Boston Buys Brewery

Dumps plan to build Massachusetts plant – buys Diageo brewery

The Boston Beer Company, Inc. , announced today that it has signed a purchase and sale agreement with Diageo North America, Inc. to acquire a brewery located 60 miles outside of Philadelphia, for $55 million.

The company will discontinue exploring the option of building a new brewery in Freetown, Massachusetts.

It is estimated that the Pennsylvania brewery will initially increase Boston Beer’s brewing capacity by approximately 1.6 million barrels of beer annually with the potential for expansion to over 2 million barrels with modest incremental investment.

The Pennsylvania brewery will complement the breweries that the company owns and operates in Boston, Massachusetts and Cincinnati, Ohio.

. The brewery is expected to begin brewing Samuel Adams beers in the third or fourth quarter of 2008.

“The plant in Breinigsville, located in the Lehigh Valley, has extremely dedicated employees, an award-winning brewing history, and a welcoming community and business environment. Without its brewhouse in full operation, however, it has been under-utilized,” said John Council, President, Diageo Global Supply, Americas. “This sale to Boston Beer enables Diageo to better utilize its manufacturing footprint and further drive operating efficiency.”

Over the past few years, Boston Beer has considered several ways of increasing brewing capacity including expanding its existing breweries, building a new brewery on a site in Freetown, Massachusetts or buying one of several breweries around the country that were potentially available.

Last year, The Boston Beer Company entered into an agreement with an option to purchase a parcel of land in Freetown, Massachusetts as a site for the construction of a new brewery. Over the course of the last year, the company invested over $4 million in an exhaustive evaluation of the cost of constructing a new brewery. After this process, it became clear that construction, whose cost estimate now significantly exceeded $200 million, might not be the company’s best long-term brewing option.

More details to follow on this story.

Comments

  1. admin says

    Thanks Moonlight. A good question that I’ve been gathering some more details on.

    The Lehigh Valley brewery was built for the F. & M. Schaefer Brewing Company in the 1970s, and was operated by the Stroh Brewery for many years. During part of that period Stroh brewed Samuel Adams beer for Boston Beer.

    When Stroh exited the brewing business, Pabst Brewing Company bought it. Pabst operated the plant until September of 2001, when it discontinued making its own beer. Diageo then bought it to make Smirnoff Ice. I have heard from reliable sources that Boston Beer plans to make Smirnoff Ice under contract for Diageo.

    Boston Beer also owns the former Hudepohl-Schoenling brewery in Cincinnati which is brewing seven days a week and is at 100% capacity. It also contracts to have beer brewed elsewhere, including at the Latrobe plant in Pennsylvania where Rolling Rock was once brewed. Boston Beer has said recently that it is interested in also purchasing the Latrobe brewery.

    So, Boston Beer, which originally had all of its beer brewed by others under contract, is slowly becoming a brick and mortar brewer – brewing much of its beer in its own plants and soon to be making product under contract for others – an ironic twist.

  2. beertje46 says

    admin wrote:
    Boston Beer also owns the former Hudepohl-Schoenling brewery in Cincinnati which is brewing seven days a week and is at 100% capacity. It also contracts to have beer brewed elsewhere, including at the Latrobe plant in Pennsylvania where Rolling Rock was once brewed. Boston Beer has said recently that it is interested in also purchasing the Latrobe brewery.

    Any idea what the capacity is in the Cincinnati plant?

  3. steveg says

    The Boston Beer 2006 Annual Report says they produced 1.6 million barrels in 2006, and in 2007 they plan to produce 40% – 50% of their beer at the Ohio plant in 2007.

    I guess that puts production at about 700,000 – 800,000 barrels/year. Impressive.

    The Report also states that the Company invested about $2.3 million in the Brewery in 2006. Pretty cool that they are keeping that place alive and well.

  4. admin says

    My research shows that they had a capacity of 800,000 at the end of 2005. There is no indication that any significant upgrades have been made since – so looks like that’s about right.

    Admin

  5. frigatebay says

    What does this mean for the old Latrobe plant? Didn’t city brewing buy it with the intention of contract brewing Sam Adams?