Sapporo Holdings has taken a more than $91.5 million (JPY 13.9 billion) impairment charge on the goodwill of its Stone Brewing business, which the Japanese brewing giant acquired nearly three years ago for $165 million.
The impairment charge, announced on January 30, was met with criticism from 3D Investment Partners, a Singapore-based investment fund manager and the largest individual investor in Sapporo, per Reuters.
In a filing last week, Sapporo cited the San Diego craft brand’s write-down as a drag on its profits, despite an increase in core operating profit.
3D issued an open letter to Sapporo’s board of directors on February 6, expressing “concerns regarding the company’s severe lack of capital discipline amid repeated large-scale M&A impairments” and “strong disappointment and concern” over the Stone write-down.
“Unfortunately, the Stone impairment was not the first time Sapporo destroyed shareholder capital through acquisitions,” 3D wrote in a press release published Tuesday. “In fact, Sapporo has recorded impairment losses on all of its acquisitions of overseas alcoholic beverage businesses, including Sleeman Breweries, Sapporo Vietnam, Anchor Brewing, and Stone.”
The “cumulative impairment losses” of those acquired brands amounted to more than $250 million (JPY 38.0 billion), with Anchor accounting for more than $78.3 million (JPY 11.9 billion), 3D wrote.
“In our experience, such an uninterrupted track record of failure is unprecedented in the alcoholic beverage industry and should be cause for serious reflection and concern on the part of the entire board,” the firm continued.
3D criticized Sapporo’s acquisition of Stone amid “declining sales and continued unprofitability” for “a price-to-book ratio of approximately 3.4 times.”
In a statement shared with Brewbound, and first reported by Beer Marketer’s Insights, Sapporo-Stone Brewing CEO Zachary Keeling stated that the write-down in Sapporo Holdings’ financial results “reflects a change in the timing of financial expectations compared to the beliefs held at the time of the Stone Brewing acquisition.”
“Across the U.S. beer market, macro growth has been slower, and raw material costs have increased, leading to more challenging near-term consequences for the business,” Keeling stated. “However, despite this accounting adjustment, 2024 showed promise for the U.S. Sapporo-Stone Brewing business.”
Keeling added that the integration of the companies resulted “in both revenue and profitability growth compared to 2023,” with Sapporo growing +12% and core Stone brands increasing +2% in 2024.
“Moving forward, Sapporo-Stone aims to continue growing its legendary brands while optimizing its business structure and manufacturing footprint to build a strong, enduring enterprise,” Keeling continued. “Sapporo-Stone is further strengthened by the long-term commitment from Sapporo Holdings prioritizing growth in the U.S. beer market.”
In late-January, Sapporo-Stone cut 1% of all roles, amounting to 2% of its total workforce, as part of an organizational restructuring. The company also eliminated its e-commerce business and ceased shipments of beer and merchandise.
Last May, Sapporo-Stone unveiled a $60 million expansion plan to double its annual capacity to about 700,000 barrels.
Stone’s output declined -6% in both 2022 (342,216 barrels) and 2023 (320,288 barrels), according to the Brewers Association’s New Brewer magazine.
When Sapporo acquired Anchor in 2017, it produced 108,958 barrels, according to the BA. In 2023, its output had declined to 15,000 barrels before Sapporo ceased operations and sold the business to Chobani CEO Hamdi Ulukaya in 2024.