Following the news that Stone Brewing Company is in the process of being sold to Japan’s Sapporo Holdings for $165 million, Stone CEO Maria Stipp and director of public relations and communications Lizzie Younkin spoke with Brewbound Friday morning about the proposed deal.
Here are excerpts from that conversation, edited for clarity.
What happens to Stipp and Stone founders Greg Koch and Steve Wagner once the deal closes in August?
Stipp: “Steve and Greg are going to step away from the brewing side of the business. They’re still a part of the ownership profile for Stone Distributing Company. So they will continue to be on that. And then as for myself, I am here and I am looking forward to this next adventure. It’s going to be really exciting.”
How long has this been in the works? I know some of the things that came out during the trial [with Molson Coors]. Were there other players that you engaged with during the sale process?
Stipp: “Kenny [Sadai, Chairman, Sapporo U.S.A.,] came to us looking for brewing capacity in the U.S., and as we got to know each other and did some touring and got to know some of the collective teams, we realized how much we had in common and how easy it was to work together. We have shared visions, that’s really the most important part of any prospective deal. So it’s been months, to be honest. It’s been a lot of time and consideration. We had to get to know each other, right? And really understand the intentions of what the marriage could look like. So it’s been going on for quite some time.
“In terms of any other visitors at Stone, we did have some additional interest, which I won’t discuss, but this was really from the beginning a great fit for both.”
How do you separate these two entities — the brewing business and Stone Distributing? Who remains involved in the distribution side?
Stipp: “First off, we have really strong leadership on both sides. But we also have a group of employees, like myself as an example, that wear two hats. So we’re gonna have to continue that until we can truly set up both entities with their own separate leadership teams and process. As you know, these two companies have never been two companies. It’s always been one company. So all of our processes [are] very much interwoven.
“The good news though, is we have really strong leadership on both sides. They’re really excited about stepping up and leading, so I think all of it is going to work itself out. We have to create a shared service agreement that will allow us the ability to work for a period of time, and make sure that both companies are set up for success. So we’re going to take our time and do it right.”
Is there someone who has been installed to lead Stone Distributing? And from there, how does the distribution begin to work when you are separate companies? Is there a distribution agreement in place for Stone? Does Sapporo and Anchor come into the portfolio?
Stipp: “We have leaders already in place at Stone Distributing. So it’s not to say that we need to create a brand new leadership team; we already have really strong leadership there.
“Secondly, to answer your question, we’ve been very thoughtful. Sapporo and Stone were both very rigorous in the spirit of keeping Stone as a part of Stone Distributing Company. So that came with a robust distribution agreement. So Stone will be staying with Stone Distributing Company into the future.
“And your third question was around the opportunity for additional brands under the Sapporo umbrella to come to Stone Distributing Company. That still remains a question mark. I think there’s a lot to learn there and we’ve been really focused on getting this initial transaction complete.”
Younkin: “The day-to-day people on SDC that our suppliers and accounts and everybody’s used to working with and the leadership that everyone knows as leadership stays. They’re all the same people, like I said, very strong leadership.”
Stipp: “Like I said, I’m gonna be wearing two hats still for some period of time, so I’ll still be a part of Stone Distributing. Anthony Trento leads our sales organization. Clint Graflund is our warehouse and logistics leader. And they’ve got many other people under their watch that do a fantastic job every day. I guess you saw our numbers just recently, so super proud of that result.”
Any immediate changes for any brands under Stone Distributing?
Stipp: “Nope.”
The VMG/Hillhouse money. That’s kind of a thorny thing. How does that go from here? Is this sale going to help resolve some of that [$464 million owed to VMG/Hillhouse]?
Stipp: “So this transaction was not on the heels of that question and quite honestly has nothing to do with the story that I’m telling today.”
One of the [Sapporo] documents breaks out the ownership percentages: 61.2% is Stone Brewing investments; VMG Stone Brewing, obviously, we know that one is 19.5%; Stone Employee Holdings is 15%; and HH Stone Holdings is 4.3%. So, who are the players in that 61%, that 15% and that 4% range? Are you able to sort of tell us who those breakout to?
Stipp: “Sounds like you’ve got plenty of detail.”
I’ve got a lot of details. It’s amazing what happens with these publicly traded companies.
Stipp: “I think you got everything you need.”
As far as capacity utilization goes, we know that the plan is to ramp up to 360,000 barrels over time, but through 2022 to 2025, I guess, is there room to sort of bolt on? Is this the beginning of building a platform in the U.S. with Anchor and Stone?
Stipp: “We’re focused on Sapporo Brewing needs at the moment, and 360,000 barrels is a significant amount for us. That certainly doubles the size of our overall production. That will require us to put quite a bit of capital together both in terms of Escondido and Richmond. Richmond is a perfect brewery for build out. I’m really excited about it for Richmond. Just to add the capacity, jobs, the energy there is going to be great.”
You just pumped in [$2.7 million] of investment in Richmond to expand capacity there?
Stipp: “We added some tanks earlier this year that we needed for our own production needs. But this obviously is a completely different addition.”
What’s the general vibe among the team? Is everybody excited?
Stipp: “I haven’t been able to really talk to the large portion [of the team]. I’m super excited to do that all day today. But from what I have heard over the last several hours, my leadership team has known, of course. They’ve been working very much arm-in-arm with the Sapporo team. But everybody’s very excited. This is a huge opportunity for us. It doubles the size of the company. It certainly puts scale. The beer business is a game of scale, I think we all know that. Making sure our assets are fully utilized, so this is a true unlock.”
What is the value of the assumed cost synergies of a deal like this for both companies?
Stipp: “You’ve got a high inflationary market. Everyone’s doing their very best to get the right type of costs for all of the different materials that go into the brewing process. And so, with scale always comes typically a better negotiating power in terms of what you can try to drive in terms of costs. So we’re certainly hopeful for that.”
In any situation like this, employees are always wondering, you know, what’s next and how does it affect me? Are there any expected changes?
Stipp: “One of the reasons I’m so excited about this is that there really isn’t a lot of redundancies. In fact, if anything, we’re going to need to hire and add more talent. We need everybody on this team. One of the key reasons why Sapporo was so interested was because of the strength of the leadership team and the people that drive Stone and Stone’s growth. So that’s a big portion of their decision that they made. And so we’re going to be very busy.”
What are we not asking?
Stipp: “I have to just point out the fact that Stone and Stone’s team have done such a great job of work, and truly, if you look at the results, I couldn’t be happier with the results. The brands are doing well. The people are awesome. And this is just a great next step. It’s a big jump for everybody.”