smuttynose up for auction

Discussion in 'General Brewing Discussions' started by dfj, Jan 19, 2018.

  1. dfj

    dfj Active Member

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  2. J A

    J A Well-Known Member

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    If Inbev was interested, they wouldn't be going belly up. :cool:
     
  3. KC

    KC Active Member

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    Nudge nudge, Rogue Farms
     
  4. dfj

    dfj Active Member

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    they claiming production at 50% capacity. they just finished a 1000HL Gold status green brewery + keeping the old one running as Smuttylabs
    New England landscape is crowed right now with hundreds of craft breweries. NH alone has over 70
    so many good beers to try there is nothing to compel anyone to just buy their product.
    their plan only included growth to cover huge expense to go gold green. Being green is good but not at the expense of going out of business
     
  5. dfj

    dfj Active Member

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  6. KC

    KC Active Member

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    Rogue has shown success with the vertical integration model - growing to brewing to distribution plus foodservice from a small coastal town. Seems like a good fit if they want bicoastal presence like Redhook did.

    Otherwise I think most large breweries will have trouble with the farm format away from major metro, and small owners will hit the wall with distribution.
     
  7. dfj

    dfj Active Member

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    1000 HL is too big w/o huge distribution channels. Smuttynose production peaked 3 years ago and has been on a downward path
    I knew the owner of nuttfield brewery in derry NH before he expanded to 33BBL but he passed away. Still think 33BBL is the max local size unless you have a big marketing partner or solid contracts brewing. The tend in craft brew is to look for the next best beer. Very little loyalty unless its a brewpub. brewpubs is a 1 to 3bbl size system. above that you need distribution. Shelf's are crowed with 100 microbrews
    it was a good 24yr run. Nothing last forever. hopefully they find a buyer
     
  8. thunderwagn

    thunderwagn Well-Known Member

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  9. HighVoltageMan!

    HighVoltageMan! Well-Known Member

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    In addition, the profit marginal drops dramatically when a brewery distributes. Small brew pubs have a much larger profit margin, 30-40% if managed correctly, distribution margins can drop to 5-8%. Right now the market is saturated with really good beer, a brewery that expands with the hope of gaining market share is risky.

    Sadly, I don't think this is unique or isolated to New England. I think we will see this more often.
     
  10. Nosybear

    Nosybear Well-Known Member

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    There's an article in Craft Beer and Brewing on this subject, basically making the case that if you're a mid-sized craft brewer, you're in for a bit of a rough ride. Markets are becoming saturated in the US (if you assume the US is this big, homogeneous area) and as you mention, the highest return per pint is the return on the pints you pour yourself. So I did what I do for a living, went out and got data....

    Google makes a lot of its search data available to others so I looked for data from 2004 on for the search terms "Brewery" and "Opens". Turns out there is a slow, steady increase throughout the period. There appears to be a small dip in the last reporting period but it's within the realm of statistical noise. The same search for "brewery" and "closes" didn't yield enough data to even use. So craft beer is still growing. Next is where. Small neighborhood breweries are doing well, apparently. The big "craft" brewers like New Belgium, Lagunitas, St. Arnold and so forth are doing well. The problem is in the middle and a large part of the problem is bad business decisions.

    You overextend, over-leverage, attempt to grow too fast, base your predictions on the top of an upswing, you will have business problems. One area where the article mentioned in the first paragraph is very weak is data. They tell several anecdotes about breweries having to close but I don't know if the rate of closure has changed and I can't tell it from the data. The anecdotes match what I get to be the mood of the industry, particularly in the middle of the size distribution but without data, it's impossible to tell. Maybe the Brewer's Association has some stats, I don't know. Smuttynose was one of the stories mentioned in the article and I can't remember exactly the story around why they closed - I believe it was attempting to grow too fast. Lots of factors but I believe the general point of the article to be true: It's a tough time to be a mid-sized brewery in the US.
     
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  11. dfj

    dfj Active Member

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    in 2009-10 sales up 30% the the decline hit as large variety micro brews started to show up on shelf everywhere

    from seacoast online
    Smuttynose says the brewery is capable of producing 75,000 barrels a year. However, in the last year it has been running at 50 percent capacity.

    Owner Peter Egelston says the company's financial models were based on 20 years of consistent growth. He said as the marketplace stabilizes, Smuttynose can regain its footing with a major infusion of capital

    no one predicts 20yr of growth not even amazon
     
  12. KC

    KC Active Member

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    You give those numbers to investors, you don't actually operate to them. It's like they had a business student from the community college write a plan for free.
     
  13. Nosybear

    Nosybear Well-Known Member

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    Anyone sinking money into an investment that's supposed to grow consistently for 20 years deserves their rate of return.
     
  14. dfj

    dfj Active Member

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