Roak Brewing to Acquire Right Brain Brewing

A pair of small Michigan beer companies are set to merge in an effort to better compete with larger brewing operations. Royal Oak-based Roak Brewing Co. announced this week that it is in the process of acquiring Traverse City’s Right Brain Brewery.

Speaking to Brewbound, Roak Brewing co-owner and CEO John Leone said the deal is expected to close in the next 60 to 90 days, pending approval from the Michigan Liquor Control Commission. He declined to share specific financial terms of the deal, noting that some details of the transaction are still finalized.

“We’re still meeting and brainstorming and writing all over whiteboards what it’s all going to look like,” he said. “There’s a lot of planning going on.”

What is known is that Right Brain founder Russell Springsteen will continue to be “the driving force” and “the vision” behind that brand, Leone said. Springsteen will also receive an ownership stake in Roak, which is owned by Leone and two partners.

“We realized that together we were going to be better off than apart,” Leone said.

The acquisition may only be the start for Roak, as Leone said he envisions building a platform of small and independent breweries in Michigan capable of competing with larger brewing operations with “significantly more money and resources.”

“This is the start of one deal, but it could be a lot more,” he said. “If anybody is interested, we’re going to continue to talk and explore opportunities.”

Roak, which was founded in 2015, grew production an estimated 17 percent last year, to 3,400 barrels, according to data from the Brewers Association. Meanwhile, Right Brain, which was founded in 2007, grew production 18 percent, to 6,611 barrels.

“It’s a little bit more challenging if you’re in that 3,000 to 5,000 [barrel] range to compete with the number of breweries that are 20,000, 30,000, 40,000, 50,000 barrels and maybe bigger in Michigan,” he said.

Other craft breweries have formed alliances in recent years, including the family office-backed Artisanal Brewing Ventures (Southern Tier and Victory Brewing) and the private equity-backed Canarchy Brewery Collective (Oskar Blues, Deep Ellum, Three Weavers, Cigar City, Squatters, Wasatch and Perrin). However, the Roak-Right Brain tie up doesn’t have the financial backing of those operations, Leone admitted.

“It’s just us, and we’re doing this on our own,” he said. “I’m not saying we don’t have financing from banks and things like that — most businesses do — but we don’t have access to, ‘Hey, by the way, we need another $4 or $5 million today.’ We don’t have that.”

Nevertheless, combining the two companies provides “critical mass” that will allow them to pool resources and gain better leverage with their wholesalers, Leone said. In fact, the two companies plan to hire sales reps to staff a “statewide sales force.”

“Via that combined revenue, we’re able to invest in our sales force,” he said. “And we’re investing in some other areas also, which in the long-term is going to benefit us both.”

Those areas include hiring additional brewing staff members, sharing canning and bottling capabilities, and installing a full-service kitchen inside Right Brain’s taproom, Leone said. Additionally, Roak will use some of its excess capacity to brew Right Brain’s higher volume offerings, he said.

“Right Brain, frankly, was having some problems brewing enough beer,” Leone said. “They just didn’t have the facility to do it, so we’ll brew some of those items.”

The deal also opens for the door for Right Brain to begin distributing its beer outside of Michigan. Leone said the plan is to begin shipping Right Beer beer to some of the same states in Roak’s footprint, which includes Indiana and North Carolina. The company could also expand into four more states in 2019, he added.

In Michigan, where Roak and Right Brain are “not 100 percent” aligned, Leone said he doesn’t anticipate switching wholesalers.

“There’s no reason to change things,” he said.

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