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Arizona’s Huss Brewing Buying Papago Brewing Co.

Craft Business Daily:

This morning, up-and-coming Huss Brewing Co. of Tempe, Arizona, announced its acquisition of Papago Brewing Company, a pioneer in the Scottsdale brewing scene.

It’s an interesting deal, a sort of consolidating “up”: Huss is a fast-growing local brewer. But 15-year-old Papago has helped “birth” craft beer in Arizona. Known for their Orange Blossom brew, they’re also the state’s original landmark craft beer bar.

Together the two will produce about 9,000 barrels. The combined company is expected to end the year as the new third-largest brewery in Arizona based on Nielsen data (trailing only Four Peaks and SanTan).

The bump up in the rankings is nice, but Huss co-owner Leah Huss contends that the “most important” aspect of the acquisition is how it ensures Papago “will stay in Arizona and not be bought by an out of state or international conglomerate.”

The deal will award Huss with Papago’s full portfolio of brews, but Papago will hold on to its craft beer and restaurant and “will continue to use the Papago Brewing name under license.”

First Beverage Group brokered the privately financed deal, which closed in late August; terms were not disclosed.

PAPAGO’S LEGACY. Papago Brewing Company opened its doors in 2001 as a bottle shop, homebrew supply store and tasting room. The company has since grown into a “local landmark” (one compared it to Falling Rock Tap House, Denver’s famous beer bar) that serves an array of beers and food from the Papago Plaza Shopping Center.

Papago also has their own brands, whose sales are about 90% comprised of the popular Orange Blossom mandarin wheat brand (they also have Coconut Joe stout and more). Those brews have been contract produced by different entities over the last decade-plus. The beer has been “kind of like a foster child; it was growing on its own,” said Huss co-founder, Leah.

She, in fact, has also co-owned Papago for more than a decade.

Leah actually had secured the contract to brew Papago at Huss before they opened in 2013. That deal was set to expire in 2018. The current milieu of M&A made them acquisitive, said Huss sales chief, Chip Mulala.

With their forces combined, Chip says, the popular Papago brand and fast-growing Huss can make great strides in the underdeveloped craft market.

FAST-GROWING HUSS. But Huss isn’t a mere contract brewer. The company holds its own portfolio of 20-plus beers. It’s the state’s fastest-growing craft brewery and the 13th fastest-growing brewer in the nation among new craft beer entries, per IRI data (via Huss). In fact they’re building a new flagship taproom — Huss Brewing at Uptown Plaza — in a recently renovated plaza in Phoenix on Camelback Road and Central Avenue.

With one brewery on a tear and the other impeded by capacity constraints, “we realized Huss Brewing can support the Papago brand in the Arizona market better than we could,” said Papago president Ron Kloth. “This deal is just the next logical step for us to go in order to continue our business evolution.”

CHAIN ANGLE. Leah and Huss sales chief Chip Mulala told us that this union will make the two greater than the sum of their parts — more relevant in the wide-open Arizona craft landscape. They compared it to the tie-up between Green Flash and Alpine a few years back in San Diego.

The proposition: Huss has really just started entering supermarkets as of late last year. That’s important: As Chip points out, some 80% of beer sales in Arizona go through chains.

Their recent off-premise chain seeding — they’ve gotten placements in Fry’s and Kroger —  helped land them on that recent “top 15 new craft vendors” list from IRI. Huss is the fastest-growing brewer in the state and third biggest new craft vendor in the Western region.

But they currently have “no plans to leave Arizona.”

“From day one, our family motto has always been to be a legacy brand: plant roots in Arizona, and always be involved [there],” said Leah. “We’re building our business for our daughter’s future.” They have a plan to “sign it over to her one day.”