WORD TO THE WISE
 Sam Holloway 
President,
Co-Founder
Greetings!
DID APHRIA, INC. OVERPAY FOR SWEETWATER BREWING COMPANY?

As we reported last week, NASDAQ traded Aphria Inc. (APHA) has agreed to purchase Atlanta, Georgia-based Sweetwater Brewing Company for $300 million dollars. Initial calculations indicate this number is possibly too much, equating to a price of $1,150 per barrel (using 2019 production numbers, the most recent year of availability from the Brewers Association). How could anyone make the same mistake Constellation Brands did with their purchase of Ballast Point for $1 Billion in 2015, a purchase they admitted was far too high only four years later?

Let's review some recent transaction comps (CAS Members can review valuation approaches by clicking this white paper). Ballast Point was sold for roughly $3,600/Bbl in 2015. Boston Beer Company paid about $1,000/Bbl in 2019 for Dogfish Head. Conversely, the remainder of Craft Brew Alliance was sold to AB InBev in 2020 for about $290/Bbl (if the value of Kona were included, it would be about $445/Bbl). This is a fairly wide disparity for companies with national distribution and international reputations!

What other factors get figured into a valuation? I will examine some of these in the next section. (Image credit: Fool.com)
HOW DO STRATEGIC BUYERS JUSTIFY THEIR ACQUISITION PRICES? WHAT DOES THIS MEAN FOR THE SWEETWATER PURCHASE?

There are generally three types of buyers (CAS Podcast - Members Only) and all three have been active in the craft brewery space in recent years. Aphria, Inc. is a strategic buyer. Strategic Buyers (think Heineken, AB InBev, Molson Coors, & Aphria, Inc.) generally pay the highest prices, sometimes appearing to pay too much from a purely financial valuation perspective. For example, purely financial valuation methods may not adequately model some of the value chain efficiencies and purchasing power advantages of the strategic buyer. This appears a good rationalization for Aphria, Inc.'s price as they get access to a growing American market, but also Sweetwater's managerial expertise to potentially offer additional beverage types in their home markets in Canada. Some may recall that Ballast Point's managers were never seen by Constellation as "sophisticated" and their management team was quickly terminated by Constellation once the deal was closed. This makes their $3,600/Bbl valuation seem even more egregious... With these additional opportunities and acquisition of talented management in place, Aphria's price of $1,150 per barrel may even seem reasonable. Time will tell and I am working on interviewing a few folks with deep industry expertise so I can help our members understand the current values of their companies. Stay tuned!
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WHAT'S BREWING
MEMBER NEWS: MULTIPLE CAS MEMBER BREWERIES EXPAND DESPITE THE PANDEMIC

Despite the ongoing challenges of the pandemic and immediate threat of a second (third?) lockdown in some regions, CAS member breweries continue to march on and some are even expanding. Just this week, Baerlic Brewing (Portland, OR USA) and Coin Toss Brewing (Oregon City, OR USA) announced they were knocking down walls and expanding their taprooms. I am aware of several other expansions and will highlight those in future newsletters... but it is press time :-). (Image Credit: Coin Toss Brewing)
FEATURED MEMBER OF THE MONTH
CAMERON JOHNSON
CO-FOUNDER & BREWER, YOUNGBUCK BREWING (SPOKANE, WA)
TECHNICAL SERVICES MANAGER
STOUT TANKS & KETTLES
(PORTLAND, OR)
The first thing you notice when you sit down with Cameron Johnson is energy! This guy is full of passion for everything in craft beer. After a couple beers with Cameron, you start to understand just how much knowledge this guy has in his head and also how freely he shares ideas, spreadsheets, successes and failures based on his varied and impressive journey in craft beer.

In addition to founding a brewery and his current job for Stout Tanks & Kettles, Cameron has worked as a mechanical designer at several custom brewery equipment providers. Additionally, he has assisted with organizing, and speaking at, the Pacific Northwest Homebrewers Conference, in 2016 and 2017, advising on best practices for establishing your small brewery business plan, marketing & branding, and brewery financials. Cameron is also a contributing writer for Brew Your Own Magazine's 'Nano Brewing' column, where he covers topics from branding to alternative brewery business plan models. With whatever remains of his waking hours, he works as the tasting room manager at Pomeroy Cellars Winery, does a bit of freelance brewery consulting, and attempts to keep his two wonderful children alive and his incredibly supportive wife happy.

Cheers to you, Cameron Johnson! Thanks for being such a great CAS Member and resource for others.
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