- July 22, 2019
When artisans collaborate, good things happen. So why are so many people skeptical of the merger of Boston Beer and Dogfish Head? Will these pioneering companies lose their underdog appeal or craft beer cred? Not if you talk to Jim Koch and Sam Calagione.
By now it’s old news.
In May, The Boston Beer Company, the maker of Sam Adams and Delaware’s Dogfish Head breweries, announced the merger of their companies. The marquee players – Jim Koch of Boston Beer and Sam Calagione of Dogfish Head – said they decided to join forces to better compete against Big Beer, the companies that make more than 80% of all the beer consumed in the US.
The initial reaction to this announcement was mixed. The mainstream press focused on the cost of the deal, a $300 million cash & stock transaction. Beverage alcohol publications had mostly tepid reactions. Many wondered if the quality of the beers would suffer, while others pondered if this somehow signaled the end of American craft beer’s golden era.
On a recent phone call, Heady Times asked Koch and Calagione why two pioneering, top tier craft breweries would do something so corporate now.
"Even putting our two companies together, we still make less than two percent of all the beer made in America,” Koch said. “Percentages aside, Sam and I are still just two guys who started out as homebrewers… who went bar-to-bar handselling our wares. And for 20 years, we’ve worked together – collaborated if you will, with the Brewers Association for the advancement of independent American craft breweries.”
“Mariah and I have kept an eye on what’s being said about the merger on social media,” said Calagione. (Mariah is Mariah Calagione, Sam’s wife, and a driving force behind Dogfish Head’s success.) “Most of it is positive. Lots of folks who are fans of Dogfish Head worry that the brewery is going to lose its identity. And it’s not. I’d like to address that more later,” said Calagione. “But what surprised me was a headline that said something like, ‘Sam Adams Buys Dogfish Head: RIP Craft Beer’. That’s a bit extreme, I thought, and just not true. We have merged, and if that sounds too much like what they do on Wall Street… well, Jim and I think of it more as another one of our collaborations. We’re already bouncing ideas off one another for a beer we want to brew together.”
“Sam and I actually brewed what was probably the first commercially available beer made with Mosaic hops. We did it about eight years ago for a food & beer event called Savor. Boston Beer’s German hops source was experimenting with what was then a new variety. It was Sam’s idea to develop the recipe by writing letters back and forth to one another. I was already impressed by his creativity, but I really got to experience his enthusiasm for being an analog brewer in a digital world,” Koch quipped.
Collaborations epitomize the craft beer spirit. And the merger-collaboration of Boston Beer and Dogfish Head is good for craft beer, as nationally, more consumers will have access to the most inventive adult beverages in the world. That is because Dogfish Head products will now be available in any market that also has Boston Beer brands. The deal is nothing like the acquisitions of other high-profile craft breweries. The transaction unites two bona fide craft breweries. And perhaps most significantly, each company will retain its own leadership and artistic identity. In fact, both men believe they will be able to spend more time innovating.
“So many mergers pay for themselves with synergies that save money,” said Koch. “We have some soft synergies, but if it was just about the money, Sam and I could have cashed out many times over. This allows us to be brewers first and businesspeople second. (The Calagiones ended their relationship with private equity firm LNK and took no money out of the deal.) We’re eager to share tips and secrets we’ve learned over the years. Sam knows his stuff about continual hopping. The evidence is in every sip you take of Dogfish Head 60-, 90- and 120 Minute IPA. Our [Boston Beer’s] Sam ’76 is the product of a bunch of brand-new, innovative brewing secrets. So is our Marathon 26.2 Brew. I’m intrigued by the work Sam has done to invent SeaQuench, Slightly Mighty and SuperEIGHT… creating beers that serve a new wave of drinkers, who are making mindful choices about what they eat and drink.”
During their many appearances at trade symposiums like those sponsored by Brewbound and Beverage Daily, both men have fielded questions about how the craft beer business has changed over the last twenty years. Each have said that there was a time when almost any craft beer got noticed or sampled simply because craft beer itself was something new. Most industry insiders agree that is no longer the case, as the number of breweries in the US has reached 7,500 or so.
“To be a successful craft brewery today, one that isn’t hyper-local, I’m convinced you need artists and soldiers,” Calagione said. “These are challenging times for beer. Canned wine and RTD cocktails are getting more share-of-stomach, as they say. When things get hard, it’s important to do unique things, not fall back on old ideas. For thec reative process, it’s awesome to have the resources of a successful public company that can make decisions to stabilize brands and just not worry about the next quarterly earnings report. That is something Jim and I have both done – reinvest profits for the betterment of the company and our beers. The soldiers support artists through their expertise in areas like purchasing ingredients and structuring a sales force. That support is incredibly liberating for the artistic process.”
You almost never hear about collaborations in the world of wine & spirits. Real craft breweries (those that meet the Brewers Association’s definition of independent i.e., less than 25% ownership or control by beverage alcohol companies that are not craft brewers, plus production under six million barrels) are still a community of artisans who come together to perfect techniques and share recipes. Think of Sierra Nevada’s Beer Camp. By joining forces, Jim Koch and Sam Calagione can be successful artisans, while remaining independent family businesses. The Koch and Calagione families are the two largest shareholders of the combined company. They can also make good on their promise to support American craft beer because great products will bring more craft beer lovers into the fold.
“I know Sam wants to give his children the opportunity to be a part of the family business,” said Koch. “And many people have heard me speak about my succession plan. It’s to ‘not die’. I think this is an improvement.”