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Southern Tier Partners with Private Equity, Hires Ex-Pabst Exec

Beer Business Daily:

Lots of deals coming down the pike, though more have been private equity (see Utah craft brewers’ private equity solutions over the past year and a half), private buy-outs (Duvel Moortgat on Boulevard) and creative solutions (see Harpoon, New Belgium ESOPS) than the long-threatened big brewer buyouts (although stay tuned on that front). Now, we’ve just learned that upstate New York’s Southern Tier, maker of popular pumpkin beer, Pumking, has struck a deal with New York City based investment firm, Ulysses Management LLC. The investment is subject to licensing approval. First Beverage Group acted as advisor to Southern Tier.

According to official announcement scheduled to hit today, the partnership “will support the continued expansion of the brewery, new distribution support, sales force growth, and enhanced branding and marketing initiatives.” Monetary details were not disclosed.

And that’s not all. The brewer has also hired Pabst and A-B alum John Coleman as CEO, effective Monday. He’s former president and COO of Pabst, and was SVP Sales, Western Region A-B prior to that. “Most recently, John has been working with craft distillery brands to develop new paths to market and facilitate distribution relationships,” per release.

THE BREWERY. Southern Tier is a hot craft brewer. The 11-year-old brewer claims average annual volume growth of 48% since inception. This year they’re up 40%.

In the Brewers Association’s latest Top 50 Craft Brewers list (for the 2013 year), the brewer jumped from 37 to 31. They plan to do more than 100,000 barrels in 2014. An $8 million expansion in 2012 tripled their capacity to 150,000-barrel runroom.

And they’re branching out beyond beer: Last month they launched the DeMunck’s Hard Cider brand, and will be opening a sister craft distillery in 2015.

BBD caught up with Southern Tier co-founder Phin DeMink on the haps. Why this investment firm, why now?

“The decision was made to bring in a partner so that we had the right resources to continue to grow the brewery,” said Phin. “I plan on staying every bit involved as I’ve always been.”

A strategic buyer might not have been a good fit. “When we even considered looking at partners, we had a very detailed criteria,” Phin told BBD. That included an entity with a “long-term perspective” on things.

“When we met Ulysses, we were really impressed that they were a New York-based, small family office … as we started talking to them, we were aligned on multiple things. They’re passionate about craft, they understand craft, they understand small business and who we are, and the things important and near and dear to us.” (Their private equity arm boasts “a wide variety of industries around the globe, in companies that can range in enterprise value from micro cap to in excess of $1 billion,” per site.)

So where will they put their investment to work first? “I think probably the first areas we’re going to start looking at heavily is building up our sales force, working with our wholesalers, really focusing on that end of the business, which is also why we decided to bring on John Coleman,” said Phin.

Phin called John “a beer guy through and through who’s won the respect of distributors and retailers around the country over his many years in the industry with hard work, integrity and a spirit of partnership. This will allow me to focus on what I love best – making beer and innovating.”

YTD TRENDS. Big pumpkin fall play Pumking is up “pretty big this year,” Phin said. “This was the first year that we were ahead of the game and we were able to execute all of our distribution plans very strategically. So I think that had a lot to do with it.” But flagships IPA and 2XIPA are still growing too, “especially in our core markets.”

As for the new cider, which seemed “the most logical way” to get into the gluten-free deal, they’re just starting to ramp it up. “We’re kinda keeping it limited for time being,” Phin said, though “in 2015 we’ll probably be offering it to more of our wholesale partners.”

But don’t expect them to open a whole slew of markets. “We really want to work with our current wholesalers and strengthen our position with them, really dig in and find out what they’re looking for and really help kind of develop some further resources,” Phin said. “Even in our core markets, I feel like we’re still just kind of scratching the surface.”

For their part, Ulysses Management managing director Paul Barnett said they’re “honored that Phin and [co-founder Sara DeMink] have chosen to partner with us. … We have deep respect for the grass-roots origin of craft beer and how it’s been able to transform the beer industry for the better. This is part of a fundamental revolution towards authenticity in what people consume and we feel a great affinity for the movement both personally and professionally. Southern Tier will remain a proudly independent leading craft brewer while benefitting from the tools and resources of a larger organization.”

 

First Beverage Group, which seems to be making quite a nice business of advising craft players lately, said they were “extremely happy for all the parties involved and were honored to be a part of it,” per managing partner Townsend Zielbold.