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.”