Japan & USA: Sapporo Holdings acquires San Francisco’s iconic Anchor Brewing Company

Japan’s Sapporo Holdings Limited on August 3 announced that it would acquire iconic San Francisco craft beer maker, Anchor Brewing Company. The news was first reported by the San Francisco Chronicle.

The deal, financed through a combination of “own capital [and] external borrowings,” is worth $85 million, according to Sapporo’s second quarter financial statements. It is expected to close on August 31.

Under the terms of the agreement, Sapporo Holdings will acquire “all of the equity interest of Anchor Brewing Company,” which is controlled by a parent company “Anchor Brewers & Distillers.”

Anchor Distilling Company is not included in the deal.

Anchor Brewers & Distillers was formed in 2010 when former Skyy Spirits executives Keith Greggor and Tony Foglio purchased the brewery via the Griffin Group investment and consulting company from Fritz Maytag, who is widely regarded as one of the earliest pioneers of craft microbrewing.

The 121-year old Anchor Brewing Company, known for its Anchor Steam Beer, ranked as the 22nd largest craft brewing company in the US last year, according to industry trade organization the Brewers Association. The company produced 135,000 barrels of beer in 2016, but sales declined 4 percent versus the previous year.

In a press release announcing the purchase, Sapporo said Anchor’s annual sales totaled about $33 million in 2016. The $85 million deal represents about 2.5 times total sales and is significantly smaller than other recent California craft brewery purchases.

In 2015, Ballast Point sold to Constellation Brands for $1 billion. The San Diego-based company made about 277,000 barrels that year. Also in 2015, Heineken purchased a 50 percent stake in Petaluma-based Lagunitas Brewing Company, which made about 791,000 barrels that year. That deal was said to be worth $500 million, and Heineken has since acquired the remainder of the company.

Much of Anchor’s value lies in real estate, however. It owns the property where the brewery resides, as well as a building across the street, a source familiar with the company told Brewbound.

In an interview with the San Francisco Chronicle, Greggor said the deal had been in the works for a year, and the company held exploratory talks with several larger strategics about purchasing the brewery.

“When you take a brand like Anchor, its very soul exists in the heart of San Francisco,” Greggor told the outlet. “Of all the people we spoke to, (Sapporo) respected Anchor the most, what it stood for and the importance of its connection with San Francisco.”

Anchor will continue its brewing operations at its Potrero Hill production facility, and the company plans to open a new public taproom inside on De Haro Street, the Chronicle reported.

“Sapporo committed to investing in the Potrero Hill brewery until we exceed capacity of that brewery, but I have no idea when that would be,” Greggor told the outlet. “We are currently running at about 55 to 60 percent of that capacity.”

Plans for a second Anchor Brewing facility on San Francisco’s Pier 48 as part of the $1.6 billion Mission Rock Development project appear to have stalled completely after more than four years of delays, although the brewery wouldn’t comment, according to the Chronicle.

Anchor’s management told the Chronicle that selling complete ownership of Anchor to Sapporo — which was founded in 1876 and is Japan’s oldest beer brand — will strengthen the brewery’s long-term future and enable its continued international expansion. The brewery already exports beer to 20 countries.

In financial filings, Sapporo said the Anchor deal falls into its long-term management plan, “Speed 150,” which is aimed at building a portfolio of “highly unique” alcoholic beverage, food and soft drink brands from around the world. The company said it is prioritizing expanding its North American business.

“The addition of Anchor’s strong brand power and network to the Sapporo Group’s US beer business portfolio through the conclusion of this agreement is expected to generate further synergies and accelerate the growth of the Group’s US business,” the company said.

Sapporo previously acquired Canadian beer company Sleeman Breweries Ltd., which includes the Unibroue, Sleeman and Okanagan Spring brands, for $400 million in 2006.

Sapporo is the latest Japanese beer company to show interest in the U.S. market at a time when beer consumption in its home country are at an all-time low, according to Reuters. Last October, Kirin Holdings purchased a 24.5 percent stake in Brooklyn Brewery.

About Anchor

Name: Anchor Brewing Company, LLC (beer manufacturing and sales)

Location: 1705 Mariposa Street, San Francisco, California, USA

Year founded: 1896

Representative: CEO Matt Davenport

Num. of employees: 160 (as of December 2016)

Production plant: One plant (San Francisco, California state)

Sales volume: Approx. 1.75 million cases (equivalent to 355ml × 24 bottles in 2016)

Annual sales: Approx. 33 million U.S. dollars (about ¥3.7 billion in fiscal 12/2016)

Sapporo Holdings acquired Anchor Brewing Company’s “equity” instead of its shares due to the fact that the latter is a limited liability company.

03 August, 2017