Artisanal Brewing Ventures Execs Discuss ‘100 percent’ Acquisition of Sixpoint Brewery

After four years of discussions with Sixpoint Brewery founder Shane Welch, Artisanal Brewing Ventures (ABV) finally completed a deal to purchase 100 percent of his Brooklyn-based craft brewery this week.

Even though ABV had been courting Sixpoint for several years, it wasn’t until this summer when negotiations really began to heat up, John Coleman, CEO of ABV, told Brewbound.

As the deal came together, ABV — which is backed by family office Ulysses Management and was formed in 2016 via the merger of Victory Brewing and Southern Tier Brewing — turned to Wells Fargo to help finance the acquisition.

Coleman declined to share specific financial terms of the transaction.

Unlike ABV’s partnerships with Victory and Southern Tier, whose founders have remained involved in the businesses they started, Welch is exiting the company he founded in 2004 to focus on other “craft beer-related businesses,” including a smartphone app that helps facilitate direct-to-consumer sales at breweries.

“That’s kind of become his new passion, and he wants to spend more time doing stuff like that,” Coleman said. “He’s leaving his brand — and he created some great, great brands and a great company — in a good place with good stewardship with our team in place and obviously the team he had in place.”

Although ABV’s past strategy has focused on retaining its partner breweries’ founders, the company decided it needed to be more flexible when it came to Sixpoint, Paul Barnett, managing director of Ulysses Management, told Brewbound.

“Shane has a lot of other outside interests, which he’s passionate about,” he said. “He struggled with the idea of the obligations that are inherent in being an active founder partner like Bill [Covaleski] and Ron [Barchet of Victory] and Phin [DeMink of Southern Tier].”

Now, Sixpoint brewmaster and chief product officer Eric Bachli will lead the company. Last year, Welch hired Bachli away from popular Massachusetts craft brewery Trillium Brewing.

According to Coleman and Barnett, Sixpoint was an attractive acquisition target for ABV due to its geographical presence in New York City, where the brewery sells more than half of its volume, as well as its alignment within the Sheehan Family network of wholesalers.

“We think there’s a lot of growth potential in metro New York as well as all of the surrounding areas,” Coleman said. “And from a brewing standpoint, the brands are all very complimentary with Southern Tier and Victory brands.”

Although Sixpoint and ABV do not share complete alignment of their distribution networks, Coleman said changes would not be aggressively pursued.

“When opportunities present themselves with a willing buyer and willing seller, then we will definitely pursue that,” he said.

According to Coleman, Sixpoint is on pace to produce 55,000 barrels of beer by the end of 2018. The company did not report production figures to the Brewers Association last year, but in 2016 it reported production of 74,500 barrels.

Coleman told Brewbound that Sixpoint’s production declined to around 60,000 barrels in 2017, significantly less than the 90,000 barrels that Welch previously said his company was on pace to deliver across its 18-state distribution footprint.

Barnett, meanwhile, described Sixpoint’s volume declines as “modest,” attributing the losses to a lack of resources needed to support faraway market expansions.

The decline in production could have negatively impacted Sixpoint’s valuation, since volume and revenue growth are factors that buyers use to determine brewery multipleds. Also potentially hurting Sixpoint’s valuation is the fact that a majority of its beer is produced under contract, which is costly and less profitable.

Beer companies with their own production facilities can make better margins, and those with taprooms can also drive increased profits via direct-to consumer sales. Sixpoint failed to open a taproom at its small Red Hook facility, however, which put the company at “a competitive disadvantage,” according to Coleman.

ABV is now in the process of searching for a location to build a small production facility and taproom for Sixpoint in Brooklyn. The goal, Coleman added, is to open the new facility by the fourth quarter of 2019.

“It requires capital,” he said. “I think that’s also a benefit with our ability to provide capital and go ahead and get that thing going.”

In the meantime, ABV will begin selling Sixpoint’s beer at its location in Charlotte, North Carolina, a co-brand space called Brewers at 4001 Yancey that currently brews and serves offerings from Southern Tier and Victory.

Finally, Barnett and Coleman said ABV isn’t done buying, and they mentioned a focus on breweries located in the Mid-Atlantic, Northeast and Southeast regions of the U.S..

“The east of the Mississippi geography we find is really an attractive market,” Barnett said.

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