The Bruery, a well-known craft brewery from Southern California celebrated for its innovative sour and barrel-aged beers, has announced a significant partnership with Castanea Partners, a private equity firm located near Boston. Castanea Partners has acquired a majority stake in The Bruery, marking a new chapter for the brewery as it looks towards future expansion and development.
While specific financial details of the deal remain undisclosed, it is anticipated to be finalized this month. Brewery founder Patrick Rue, who established The Bruery in 2008 with his father Mike Rue, confirmed in a Brewbound interview that both he and his father will retain a considerable equity share and Patrick will continue his role as Chief Executive Officer.
Rue explained the strategic decision in a company blog post, stating, “We chose to make Castanea a part of Famille Rue because of their talents and their appreciation and understanding of our vision, and because they want to contribute to our continuous improvement.” This partnership signals a deliberate move to leverage Castanea Partners’ expertise in the consumer goods sector to enhance The Bruery’s growth trajectory.
Image: The Bruery’s range of craft beers showcases their experimental approach to brewing, a key element that attracted investment from Castanea Partners.
Strategic Board Restructure and Investment Focus
As part of this investment by Castanea Partners, The Bruery will see the formation of a new board of directors. Castanea Partners will hold three seats, while Patrick and Michael Rue will occupy the remaining two, ensuring founder involvement in the brewery’s strategic direction.
Castanea Partners specializes in investments ranging from $15 million to $150 million, focusing on consumer product companies. Their portfolio includes notable brands like Essentia Water and Jeni’s Splendid Ice Creams, highlighting their experience in nurturing and growing consumer-centric businesses. This background is particularly relevant to The Bruery as it seeks to expand its market presence and brand recognition within the competitive craft beer industry.
Patrick Rue emphasized the long-term perspective Castanea Partners brings, noting, “They are very patient investors who aren’t necessarily looking to get their money back very quickly. They are willing to wait for the right opportunity.” This patient capital approach aligns well with the craft beer industry, where brand building and consumer loyalty are crucial for sustained success.
Choosing Castanea Partners for Brand Growth Expertise
The Bruery considered various offers from both private equity firms and strategic investors before deciding to partner with Castanea. Rue indicated that Castanea Partners’ specific expertise in scaling consumer brands was a decisive factor.
“The expertise that Castanea has in growing other brands will give us a great foundation for successful and manageable growth,” Rue elaborated. This focus on brand development, coupled with Castanea’s investment philosophy, presented a compelling proposition for The Bruery as they aim to navigate the complexities of the expanding craft beer market.
The Bruery’s Unique Direct-to-Consumer Model and Production Capabilities
Currently distributing across 29 states in the U.S., The Bruery is projected to produce and package approximately 15,000 barrels of beer in 2017. A significant portion, about 20%, of The Bruery’s sales are direct-to-consumer. This direct sales model is a distinctive aspect of their operation, enhancing cash flow and profitability while fostering direct customer engagement. Rue believes this direct interaction is invaluable, stating, “When we tell our story face-to-face, it is that much more impactful.”
The brewery boasts an extensive portfolio of around 100 different beers annually, spread across three product lines. These include the Bruery Terreux series, known for its farmhouse-style and oak-aged sour ales, and the Offshoot Beer Co. line, which features canned IPAs. The Bruery’s facilities are capable of producing approximately 35,000 barrels of fresh wort each year, with a substantial volume aged in their collection of 4,500 wooden barrels, demonstrating their commitment to quality and traditional brewing techniques.
Navigating a Competitive Craft Beer Market
Rue acknowledged the increasing competitiveness within the craft beer sector as a key driver for seeking external investment. “We are in a place where I see the need for someone who has grown a business to come in and bring some perspective to us,” he explained. He further commented on the industry’s rapid growth: “The development of the industry, overall, is not concerning to me, but it has grown a lot faster than I could have ever imagined.”
This strategic partnership with Castanea Partners is seen as a proactive measure to ensure The Bruery remains competitive and can effectively manage future growth in a dynamic market.
Advisory Teams Behind the Deal
Farlie Turner & Co. acted as the financial advisor to The Bruery in this transaction. This firm has a track record in the craft beer industry, having advised Storied Craft Breweries on its investment in Deep Ellum Brewing and Fireman Capital Partners on their acquisition of Cigar City Brewing. Greenberg Traurig provided legal counsel to The Bruery, while Sean Lim of Sean Lim, Inc. served as an advisor, guiding Patrick and Mike Rue through the investment process.
Image: Founders Patrick and Mike Rue, whose continued leadership and significant equity stake are central to The Bruery’s partnership with Castanea Partners.
The Bruery’s Perspective on the Partnership with Castanea Partners
In a blog post, The Bruery elaborated on their future with Castanea Partners, emphasizing that since 2008, the brewery has been family-owned and operated by Patrick and Mike Rue. They highlighted their decade-long commitment to “careful, continuous growth and improvement” to produce “high-quality, innovative beer.”
The partnership with Castanea Partners is viewed as a means to “continue to grow in ways consistent with our ideals.” The Bruery recognizes that while financial partnerships are not new in the craft beer industry, this marks a significant evolution for their company. The investment from Castanea is expected to enable The Bruery to realize ambitious growth plans that might have been unattainable independently.
The Bruery underscored the alignment of values with Castanea Partners, noting their appreciation for The Bruery’s vision and their commitment to contributing to ongoing improvements. Castanea’s investment philosophy, focusing on businesses with passionate customer bases and unique industry positions, resonated with The Bruery’s brand ethos. The brewery anticipates mutual learning and growth from this collaboration, benefiting from Castanea’s expertise in brand development while sharing their deep industry knowledge.
Despite the investment, The Bruery affirmed their continued independence as a craft brewery. Patrick Rue will remain CEO, and both Patrick and Mike Rue will retain significant ownership. Castanea Partners’ role is to provide financial and operational support to facilitate future plans, including expanding direct-to-consumer options, broadening their distribution network, and enhancing production and packaging capabilities.
The Bruery expressed enthusiasm for welcoming Castanea Partners to their “Famille,” anticipating the partnership to be finalized later in the month, heralding a new phase of growth and opportunity for the brewery.
