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First Draughts


Robert Alan Wendeborn

Smuttynose auction seems like a potential steal. Or is it?

One of the really hard-hitting pieces of beer news in the last few weeks was the announcement that Smuttynose Brewing, a 24-year-old brewery in Hampton, New Hampshire, will be sold at auction. The news hits hard for Northeasterners especially because this was one of the breweries that first introduced a lot of people to craft beer. It’s also heartbreaking because the brewery could not find an investor or buyer so the auction is the last resort.

Without getting into the nitty gritty, it sounds like it would be a good deal: A solid, trusted brand with history (now it’s some pretty damaged goods), decent revenue at $10 million a year (though for a brewery of this size, that’s kinda low), 75,000 barrels of production capacity (for comparison, it’s about double what Ska Brewing can do right now), and plenty of room to grow on site with a 14-acre plot. The brewery is also currently running at half capacity, so an outside investor could use the extra space for other brewing ventures, or grow the current brand.

This would be a smashing good deal for a small brewery on the East Coast looking to grow, an opportunity for some very rich individual to fulfill their dream of owning a brewery, or the chance for a West Coast brewery to open up a shop on the East Coast on the cheap.

I do think there are some drawbacks once you lift the curtain a little and look at the goods a little closer. The real estate that the brewery stands on is valued at $6.9 million. The brewery operates an 85-barrel system, has 17 fermentors, and four bright beer tanks. And they have a state-of-the-art bottling line that can bottle 300 bottles per minute.

The drawbacks: 1. Craft beer growth is happening in cans. The bottling line might be great at efficiency so it lowers packaging cost, but it’s not doing your salespeople any favors.

2. The 85-barrel system is pretty tough when it comes to agility of a brewery. That means you brew 85 barrels, which costs at least $3,000 in ingredients, and you need to know that it’s going to sell. That’s also a big investment for a potential experimental or limited-release beer. It’s a great system for efficiency, but not for creativity.

3. Most of the fermentation is also oversized. Sixteen to 17 fermentors equates to 200-plus barrels. Again, great for efficiency, not for diversity or creativity in beer making.

4. How can a business with $10 million in revenue not pay its bills on $6.9 million real estate plus equipment? You have to also buy the company’s debts, which are probably pretty high.

5. Anyone who buys the brewery runs the risk of hurting their own brand by how they treat Smuttynose. If they shitcan everyone, the buyer will lose the local community and the craft community at large.

With all that, I wouldn’t buy Smuttynose unless I was an established brewery on the West Coast. I could move in with a few talented brewers and salespeople and start making my successful brands for new markets on the East Coast, while keeping Smuttynose in a nice, tight market where it can grow more organically. I’m really surprised that breweries like Oskar Blues, Boston Beer, and Lagunitas haven’t shown interest. Maybe we’ll see how that all rolls out at the auction.

Robbie Wendeborn is the head brewer at Svendæle Brewing in Millerton, New York. He is also a former beer plumber at Ska Brewing.