Here’s something we didn’t quite expect to hear from Brew Hub founder Tim Schoen: In the company’s $100 million quest to build out a nationwide network of five contract facilities by 2018, Brew Hub would consider acquisition, and not just construction as a means of establishing a brewing presence in the Northeast, Texas and on the West Coast.
The company, which produces beer on behalf of companies like Cigar City, BJ’s Restaurants and Toppling Goliath, has faced obstacles since unveiling its concept in early 2013.
The cost to build its original Lakeland, Fla. location came in “significantly higher,” than expected, Schoen told Brewbound, and construction on a second location in Chesterfield, Mo., outside of Saint Louis, is “at least one year delayed.” That brewery is not expected to open before 2017 and the delays, coupled with costly redesigns, will put that project over budget as well. The company had originally planned on five breweries at an average cost of about $20 million each.
The company “swung and missed” on two potential locations in the Northeast, Schoen said, and is now more closely examining acquisition as a way to fill out its remaining U.S. footprint.
But unlike other strategic acquisitions from the likes of Anheuser-Busch InBev, MillerCoors or even Duvel Moortgat, Brew Hub isn’t interested in the brands themselves.
“We are trying to build infrastructure,” Schoen told Brewbound. “We would be interested in their plant and their assets, not their IP — and we think there are going to be a couple of opportunities out there.”
In other words, Brew Hub would consider playing landlord if it meant they could get their hands on a facility capable of cranking out at least 200,000 barrels annually.
“Strategically, we look at high-density areas like the Northeast or California where there is so much activity and market share is much higher — and we have to be smart,” he said. “Do we build a greenfield brewery or do we acquire or merge with someone already there?”
The pitch seems simple enough: Brew Hub, which is backed by Yucaipa Companies, a private equity firm started by billionaire Ron Burkle, brings growth capital and operational expertise. The seller, meanwhile, retains their independence — and perhaps more importantly the option to sell the brand down the line — and instantly becomes the anchor tenant while simultaneously gaining access to Brew Hub’s other brewing facilities.
Brew Hub has “quietly taken calls” from a number of interested companies, Schoen said, and there is “no question” acquisition will play a role in the company’s strategy going forward.
“Our goal is still to have the entire network built within a five year period,” he said. “From an investor strategy standpoint, we are still trying to hit that goal by 2018 or 2019. What will be the anatomy of that network? Mergers, acquisitions and joint ventures would get us into the market a lot quicker and make expansion a lot easier.”
In the meantime, Brew Hub is reinvesting at its original 64,000 sq. ft. facility in Lakeland. It recently expanded capacity by 60 percent, to 100,000 barrels, and took on a pair of new contracts with M.I.A. Brewing Company and JDub’s Brewing Company.
“We designed the brewery with expansion in mind,” Schoen said in a press statement. “The expansion proves the model we built to help craft brewers grow is working. We’re excited to continue helping our partners grow as we expand, and we welcome the opportunity to add quality brewers like JDub’s and M.I.A. to our team.”
JDub’s expect to increase volume to nearly 10,000 barrels annually, while M.I.A will increase volume to nearly 8,000 barrels per year, Brew Hub said in a release. Brew Hub is also planning to announce another partnership with a “non-Florida” brewery in the coming weeks, Schoen said.
In addition to house brands KeyBilly Island Ale, Pool Hop IPA and Diver Down Red Ale, Brew Hub also brews North Carolina’s Green Man Brewing and makes the Orange Blossom, GolfBeer and Brew Bus products.