Deschutes Brewery has made the first acquisition in the 32-year-old craft brewery’s history. Bend, Oregon-headquartered Deschutes has acquired another Bend craft brewery, Boneyard Beer.
Financial terms of the transaction were not disclosed. However, the companies described the tie up as a “joint venture,” with both brands retaining their separate identities.
“This is about a combination of companies, a combination of skill sets and assets and attitudes and all those kinds of things,” Deschutes founder Gary Fish told Brewbound. “And we think that the sum is going to be greater than the total of the parts.”
Fish summed up what Boneyard brings to Deschutes succinctly: “Attitude.”
“Seriously, the whole Boneyard attitude, not just are they great brewers, but they’ve got a great brand, and it’s a younger, more relevant brand,” he said. “Our brand has aged, and we keep trying to bring the Deschutes brand to the younger consumer, and we’re having some success with that, but Boneyard is deeply rooted in that marketplace, and we’re excited, quite frankly, to learn from them.”
Boneyard co-founder Tony Lawrence will become a shareholder in the surviving entity, as well as return to Deschutes, where he started his career in 1989, as an employee. He will be charged with managing the Boneyard brand moving forward.
Additionally, “a very large portion” of Boneyard’s 18 production employees will be retained, Lawrence told Brewbound.
“One of the clear missions here is to keep everyone employed and keep the family together,” he said. “We certainly believe that the Boneyard juice, the juju, the secret sauce comes from the team that I’ve surrounded myself with for years.”
Boneyard staff joining Deschutes will be eligible to take part in Deschutes’ Employee Stock Ownership Plan.
Boneyard’s original 20-barrel brewhouse will continue operations. The brand’s 15-barrel brewhouse location will continue operations for six to 12 months before likely being phased out. Lawrence will continue to own and operate the Boneyard Pub in Bend.
Conversations between Fish and Lawrence about linking their businesses have gone on for “years.”
“Casual conversations turned into more serious conversations, and serious conversations turned into more negotiations,” Fish explained. “But it was just conversations over beers that became something more.”
Those conversations sped up last year when the pandemic shuttered on-site service at bars, restaurants and brewery taprooms.
Prior to the pandemic, the decade-old Boneyard was content with producing around 30,000 barrels of draft-only beer annually, while avoiding major capital expenditure projects and infrastructure projects, Lawrence said.
The pandemic wreaked havoc on that business model, forcing Boneyard to pivot to packaged product at a time when other beverage producers were also making the switch, leading to a multi-year can shortage. Lawrence said conversations with Fish and Deschutes “picked up a lot of speed” and a deal with Deschutes became “a no brainer.”
“We made a 100% pivot from doing 30,000 barrels of draft to essentially zero in March and April,” Lawrence said. “While we were [a] 100% draft-only brewery, currently we’re probably 80-20 [cans to draft], maybe even a few months back 90-10 cans to draft. So my whole parking lot’s filled with kegs. That opened Pandora’s Box, and here we go.
“Currently, we’re doing about 1,300 cases a day, five days a week, 5,000 or 6,000 roughly at the end of the week and that’s just serving Oregon specifically,” he continued. “And even in Oregon, with some of the off-premise relationships, Safeway, for example, I think we’re only in 40 Safeway stores, as opposed to the 140 that are available to us throughout the state. So we’re severely challenged in fulfilling the pipelines. So we need some help.’
“And we can help,” Fish said. “We’re happy to be in that position.”
Deschutes, the 11th largest Brewers Association-defined craft brewery by volume in 2019, will scale up Boneyard’s offerings, starting with RPM IPA, offer sales and marketing support, as well as work through supply chain constraints.
Although Deschutes’ and Boneyard’s wholesaler networks aren’t aligned in Oregon — Boneyard is with craft-focused Point Blank Distribution, while Deschutes is partnered with Columbia Distributing — the two companies haven’t addressed aligning networks. And Fish said the company isn’t viewing alignment as a “have to” proposition.
“I think we can all look forward to a day when we don’t have to make two calls for the same territory, but we’re not in a hurry to do that,” Fish said. “We are trying to do what’s best for the brand first, and then we’ll deal with whatever efficiencies we think we can gain at some point in time in the future.”
Fish admitted that they don’t have all of the answers yet but they plan to “figure it out on the fly.”
“We’re trying to look after the people first, then after that, we know the nuts and bolts of having the flavor match and being able to get Boneyard beer in cans, and then we’ll go from there as logic dictates,” he said. “We’ve got a lot of work to do for the business that lies in front of us.”
Full production of Boneyard’s offerings at Deschutes’ facility will begin as soon as possible, Lawrence said.
“We certainly would like to come out of the gate swinging this year before 2021 is over,” he said. “So we’re going to attack it.”
Lawrence said it’s unclear what will happen with Elixir, a non-alcoholic sparkling CBD offering.
“We certainly believe there’s a lot of opportunities for the Elixir brand or the liquids themselves, and now that we’re crossing this threshold, we can open up all the other folders for conversation that we haven’t been able quite get to narrow down some of these specifics yet,” he said.