E-Malt.com News article: USA: Terrapin Beer Co. to sell a minority interest to MillerCoors' craft beer division

Athens microbrewery Terrapin Beer Co. has agreed to sell a minority interest in the venture to MillerCoors’ craft brewing division Tenth & Blake Beer Co, Online Athens reported on October, 17.

Terrapin has signed a letter of intent to give Tenth & Blake less than 25 percent ownership in the Athens company, said Terrapin Beer Co. President John Cochran, who founded the brewery with partner Brian “Spike” Buckowski. The arrangement ensures Terrapin remains an independent craft brewery under guidelines from the Brewers Association, Cochran said.

The minority ownership will be given in exchange for reducing a Tenth & Blake loan that was made last December to buy out a group of Terrapin investors, Cochran said. Cochran would not disclose the amount of the loan or how much of it will be applied toward Tenth & Blake’s minority share in the company.

“We’re not disclosing what percentage it is, but it’s less than 25 percent,” he said. “And it’s not like 24.9 percent. It’s well below that.”

Cochran and Buckowski wanted to pay off the investors who bought into the venture in 2007 because they couldn’t agree about where Terrapin was headed or how to run the brewery, Cochran said.

“As founders, both Spike and I felt strongly committed to the original vision we had for Terrapin, and we were determined to stick to our guns,” Cochran wrote in an Oct. 5 email to Terrapin employees and distributors.

After obtaining the loan from Tenth & Blake, however, Cochran and Buckowski realized there was a lot of common ground between the two parties.

“During the loan discussions, it became clear that we and the Tenth & Blake leaders shared a common view of the long-term potential of Terrapin. Those conversations have now led to Spike and I inviting Tenth & Blake to convert a portion of its already existing loan to a minority stake. This allows Terrapin to significantly reduce our debt burden and enables us to invest more intensely in production capacity and innovation,” Cochran said.

The sale of the minority stake to Tenth & Blake will make it easier for Terrapin to acquire funding from banks, Cochran said.

“By converting a big portion of the (Tenth & Blake) loan to equity in Terrapin, we’ll be able to talk to banks about money for expansion,” he said.

Terrapin wants to spend $4 mln to $4.5 mln on an expansion plan that will double the company’s brewing capacity up to 45,000 barrels a year. One barrel is the equivalent of about 31.5 gallons.

“It’s a great thing,” Cochran said. “Because of the lack of capacity in the past year, we haven’t been able to make as many special beers, and Spike and I like to experiment and play around and show a huge variety available.”

Before the agreement, Terrapin couldn’t cover the costs of expanding production to fulfill demand of its beer products outside the Athens and regional market, Cochran said.

“We had distributors selling out and asking, ‘Where’s the beer?’ ” Cochran said.

The deal also will enable Terrapin to pursue a barrel-aging program where beer can be stored in oak barrels for six months to a year to allow the beer to soak up the oak flavors of the wooden containers, Cochran said. Terrapin already has done limited amounts of barrel aging but hasn’t been able to produce for sale.

“This takes us to a whole new dimension,” Cochran said. “Now, we’ll be able to start a full-time barrel-aging program and bottle it and get it to the public.”

Critics of the deal between Terrapin and a MillerCoors subsidiary say that Terrapin has sold out to corporate America, but Cochran disagrees.

“Those people just need to hear the full story,” Cochran said. “Nothing changes for us. We’re still in control to decide what beers we’ll make and when to make them. In a way, it allows Terrapin to become more of a craft beer company than we have been because it allows us to do things we couldn’t do before.”

If the deal goes through, Cochran expects the expansion - adding more equipment to increase capacity in the existing building off Newton Bridge Road - to be complete and ready to produce more beer by the middle of next summer.

They expect to add workers and already are advertising for a barrel master to oversee the barrel-aging program.

Terrapin opened the Athens brewery in 2007 and began producing its first beers for distribution in 2008.


19 October, 2011