The craft beer landscape has shifted.
On May 9, Boston Beer Co., makers of Samuel Adams, announced a merger with Delaware brewery Dogfish Head, joining the two longtime craft beer pioneers together in a $300 million deal. It’s the first major acquisition in the 35-year history of Boston Beer, and unites the second- and 13th-largest craft breweries in the country.
I recently spoke with Samuel Adams founder Jim Koch about the deal, and what’s next.
You have a close relationship with Sam and Mariah Calagione (Dogfish Head’s founders). Are they what attracted you to the deal?
If it were a similar brewery without Sam and Mariah, we wouldn’t have been interested. It was a couple of things. I’ve worked with Sam in particular for over 20 years, advancing independent craft brewing in the United States, going back to the formation of the Brewers Association, the craft beer definition, the Savor event, the independent craft beer seal. Those are all things that Sam and I have fought together for. And they were kind of defining events.
We share the same values. This is somebody that I have a lot of respect for, and I know he’s an extremely creative brewer. Sam and Mariah are a big part of the deal. They’ve agreed to stay on for at least five years, and hopefully longer.
Practically, what should both Sam Adams and Dogfish customers expect following this merger?
That our beers will be better. I know with the Dogfish Head beers, we’re going to be able to put them into our logistics system, which means more frequent deliveries to the wholesalers, which means smaller inventories and fresher beer. We have access to better ingredients like higher quality hops, because as a bigger buyer we select first. For example, when we did our Savor beer, we were playing around with a hop that had a number, No. 369. We were one of the first to brew with it. That became Mosaic, which is now this big craft beer hop.
And for Sam Adams, Sam’s brewing experience is as one of the most respected craft brewers, one of the most innovative. We’re going to be able to share whatever tips and secrets each of us has learned. He knows stuff about continuously hopping beers, which I think is a very interesting idea. We’ve innovated in some of the elements of a hazy juicy New England IPA. He’s got this 95 calorie quite flavorful IPA called Slightly Mighty, which is very interesting. We have Sam ’76, which has a bunch of brewing secrets behind that. You’re basically putting together two of the most innovative and accomplished brewers in craft beer in the last 20 years.
Dogfish has had success in the healthier beer space with SeaQuench Ale. Is that something you’d like to do more of?
I think so. We both have taken a slightly different approach. We’ve been making 26.2 for the Boston Marathon for eight years now. We’ve been working with beers that are really good after exercise. Sam has come at it slightly differently with a sour beer. Though they’re both built on the Gose style, they drink quite differently. We’ll be sharing our thoughts on things we’ve learned about hydration, use of salt in beer, and the right amount of sour.
What’s your favorite Dogfish Head beer?
I’d have to say 60 Minute [IPA], because it’s a unique and very creative take on a beer that has become a standard for craft brewers. The continuous hopping is a different twist.
Is Boston lager still your favorite beer?
You open my refrigerator and that’s what you’re going to find.
Putting you on the spot, have you all discussed any specific new beer products or brands that might be coming together soon?
I’ll put it in context. The deal hasn’t closed yet. There is a possibility that the government might find an issue. We doubt it.
To answer your question, yes, we’re already talking about what our first collaboration beer would be.
Can you hint at all at what that might look like?
Not yet. But Sam’s idea, if it develops, the idea he threw at me was like “Wow, that’s super creative.’’ And I threw a different idea at him.
How did he receive your idea?
He thought it was interesting, too. His is more out there. His is developed around a relationship that he has with a couple people who are outside brewing. Mine was more based on some technical brewer techniques.
You’re opening a tap room right in Faneuil Hall. I’ve read that it might not be open until the fall. Any changes coming to that after the merger?
Late fall. The design has been done, the floors are poured. But we sent Sam the plans and our ideas. We said, “Sam you’re a creative guy, you’ve developed multiple concepts like this. You’ve got the Eataly brewery (in New York). You’ve done a seafood restaurant called Chesapeake & Maine. You started as a brewpub, and you’ve got a couple more. What do you think of our idea?’’
So we’re gonna get his thoughts on that. It just gives us another extremely creative mind to throw us things that we didn’t think of.
Do you see yourselves acquiring more craft breweries as you go along?
Not really. This was a unique and special opportunity that came. We probably turned down 100 earlier opportunities. This was sort of an unexpected thing that came about at the Extreme Beer Festival [in February], when our booths were across the aisle from each other and we were having beers together.
Who brought it up?
That’s a good question. I think it was Sam. He has a private equity investor that was ready to get out.
How would you characterize those 100 or so opportunities with other breweries?
They were a wide range of sizes and shapes. None of them excited me. They were just sort of business deals. They were spreadsheet deals. There wasn’t any culture and chemistry in them.
Boston Beer has been pretty successful at innovating and growing for 35 years. We’ve done fine creating our own opportunities rather than try to go out and buy them.
What are the biggest challenges facing a legacy brewer right now?
The challenges are common among all craft brewers who rely on selling beer outside their brewery. The taproom model has its own challenges that are different than the rest of the industry.
We’ve been through some cycles. It’s pretty clear the last 15 years of craft brewing have come to an end, where it was growing double digits every year, if you build it they will come. The growth outside of tap rooms is down to single digits, at the same time there are literally 1,000 new breweries entering every year. The market’s growing two percent, the number of breweries is growing 15 percent.
And probably more significantly, the big global brewers have started flexing their muscles in the craft space, by buying up craft breweries and then marketing them as if they were still small and independent breweries and not being transparent about the real ownership of those breweries. That’s probably the biggest threat. We are not now competing with other craft breweries, who are similar to us and share our values and our resources. Now we’re competing with huge global brewing conglomerates who are 50 to 100 times our size. All of a sudden Goliath has shown up. And it was a bunch of Davids.
What’s one thing you like about your company right now and one thing you wish you could change?
I like that we’re still innovating. We’re trying new things all the time. It’s fun to come to work every day. It’s Friday afternoon right now and I’m bummed because I have to wait two days to come back in again.
As far as what I would change, I’m lucky because I’m still the majority shareholder. If I want to change something, I do it. So as far as if I’d change anything, if I did I think you’d see it.
So the company everyone sees pretty much reflects what you personally want it to be?
Yes, I think that’s right.