Canada, AB: Big Rock Brewery considers restructuring, potential sale amid industry downturn
Big Rock Brewery has launched a strategic review to look at cost reductions, restructuring, refinancing and potential sale of all or part of the corporation’s assets, the Calgary Herald reported on March 30.
The 38-year-old Calgary-based brewery’s 2022 financial statement shows a loss of C$7.1 million, including C$3.8 million in the final three months of the year.
“Any time you’ve got industry consolidation going on, changes in the industry, a down year for beer . . . it’s the responsibility of the board in particular to look at all options,” said Stephen Giblin, who was installed as interim president, CEO and chair of the board of Big Rock on Oct. 27, 2022.
“I think it’s time for us to look at a strategic plan and develop a good plan for the business going forward.”
Acumen Capital Finance Partners Ltd. will serve as strategic adviser to the special committee of the board of governors and could result in new partners being brought in or other strategic initiatives. Not timeline has been placed on the completion of the review.
It was a tough 12 months for the brewery, which saw sales volumes drop three per cent over 2021, exacerbated by inflationary pressures and rising costs.
On March 28, Blair Burdesco, executive director for the Alberta Small Brewery Association, said costs are up 30 per cent for brewers on everything from grain to cans and boxes.
Still, there are some foundational strengths for Big Rock. Revenue is actually up two per cent year-over-year at a time when industry revenue is down four per cent.
Its balance sheet took a big hit with C$2.4 million in charges this quarter, including C$1.4 million in inventory writedowns of expired product going back to 2021, C$200,000 in fixed asset writedowns and C$800,000 related to restructuring. Revenues were also affected in the fourth quarter due to the closure of its Vancouver restaurant and tap room in early 2022.
This is essentially a step back to streamline its operations to improve its performance.
“We made the tough decisions that are required to get the company positioned for future growth,” said Giblin.
This not the first time the brewery has had to navigate choppy waters. The brewery had to find its feet after founder Ed McNally died in 2014, then took on C$1.7 million in losses in the first quarter of 2019 — blamed on the province’s taxation system and the elimination of a small brewery grant program — that led to an undisclosed number of layoffs.
Bolstering its efforts for 2023 is the removal of volume produced under co-packing agreements from its taxation formula. This will avoid double taxation on co-pack customers and will allow Big Rock to grow its co-pack business without negative effects on Big Rock branded products sold in Alberta.
Co-packing is an agreement in which Big Rock brews other labels’ product for them.
A big part of the brewery’s path forward will come in the form of a push to “premiumize” its beer. Big Rock began this with a recently released New England IPA that Giblin says has sold well, and it will be launching other new top-shelf brews in April and May.
But there will be no tweaking of hallmark recipes for its Traditional and Grasshopper beers.
For Big Rock’s management, it is a matter of reasserting the brewery in an ultracompetitive craft beer segment.
“The revenues in the industry are down because people aren’t drinking as much beer. But in our view, people are drinking higher-end beers,” said Giblin. “It’s very competitive in the more price-conscious market. So if we premiumize, we are gonna get better margins for the business and we’re going to have a better competitive position.”
31 March, 2023
