason for this purchase structure was to retain Deb Carey’s slight majority control of the issued and outstanding voting shares and that assigning Eichhoff[‘s] and Speer’s voting shares to the ESOP could lead to Deb Carey owning less than 50% of the outstanding voting shares,” the complaint said.

The plaintiffs’ goal is to sell their shares after a judge determines “a fair value” for them, Palmersheim said.

“Up until May of this year, their long-term goal was to absolutely remain a shareholder,” he said. “They were founding shareholders so they wanted to just remain and work these things out in the New Glarus brewery family. Now they just think it’s just gone on to the point where that’s going to be impossible.”

In regards to the valuation of the company, all parties are in disagreement. The lawsuit alleged that the company “refused to disclose financial information and valuation information to the minority shareholders, even after shareholder requests.” However, Carey said this is untrue and added that the company’s valuation must be calculated annually for its ESOP, which is available for shareholders to see.

“They have at minimum a reviewed financial [statement], the valuation and an annual meeting, plus four communications with their dividend checks,” she said. “I don’t know, what do they think they should be getting?”

The most recent ESOP valuation placed New Glarus’ value between $92.8 million and $113 million, according to the lawsuit. Carey estimated that it’s closer to $100 million. But based on recent acquisitions and other traits about New Glarus, Palmersheim estimated the value is between $350 and $500 million.

“This brewery is extremely profitable for the level of sales that it has,” he said. “It has zero debt; it’s expanded and bought all the land around it and built two new facilities. So, it’s a little different animal than the other craft breweries that I’ve seen.”

Palmersheim said the defendants don’t begrudge the Careys for their success and appreciate Dan Carey’s brewing talent, but want fairer treatment as shareholders.

“I do a lot of these types of cases in representing closely held businesses,” Palmersheim said. “I have never seen a particular case where I’ve seen such an extreme level of majority control and oppression in this particular case with New Glarus Brewery.”

Carey took particular umbrage with the lawsuit’s request that she be forced to step down or step aside for independent directors.

“I started this brewery with $237,000 — that would be a GoFundMe today,” she said. “With $237,000, I had built a multi-million dollar business … and somewhere in America, there’s someone else who can do my job? Please, show me another brewery who has outperformed me.”

Carey sees the lawsuit as the crystallization of a larger issue: Who should benefit from a company’s success?

“There is a lot of chatter about who should get the money, and I feel like there’s enough money to go around, and I’m really proud of the balancing I’ve done to really take care of my investors, and really take care of my people,” she said. “It’s interesting when this big national conversation gets down to a local level because that’s what you see now. Out of all of my investors, I’ve got three of them that are pissed off, and are going to try to destroy the company. Now, should they get to do that? Are they so important that the rest of the investors and all the employees and myself and my husband should all suffer?”

The first time Carey said she sensed frustration among some shareholders was during the June meeting when she recapped the year and explained how New Glarus did not lay off any employees or cut their hours during the pandemic, nor apply for a loan from the U.S. Small Business Administration’s Paycheck Protection Program (PPP). Speer pushed back against those decisions, she said.

“I, basically in his opinion, wasted money keeping people,” Carey said. “I should have sent them home and saved some money, applied for PPP and all these additional funds.”

In addition to the plaintiffs, New Glarus has nearly two dozen other investors. The complaint said the company has 25; Carey said there are 27. After Carey and Speer’s standoff during the meeting, several other investors thanked her for her stewardship and assured her they were pleased with her leadership, Carey told Brewbound.

Carey colored the lawsuit as “a vendetta” both “personal and political” on the part of Speer, who she said has encouraged the brewery to hire his son, a trained professional brewer. The complaint noted that “one of the plaintiffs’ children was denied employment despite his college degree and experience being specific to brewing beer,” and contrasted this with the fact that the brewery has employed the Careys’ daughter Katherine E. May as an architect.

“Steve being upset that we didn’t hire his son is not going to get me to sell the brewery — we’re not going anywhere,” Carey said. “I don’t cave to bullies, and I don’t start fights, but I will finish them.”