Dogfish Head Pulled Off The Greatest Exit Strategy of All Time
When I first got into craft beer fanatically in the mid 2000’s, Dogfish Head was the king of the mountain in terms of brand recognition, coolness and innovation. They were the textbook definition of what beer was supposed to be as opposed to the other options on the shelf at that time, which was either macro light lager or European imports. While I had just moved out to California, I just had to have my hands on anything and everything Dogfish Head made and would have my dad scour the shelves to pack up a box for me. That’s right, he had to go on a hunt for Dogfish Head. It was in such demand that you would have to call or drive around to make sure you could get your hands on this highly popular brew. I remember my dad asking me “Are you sure this stout is supposed to be $9.00 for a 12oz bottle??” I told him yes, and “snatch it up as quick as you can, who knows when Dogfish Head will brew it again.” Some of my most fond early beer experiences come from Dogfish Head, tasting the vast differences between 60, 90 and 120 Minute IPA, drinking my first Brown IPA (Indian Brown), my first wood aged beer (Palo Santo Marron). While I had enjoyed high quality, well-crafted beer before being introduced to Dogfish Head, I can directly attribute them with the first beers that I slowed things down for and learned to appreciate ingredients, recipes and experimental beer concepts. Sure, there were plenty of “misses” coming out of Dogfish Head, but they still had the guts to push the envelope in a market largely dominated by big beer and imports.
As the first decade of the new millennium came to a close, Dogfish’s stock in the beer world rose with the tide. Sam and company knew they had a cult following and so many more people wanted to buy their unique beer outside of the northeast United States. They were so popular and cutting edge, they were able to parlay their vibe into a show on Discovery Channel called Brew Masters, in which they told the stories behind their wacky, experimental beer. It’s safe to say Dogfish peaked in popularity at this point. As Dogfish Head began to methodically ramp up production and expand into new markets, craft beer began to blow up big time. Stone Brewing, Deschutes, New Belgium, Oskar Blues, Firestone Walker, Green Flash Brewing, Bell’s Brewery, Ballast Point, Founders Brewing all attacked every shelf, every tap handle and every big box store they could. Dogfish Head’s peers in the northeast like Southern Tier, Victory and Brooklyn Beer began strategic partnerships to stay competitive up against all the players making a go for the national market. This left Dogfish Head in a weird spot. There were many more breweries on the shelf than when 60 Minute IPA was capturing the imaginations of the daily craft beer drinker and the market became flooded with makers of crazy experimental beer.
Dogfish Head was left in a very difficult position during the height of the last craft beer boom. Their flagship IPA wasn’t anything close to what was desired by consumers, and their presence wasn’t very strong in the states they expanded to. We began publishing press release after press release stating Dogfish was removing themselves from underperforming markets to better focus and serve their more popular markets. With Dogfish Head being left in the dust, they reached out to private equity to get back in the game. Dogfish Head struck gold with a few new products, finally began canning beer well after the craft can revolution, and we began receiving press releases again, this time announcing returns to many of the markets they left.
Fast forward to 2019. There’s Anheuser-Busch / In-Bev littering the shelves and ballparks with the craft brands, you have the small local breweries doing fun, interesting, experimental beer, and in the middle is a full-on war with regional breweries fighting for the scraps the big and little guys don’t want in the beer bars, restaurants and bottle shops. It cannot be a fun gig being the Dogfish Head sales rep trying to push 60 Minute IPA. Dogfish Head’s Sam Calagione has mentioned in sales conferences that Dogfish would adjust with the markets in regard to pricing, as the one-size-fits-all model would price them out of many markets. Dogfish Head has never really competed on price with the likes of Stone, Oskar Blues and Lagunitas, breweries I see hovering around the “dollar per bottle” mark at retail. Even with the investment from private equity, Dogfish seemed very challenged in a very competitive market that doesn’t resemble the days of their greatest success, and there didn’t seem like they were going to take a path that was going to elevate them higher on the BA Top Sales List. Speaking of which, Dogfish does sell a lot of beer, it’s just they want to keep growing and payback their big loan they took in 2015 and seems like a pretty difficult task.
Last week, Dogfish Head and Boston Beer Company, makers of Samuel Adams beer, announced a “merger” in which Dogfish Head would receive money and stock in exchange for the company. This is the most brilliant exit strategy in the history of craft beer. This will allow Boston Beer to get a little bit of beer cred back, since they have pivoted over to hard cider and hard seltzer in recent years, this will allow Dogfish Head to immediately pay back that fatty private equity investment, and it will surely put Dogfish Head in a much favorable position against the biggest players in craft beer at the restaurant and retail level. All the hard work Sam Calagione, his family and his team have put into this company could have ended in retiring with a ton of debt or the temptation of selling to any multi-national beer corporation. Selling to Boston Beer wipes out the debt, gets the right people paid and Dogfish Head saves face by selling to one of the largest breweries deemed “Independent Craft.”
June 6, 2019 @ 3:06 pm
I think the days of giant conglomerates paying top dollar for regional breweries is over. You might see some get snapped up for fire sale prices. Sam Adams might be the only brand with the market share, diversification (cider/seltzer) to still fetch a gigantic number.
As a retailer, I can see the craft beer market eating itself right now. The consumer only wants what is new, hot and or ultra local.
June 5, 2019 @ 5:39 pm
I still have a 120 minute IPA in the big bottle…..The last one I had four years ago was delicious. I don’t normally comment on these things, but I just wanted to drop that here….
May 28, 2019 @ 2:26 am
Well written story on the merger. One also cannot discount Sam’s and Jim’s friendship over the years on the BA board and as industry leaders. Wall Street has asked who is going to fill Jim’s voice once he retires. Sam was a good fit for this as a board member and I believe 20 years Jim’s junior.
Keep up the good work
Tod Fyten
Publisher
Brewers Digest
May 15, 2019 @ 2:35 am
Good way of explaining the sale
May 14, 2019 @ 5:43 pm
Long story short!
Thanks Sam for ruining the Love!
May 14, 2019 @ 4:42 pm
Dogfish Head being my favorite company merging with the first company I truly remember enjoying when I got into tasting the beer instead of getting drunk makes me happy. I only wish New Belgium would join them.
May 14, 2019 @ 4:13 pm
Good job on the Dogfish side but you seem to avoid complementing Boston Beer. Many disguised swipes at the leader in the craft industry. Like them or not Jim has had the back of the entire industry and brews beers that are second to none. They might not be considered the cool kid on the block but have always had the guts to pave new paths.
May 14, 2019 @ 4:07 pm
406,000 shares for Sam and family at today’s close of 347.76. He’ll be OK.
May 13, 2019 @ 11:09 pm
As a fellow Dogfish fanatic and one who loathes ‘selling out’, I don’t even consider Sam’s merger a sale. In fact, he probably could have sold his company for twice as much to one of the conglomerates. You nailed it. Best exit ever. And umm, did you really find a World Wide Stout for just $9 bucks ?!?
May 14, 2019 @ 5:52 am
The high octane yellow cap beers (which are phenomenal) can be bought for ~$8 each in Delaware. In my state it’s $12-14!
If you’re ever in Delaware load up! ????
May 13, 2019 @ 4:08 pm
Best summation I’ve read abut this yet. You hit the nail on the head.
May 13, 2019 @ 3:55 pm
Well said ????
May 13, 2019 @ 2:01 pm
Good for Dogfish Head! It’s just a shame they had to merge with Sam Adams, the low-blow, scumbags of craft beers.
May 14, 2019 @ 8:06 pm
Why the anger towards Sam A
May 15, 2019 @ 4:21 pm
Agreed. Sam Adams are not who they once were, and while they still like to refer to themselves as “the little guy”, they are anything but and make regular efforts to keep down the little guys.
May 23, 2019 @ 2:59 pm
Have you ever sat down with Jim, listened to his story and watch him sample small local craft beers that he continues to support and enjoy? Jim does micro lending for small food and beverage people trying to get started in the industry…because he supports them. He started in his kitchen, much smaller than any of the new micro breweries. I would hardly call that trying to keep the “little guys down”. He never sold out and as long as hes a part of Boston Beer he never will.
May 13, 2019 @ 2:00 pm
And it will also put Boston in a position to be bought out in the future by one of the BIG guys!!
May 15, 2019 @ 4:51 am
You are absolutely right on this one!! I see the Boston Beer Company selling out to a big conglomerate. Sad, but true. I give it 3-5 years. Hopefully, Dogfish will continue with their good beers and spirits and not allow Sam Adams to mess with what’s been working so well.
June 9, 2019 @ 6:56 pm
So sad to see a good beer go downhill.Never thought i would see Dogfish sellout.Every time this happens they change the recipe.They cut corners to save money.The same with Ballast Point water it down does not taste the same.Might as well drink that corona crap.Goodbye Dogfish and Ballast point.Will not buy again.It’s not Craft Beer anymore.RIP Sam