USA: Kona Brewing’s Hawaiian operations to be sold

Craft Brew Alliance (CBA), the seventh largest craft beer group in the United States, and Anheuser-Busch (A-B) today announced to sell CBA’s Kona Brewing operations in Hawaii to an independent group of investors headed by former Anheuser-Busch president David Peacock.

The move follows A-B’s announcement from November 2019 to buy the remaining shares in CBA it does not already own (inside.beer, 11.11.2019). In August 2019, A-B waived an option to buy the remaining 68.8% of CBA at USD 24.50 per share (inside.beer, 23.8.2019). Only three month later, A-B was able to buy it at a remarkable discount for USD 16.50 per share. Both companies said, the intended sale was meant “to expedite the regulatory review process and alleviate potential regulatory concerns regarding the proposed expanded partnership.”

CBA and A-B continue to expect the closing of the expanded partnership to occur no later than the end of 2020, after receipt of required regulatory clearance and satisfaction of other customary conditions.

According to the original plans, A-B wanted to buy Kona Brewing as a whole including the old brewery and a new brewery under construction, a kegging line and two brewpubs - all in Hawaii - as well as production and filling of bottled and canned beer on the mainland.

Under the revised plan, operations on the mainland will be kept by A-B while all operations in Hawaii will be sold to PV Brewing Partners, a partnership between investment firm VantEdge Partners and David Peacock, who succeeded August Busch IV as president of A-B in 2008 after the acquisition of A-B was completed by InBev on November 18, 2008. He stepped down as A-B president in 2012 and is acting since 2013 as Chairman of Vitaligent, a holding company which owns more than 75 Jamba Juice stores across the United States.

“While our shared vision for the expanded partnership between CBA and A-B did include CBA’s Hawaii operations, we are still optimistic about the ability of CBA and A-B to offer more consumers, in more communities, even more choices as a result of this expanded partnership,” said Marcelo “Mika” Michaelis, president, Brewers Collective, A-B. “We are confident that PV Brewing will continue investing and driving economic growth in Kona’s communities in Hawaii.”

Kona Brewing Company was founded in 1994 by Cameron Healy and his son Spoon Khalsa. It was sold 16 years later in 2010 to CBA. The company runs a 14,000-barrel flagship brewery in Kailua-Kona on Hawaii's Big Island and two brewpubs on two islands. Today it’s one of the leading breweries in Hawaii, able to supply around 13% of the local demand. It employs about 220 people.

In 2012 Kona Brewing sold 220,000 barrels of beer (260,000 hl), the majority of which was brewed on the mainland. In 2017, the brewery was sued for misleading customers about the origin of its beers. Two beer drinkers from California said they were falsely led to believe the product was produced in Hawaii because of labels feature like surfers , hula dancers, and other beachy themes, and names like Longboard Island Lager and Wailua Wheat (inside.beer, 4.3.2017). Last year CBA as owner of Kona Brewing agreed to offer partial refunds to settle the lawsuit. The Portland-based brewing group offered to reimburse a maximum per household of USD 20 with receipts and USD 10 without receipts. To cover the costs, the group had taken a USD 4.7 million pretax charge (inside.beer, 31.5.2019).

In order to bring production back home, the brewery started early last year the construction of a new 30,000-square-foot brewery and canning line with capacity to produce 100,000 barrels. The new location will be able to supply around 80% of the local demand, with only bottled beer still needing to be shipped from the mainland.

After some delays, the first brews of the USD 20 million investment, which were planned for “the end of February, beginning of March” are now expected for “late July, early August,” according to Bill Smith, Kona Brewing general manager of Hawaii operations. “Hopefully in August, we’ll actually be packaging. September, we’ll be fully online.”

“In the same way that CBA carried on the legacy of what Cameron Healy and Spoon Khalsa built at Kona, our number one priority is supporting Kona’s future on the Islands and ensuring the success of the brand there,” said Dave Peacock, PV Brewing Investor. “We are energized by this unique opportunity and are proud to support the continued growth of Kona in Hawaii with a new state-of-the-art brewery.”

“We are committed to working with regulators and facilitating the successful review and close of our expanded partnership with A-B,” said Andy Thomas, CEO of CBA. “We are delighted to have found a strong buyer that will continue to nurture the spirit of the Kona brand in Hawaii and offer its employees, who will remain part of Kona’s Hawaii operations, further opportunities for growth and development.”

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