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Castanea Partners Purchases Majority Stake in The Bruery

By: Chris Furnari - Brewbound - Date: 05/19/2017

 

Popular southern California craft brewery The Bruery, which specializes in creating experimental sour and barrel-aged beer offerings, has sold a majority stake to Boston-area private equity firm Castanea Partners, Brewbound has learned. Specific financial terms were not disclosed; the deal is expected to close this month. 

In a conversation with Brewbound, The Bruery founder Patrick Rue, who launched the business in 2008 with his dad, Mike Rue, said the pair would retain a “substantial amount of equity.” Patrick Rue will also continue to serve as the company’s CEO. “We chose to make Castanea a part of Famille Rue because of their talents and their appreciation and understanding of our vision, and because they want to contribute to our continuous improvement,” Rue wrote in a blog post on his company’s website. 

As part of the transaction, Castanea Partners will receive three seats on The Bruery’s newly formed board of directors. Patrick and Michael Rue will occupy the other two. Castanea Partners, which invests between $15 million and $150 million into consumer products, also has investments in Essentia Water and Jeni’s Splendid Ice Creams, among other companies. “They are very patient investors who aren’t necessarily looking to get their money back very quickly,” Rue told Brewbound. “They are willing to wait for the right opportunity.” 

The Bruery entertained offers from other private equity firms as well as strategic investors, Rue told Brewbound, but opted to partner with Castanea because of the firm’s experience backing other consumer products.

“The expertise that Castanea has in growing other brands will give us a great foundation for successful and manageable growth,” Rue wrote. Now distributed in 29 U.S. states, Rue said The Bruery would brew and package about 15,000 barrels of beer in 2017. Roughly 13,000 barrels of that will be sold, and the remaining 2,000 barrels will be left to age for several months in bottles and kegs, he added. 

One unique aspect of The Bruery’s distribution model is its approach to direct sales: As much as 20 percent of its products are sold directly to consumers. That improves cash flow, profitability and gives the company a chance to “have a direct experience” with customers, Rue said, adding that “When we tell our story face-to-face, it is that much more impactful.” 

The company makes and sells about 100 different beers annually via three product lines, including the Bruery Terreux series, which focuses entirely on farmhouse-style and oak-aged sour ales fermented with wild yeast strains, as well as the recently launched Offshoot Beer Co. line of canned IPAs. ‘The Bruery’s current operations allow for the production of roughly 35,000 barrels of fresh wort annually, Rue said. Much of that is left to age for several months in the company’s collection of 4,500 wooden barrels. 

Rue told Brewbound that an increasingly more competitive craft segment led him to pursue an investment from an outside capital partner. “We are in a place where I see the need for someone who has grown a business to come in and bring some perspective to us,” he said. “The development of the industry, overall, is not concerning to me, but it has grown a lot faster than I could have ever imagined. “It is a good time to make sure we are being competitive in the market,” he added. 

Farlie Turner & Co. — which advised Storied Craft Breweries on its investment in Deep Ellum Brewing, and advised Fireman Capital Partners on its purchase of Cigar City Brewing — served as the financial advisor to The Bruery.

Since 2008, The Bruery has been family owned and operated solely by our CEO & Founder, Patrick Rue, and his father, Mike Rue. Actually, it’s even been a little longer if you include the time Patrick spent in 2007 working on developing The Bruery business plan and layout before making the first drop of beer. Over the past decade, we’ve worked diligently on careful, continuous growth and improvement, making positive changes along the way in order to create high-quality, innovative beer more efficiently for our fans (and ourselves) to enjoy. 

Today we have some exciting news about our goals of future growth and enhanced capabilities on the horizon. We are pleased to announce that we have plans to partner with Castanea Partners, from Newton, MA, which will enable us to continue to grow in ways consistent with our ideals. While independent craft breweries forming financial partnerships isn’t something new in our industry, the introduction of a new partner in our company is indeed a change for us. You’re probably asking yourself, “Why would Patrick and Mike want a partner in The Bruery?” Good question. The Bruery started out as a very small operation, and nine years later we’ve transformed into a proud leader in specialty craft beer. We’ve had plans for growth, some of which you have seen realized over the past couple of years, with the implementation of our more efficient brewhouse, our new packaging hall for our clean beer, and the extension of our sour and wild program into our Bruery Terreux brand and facility. While we have plenty of ideas and a strong vision for how we want to grow, our financial partnership with Castanea will afford us the capabilities to realize those dreams and achieve more than we ever could entirely on our own. 

We chose to make Castanea a part of Famille Rue because of their talents and their appreciation and understanding of our vision, and because they want to contribute to our continuous improvement. Castanea Partners invests in businesses that have a passionate customer base and a unique position within an industry. They have a small group of patient investors, and have invested in quite a few notable brands, such as Jeni’s Splendid Ice Cream, Urban Decay cosmetics, Essentia Water, and drybar. The expertise that Castanea has in growing other brands will give us a great foundation for successful and manageable growth. We’ll learn a lot from the folks at Castanea, and they’ll learn from us too. 

We are still an independent craft brewery. Patrick will remain in his current role as CEO, and he and Mike will continue to own a significant portion of The Bruery, Bruery Terreux, and Offshoot Beer Co. Castanea will help us financially and operationally with our future plans. Thanks to this partnership, we will be able to explore more opportunities both in direct-to-consumer options and in our 29 state distribution footprint, and implement internal enhancements to our production and packaging side. 

We anticipate this partnership will be completed later this month, and we look forward to welcoming Castanea Partners to our Famille.


A shoutout to our great advisors:

Farlie Turner & Co. in Fort Lauderdale, Fl. represented The Bruery, and provided great wisdom and friendship along the way. In particular, Craig Farlie, Daniel Vetrano and Keita Iwabuchi went above and beyond for us. 

Greenberg Traurig (out of the Fort Lauderdale, Fl. and Chicago, Ill. offices) fantastically represented the legal interests of The Bruery. Bruce March, Chad Striker, Julie Morgan, Noam Lipshitz and Alexander (Ryan) Zachariah worked many late nights and weekends, and kept a great energy and sense of humor along the way. 

Sean Lim of Sean Lim, Inc. acted as an advisor for The Bruery, navigating Patrick and Mike through an unfamiliar and daunting process. Sean managed the external resources and helped to keep the process streamlined and organized for The Bruery.


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