Acquisition watch

Speculation can be fun for the entire family, but please keep in mind that while this post is semi-serious and for entertainment purposes only, there are real world implications that arise from any real world acquisitions. Real people are behind these companies, and while some will undoubtedly become enriched beyond their wildest dreams, many won’t. Most people working there can face deep uncertainties regarding their future. So keep the workers in mind while we throw things at the wall to see what sticks. This post is full of tea leaf reading, palmistry, some actual insights and input from knowledgeable people, and an absinthe fueled Ouija conversation with Madame Leota.

This isn’t specific to Molson-Coors taking on Blue Run, there are many independents that are attractive to multiple conglomerates, so buckle up. The great consolidation will continue!

If any of these things actually happen, I warn you to be prepared because I will obnoxiously refer you back to this article.

Let’s start with the short list, my made up chances of it happening, and some thoughts below.

• Castle and Key 92%

• Old Elk 50%

• 291 50%

• Barrell 60%

• Kentucky Peerless 80%

• Sagamore Spirit 6% (ACQUIRED)

Now that most of the work has been done, doesn’t it make sense for Sazerac Co to finally bring Taylor back “home?”

CASTLE AND KEY

• I think this is only a matter of time, not “if.” The cost of capital these days is exorbitant and C&K has some rather ambitious plans that inclue lodging and whatnot. Also, there are likely some people with stakes in the company that I’m sure would love to see the cash money truck fleet back up and bury them in piles of scratch. They kind of have it all right now, distillation capacity, a recognizable brand, arguably the most impressive visitor campus of all, and loads of history.

  If Sazerac doesn’t acquire this, I’d frankly be bummed out, the Taylor connection is just too much to resist isn't it? Could SazCo risk another distillery owning The Old Taylor Distillery Company?. I think an acquisition is a given, it’s a matter of who and how much?

  Prediction- $475 million and change.

Yes, I know they’re related to Otter Box, but still….

OLD ELK

• This one is a longer shot as it’s related to Otter Box, and hell, you never know what crazy rich people will do next. Is whiskey a legacy lifelong passion that they cannot bear to give up? Will economic factors force a decision one day? Will their interest wane and the siren song of the cash money trucks be too loud to ignore? I’ve got this as a 50% chance, but at this point anything is possible. The Coors connection to Colorado is real, and Old Elk is arguably Colorado’s most known whiskey so could that be next?

  Let’s also layer in the Greg Metze factor. Who better to help oversee the budding Coors Whiskey portfolio? This guy knows it ALL, and could be huge for a brand new spirits portfolio that lacks experience in building a whiskey brand. Greg knows how, and he likes drinking Coors….

  Prediction- $225 million and a lifetime supply of Coors for Greg.

I hope this one doesn’t ever happen, but again…. those damn trucks have a habit of changing minds…

291 DISTILLERY

• This is another sort of fifty-fifty shots, Michael Myers is one of the few remaining craft rebels that haven’t yet sold. He came up with a group of people that put companies together by hand (in Michael’s case, literally building his own still), and most have been acquired (Few out of Chicago for instance). Will Michael hold out because he’s one of those kinds of people that has to be doing something always and isn’t interested in sitting on a beach earning 7% on a sizable stack of money that Escobar would’ve hidden in several sofas?

  I put this as 50% chance of happening, because I love making up percentages. I think Michael is a worker, and wouldn’t be able to sit still if he did sell, but the brand has some good recognition and distribution, has MORE distilling capacity than Blue Run and Penelope COMBINED, and is already seen as a more premium brand, plus of course, the deep Colorado connection.

  Prediction- $225 million gets this done.

Think of it, you just won a billion on Mega-Millions and now you own Barrell and get all the Seagrass and Canadian you want.

BARRELL CRAFT SPIRITS

• This one could come down to economics more than anything. Since Barrell doesn’t distill, they’re heavily reliant on brokers and contracts. When whiskey is plentiful and inexpensive, they can function without fear. When the market tightens, and demand increases, prices tend to spike, making their business more expensive to run. There are several cautionary tales here for non-distilling producers, let’s take the old Black Maple Hill (not the Oregon nonsense) who sourced their whiskey from KBD, who sourced their whiskey from all over, including brokers. When the bourbon boom started to take off 20 years ago, the barrels available to KBD began to increase in price, or were no longer available.

  As the boom continued, the costs continued to skyrocket, to the point that KBD couldn’t get the barrels, and Black Maple Hill could no longer afford to stay in business. Barrell is better capitalized than BMH of old, but the economic factors that plagued KBD/BMH could happen again. An acquisition could not only give Joe Beatrice a few hundred king sized beds full of money to roll around in, but could also provide economic certainty and continue to grow the brand.

  Prediction- $245 million due to the perception that Barrell is an ultra-premium brand with wide distribution and great marketing and MULLETS!

Name a better looking bottle, it’s ok, I’ll wait.

KENTUCKY PEERLESS

• This one hurts. 5-years ago I would’ve said, absolutely zero chance of this happening. Corky brought this back from the dead, fought like hell to do something so insane as to charge $100+ for a two-year old Rye to make the company profitable from jump, and get his DSP number back (UNPRECEDENTED!)! No way he would sell what would be his family legacy, owned and operated for generations to come. Well, that is a great story and all, but do you think the cash money trucks care about a story? Nope, they just want what they want, which is to bury you in tonnes of scratch that you could only dream of attaining if you were say, LeBron James. Nothing says “family legacy for generations” like $300 million which is my prediction for this one too.

  Master Distiller Caleb recently departed to start his own wait for it, wait for it, Distillery! Change is already afoot there, and this excellent brand, with more history than almost any out there save for Castle and Key, has so much value and potential. They have distillation capacity, an immediately recognizable label, terrific Rye whiskey in a growing category, beautiful packaging (which would be in immediate jeopardy upon acquisition btw, an easy way to cut costs and increase margins) and really good distribution. Their visitor center at the distillery is also top shelf.

  Prediction- $300 million and it’s a gimme.

The branding alone is worth a visit from the cash money trucks. What’s inside should get them to unload.

SAGAMORE SPIRIT

• First prediction, the name will change subtly at some point from Sagamore Spirit to Sagamore SpiritS. Why? Because they’ll make a Bourbon, if they haven’t already. Maybe they won’t, as the Spirit could be the Spirit of Maryland and you don’t need the S at all. I’m not a marketing major so eat it. Yes, Rye is a perpetually growing category, but it’s still circus peanuts compared to the behemoth that is bourbon. Having a Rye only company while admirable, kneecaps growth opportunities that having both would offer. This leads into why I give it a 6% chance. There was some substantial change at the company over the last 5-months. New suits joining to push growth, and expectations from an owner who likely feels underrepresented in the market lead me to believe that Sagamore is at an infection point. While growing, is it growing fast enough? Has the growth met projections? Is there patience for the plan? Have the plans changed?

  Sagamore makes some of the best Rye on the market, but they do have some challenges, such as a higher priced standard bottle at $40-ish that is cocktail friendly, but double the cost of other higher proof cocktail bottles from other distilleries. The stunningly gorgeous bottle design is difficult to pour in a fast paced bar environment, so it’s a challenge to get on a menu in many places. Sagamore only does Rye, so it’s not like they have multiple avenues of engagement in bars/restaurants which could boost their revenue and perhaps cause a well off owner (why hello Under Armour founder) to dismiss any buyout offers.

  That being said, big time money people tend to love profiting from their investments so that they can do other things that interest them (and profit there too!) and I could be wrong here, but I predict it sells eventually because it’s definitely an attractive company that checks an awful lot of boxes- branding, packaging, distribution, recognition, and capacity, so why the low chance on this? Because Sagamore is part of a now maturing development called the Baltimore Peninsula which features office space and retail, so it might not make sense to opt out of a portion of that real estate portfolio unless going all out.

  Prediction- $350 million just for the distillery.

Dark horses pay big when they win, but usually don’t.

THE DARK HORSES

These are some dark horse brands that likely aren’t near-term probabilities, but should be on any watch list.

• Pinhook (I hope this never happens, but this brand has an awful lot of appealing reasons why it could happen)

• Kings County (Someone has to eventually take Empire Rye seriously)

• RY3 (it could happen….)

• Still Austin (Their goal is going public, but money is money)

• Garrison Brothers (42 state distribution!)

• Chattanooga Whiskey Co. (I mean come on!).

• Smokewagon (the lack of ultra aged product….)