Dogfish Head Craft Brewery, one of Delaware’s best known businesses, announced Thursday it is merging with Boston Beer Co., the makers of Samuel Adams beer and Angry Orchard hard cider.
The merger is valued at about $300 million. The transaction is expected to close late in the second quarter of 2019, subject to closing conditions.
It’s a stunning turn-of-events for the Milton-based, independent brewery founded by Sam Calagione, a Massachusetts native, and his wife Mariah, who was born in Delaware.
Dogfish Head plans to retain its name and will still be a craft brewery, according to a press release sent out Thursday.
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‘We’ve all been through mergers’
Brewery-goers at the Milton brewery Thursday were shocked by the news. Many shared concerns that Dogfish Head will lose its revered local touch as a result of the deal.
“We like the local, hometown feel of it,” said Joe Grignano who was visiting from Pennsylvania with his wife, Diane. This is one of the reasons why we stop here when we come to the Delaware area. So we’re hoping that maybe it will stay the way it is.”
Milton resident Paul Swider, who said he moved to the area “40 pounds ago,” said the merger was surprising news on several levels.
“We’re big boys and we’ve all been through mergers,” he said. But his main concern was that they don’t move the brewery or production to Boston, because he’s not sure how he’d explain a three-day shopping trip to his wife.
“They say it’s off-centered and they are. We are.”
For Swider and his group of friends, coming together over a Dogfish beer has been a sign of friendship.
Boston Beer Co. is the second largest American craft brewer based on sales volume behind Yuengling, according to the most recent Brewers Association statistics released in March. Dogfish was ranked 13th. Bob Pease, president and CEO of the Brewers Association, said Thursday night that Yuengling will remain number one after the merger is completed.
Boston Beer was founded in 1984 by innovative brewer and chairman Jim Koch. The company is widely recognized as helping to launch the craft beer industry when it started making Samuel Adams beer. It also produces Angry Orchard hard cider, Truly Hard Seltzer and Twisted Tea.
The Dogfish Head brewery began in Rehoboth Beach in 1995 as a “nanobrewery.” As the company grew, brewing moved to its current Milton site, where the brewery and the tasting room have since become one of Delaware’s top tourist destinations.
As he was leaving the Rehoboth brewery Thursday night for a trip to New York, Calagione, 50, said that the company is not leaving its Delaware roots.
“If you care about true indie craft beer, come to our locations and celebrate with us,” he said. “If anything, our combined companies will get more and more off-centered as we fight the world of conglomerates that dominate our country’s beer landscape.”
Craft beer growth
Anheuser-Busch and other bigger companies such as MillerCoors and Constellation Brands have been acquiring craft breweries and using their market power to challenge regional and national craft beer brands like Boston Beer.
That and local and regional beer growth – there are more than 7,300 breweries in the U.S. now – had made growth more difficult for well-known breweries such as Boston Beer and Dogfish.
That climate “was a significant element” in the deal, Koch said Thursday.
“Independent craft brewers are now under pressure from all of the, as Sam calls them, ‘faux craft beers’ that have sold out to the big brewers,” he said. “One of the things we are committed to doing is transparency. We have always felt the consumer is entitled to know who makes the beer they are drinking.”
The two beer dignitaries began talking about a deal last fall, but it really came together over the past six weeks, according to Koch.
Both Calagione and Koch will continue to lead brewing for the newly-combined company, according to the press release.
Sam and Mariah Calagione will become the largest non-institutional shareholders of SAM stock after Koch following the close of the transaction.
Sam Calagione will join Boston Beer’s board of directors and Dogfish Head’s employees will join the Boston Beer team and continue to be involved in beer and “beyond-beer” projects, as the companies expand.
The combined company will be led by Boston Beer CEO Dave Burwick.
“We expect that we’ll see more consolidation in the Craft industry over time, and we’ll be in the best position to take advantage of those changes,” Burwick said in a prepared statement.
What happens next?
The news saddened John Medkeff Jr., a Delaware beer historian and author of “Brewing in Delaware,” but was not entirely unsurprising given that similar deals have permeated the industry.
He said that Boston Beer seems like a good partner for Dogfish Head compared to potential alternatives who don’t have a background in craft beer. What happens next, as the combined company decides how to integrate Dogfish Head, is the greatest unknown in Medkeff’s view.
“What is going to happen to the Dogfish Head brand? Because not too many of the craft breweries that have gotten purchased have fared too well in regard to their product not changing over time,” he said.
The breweries have complementary portfolios, Koch says. Samuel Adams Lager and the brewery’s seasonal beers are big sellers. Meanwhile, Dogfish Head has a growing market powerhouse in its sour SeaQuench Ale and is well-known for its 60 Minute IPA (India pale) and stronger 90 Minute IPA and even stronger 120 Minute IPA (15 to 20 percent ABV, depending on the batch).
“We both have a lot of things we do well, but don’t really overlap,” Koch said.
As Samuel Adams’ beer lineup has stagnated, it has continued to grow through its Truly brand of hard seltzer and expansion of its hard cider line, Medkeff said. He thinks adding Dogfish Head to Boston Beer’s offerings makes sense.
“Those other beverages increasingly became a larger part of what they do,” he said. “This gives them another foothold to get back into beer. It kind of jazzes up their brand again, at least for the short term.”
Dogfish Head had also been expanding its distillery program, growing it into the state’s largest. Its lineup of spirits also joins the long list of the companies’ combined offerings.
“When you think of how our portfolio (ranges) from coders to tonics to ales to lagers to spirits … they’re super excited we have the strength of spirits we have that compliments our strengths in beer,” Calagione said.
Contributing: Mike Snider, USA TODAY