For his 50th birthday, Dogfish Head founder Sam Calagione decided to go spend his day with lunch at the Starboard in Dewey Beach.
What wasn’t planned were his surprise lunch guests: Gov. John Carney and Rep. Pete Schwartzkopf, D-Rehoboth Beach. The governor and speaker of the House were there to conduct an impromptu bill signing of House Bill 125. Sponsored by Schwartzkopf and Sen. David McBride, D-Bear, the bill is an amendment to the state’s liquor law that allows Delaware brewers to affiliate with out-of-state manufacturers as long as the total domestic sales do not exceed 6 million barrels per year.
That will come in handy for Dogfish Head after the company announced May 9 that it would be merging with Boston Beer Co., brewers of Sam Adams. Schwartzkopf said the bill was written with the input of state and industry officials, and was designed as a way to allow smaller breweries to merge to have more buying and selling power.
Calagione said the merger will close Saturday, June 15. At that point, he said, the combined entity will begin discussing issues like distribution strategy. Dogfish Head is currently available in 40 out of 50 states.
Calagione said the main reason for the merger was the opportunity for growth. He said by merging with Boston Beer Co., a publicly traded company, Dogfish can grow beyond what it could on its own.
It helped that Calagione, and his wife, Mariah, were going into business with his good friend, Jim Koch, the founder of Boston Beer and a ubiquitous presence in television ads for Sam Adams. He said the companies complement each other well, as Dogfish’s strengths are its IPAs and sours, while Boston Beer is known for its lagers, ciders and tonics. Even with the merger, Calagione said, the combined companies only make up about 2 percent of the domestic beer market. In contrast, he said, conglomerates Anheuser Busch/InBev and MillerCoors control 65 percent of the domestic market.
“We’re still a David against the exact same Goliaths,” Calagione said.
Calagione said in the past, he had been approached by industry heavyweights like Anheuser Busch/InBev and Constellation Brands, brewers of Corona, about purchasing Dogfish Head.
“Mariah and I had zero interest in taking those meetings,” he said. “We believe in this community of craft.”
He said the merger will allow employees of Dogfish Head to have more job security and have additional opportunities for advancement. Dogfish currently has 400-plus employees, while Boston Beer has 1,400.
Calagione said marketing will be one of the big areas where the expanded workforce will pay off. Dogfish has 75 people handling marketing, while Boston Beer has 450.
The merger agreement is valued at $300 million; under terms of the deal, Calagione and his family will receive 407,000 shares of Boston Beer Co. stock, valued at $314.60 per share. Sam and Mariah Calagione will be the second largest non-institutional shareholders in Boston Beer Co. after Koch. Calagione will join Boston Beer Co.’s board of directors in early 2020. Boston Beer Co. is funding the purchase using cash on hand and the company’s line of credit. Dogfish shareholders will receive $170 million in cash. The combined company will be run by Boston Beer CEO Dave Burwick.
Julia Herz, craft beer program director for the Brewers Association, a nonprofit trade association for brewers, said, “We’re in a maturing market, and small and independent brewers are embracing ways to remain competitive. Time will tell what the merger means for craft brewing. The immediate news is in the face of an evolving industry and in the spirit of collaboration. This strategic alliance allows Boston Beer and Dogfish Head to remain independent.”
Eric Williams, co-founder of Mispillion River Brewery in Milford, said the move is a good one for small brewers in a very crowded beer market. “There’s strength in numbers,” he said. “Sam and Jim are going to be able to attack Big Beer.”
Williams said while the merger was viewed initially with skepticism by Dogfish fans, he thinks the brewery will continue to be an industry leader. “It’s good. It’s a change, but in five years this industry has changed quite a bit,” he said.