Be Wary Evaluating the Deschutes/Boneyard Deal
Deschutes’ big brewery—the new home of Boneyard.
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Late yesterday morning, Oregonians were startled to learn that Deschutes Brewery had purchased hometown rival Boneyard. Neither company offered any details, and Deschutes’ press release was so vague (“joint venture,” “craft-to-craft partnership”) we weren’t even sure what happened. Ezra Johnson-Greenough and local TV station KTVZ did some nice reporting and sussed out key details. They sharpen a very murky picture, but there is still so much we don’t and can’t know.
Buying breweries is risky, and the record is mixed at best. That’s as true of companies like Olympia and Falstaff as it is Portland Brewing and Ballast Point. Whenever a sale happens, our minds turn to subjects like production, recipes, and brand positioning, and we begin to imagine scenarios like, “What if Deschutes starts distributing Boneyard in Southern California?!” Yet other factors are much more central and it will be years before we learn if this was a “good” deal or not—if we ever do.
What We Know
Deschutes has purchased most of Boneyard, but Founder Tony Lawrence will retain the Bend pub and Boneyard’s CBD soda. Deschutes, according to founder Gary Fish, gets “everything else,” and plans to scale up Boneyard for their big brewery—handy, since their volume is way down. As a part of the deal, Lawrence received an ownership stake in Deschutes. Importantly, their distributors don’t line up, and Ezra reported that they may try to keep draft distribution with Point Blank in Portland.
Until Covid hit, Boneyard was making 30,000 barrels of beer they sold almost entirely on draft. That made them uniquely vulnerable to Covid, forcing Lawrence to shift to cans. I have no insight into how that went, but there’s no way to shift 30,000 barrels of beer from draft accounts built over a decade to cans in the midst of a crisis in which every other brewery is also leaping out of draft. Deschutes, one the US’s largest breweries, has by contrast built its success on bottles and cans. While Boneyard grew consistently over the past decade, Deschutes has been in a decline it hasn’t yet figured out how to reverse. Lawrence came up through Deschutes, and he apparently has a close relationship with Fish. They’re both in Bend and know each other’s companies well. So, superficially the two breweries would seem to complement each other. (If you’d like to hear more about them, listen to podcasts we did with Boneyard’s Lawrence and Deschutes’s Fish in 2019.)
Gary Fish in his office.
Tony Lawrence at Boneyard
What We Don’t Know
Even with those new details, an iceberg of information looms hidden under the deal’s surface. And here’s why I’d be wary about making too many hot takes about the future (even though we know I love offering hot takes!).
What was the deal? Buying Ballast Point wasn’t a bad idea. Buying Ballast Point for a billion dollars was a bad idea. We would relate to the acquisition differently knowing Deschutes paid a million, ten million, or a hundred million? (Deschutes did not pay a hundred million.) The detail about Lawrence’s equity stake in Deschutes might hint at a very low purchase price. That would mean little risk to Deschutes, but it could just as easily suggest little commitment to Boneyard. If by “good deal” we mean low risk to Deschutes, that may well look different than if we mean good prospects for Boneyard. Finally, we don’t know the financial situations of either brewery. Did Deschutes have cash on hand to make this purchase (and perhaps buy out distributors); did they take on debt; and how much Boneyard debt did they accept?
What are the short-term integration tactics? By all accounts this was a shotgun (or Covid) marriage, and listening to folks at the breweries talk, I believe them when they say they haven’t figured it out yet. Will they aggressively push cans of Boneyard out across the West Coast? Will they move more slowly, looking to introduce the brand into other markets in a stealthier mode? Will they look beyond the West Coast? What kind of sales and marketing support are they planning?
What’s the long-term strategy? This is where things get especially fuzzy. Now that the brands are part of a single company, how will Deschutes position them relative to one another? Will they approach them in a coordinated fashion, perhaps making Boneyard the IPA brand, or let Boneyard chart its own course aka the Moortgat collective of Firestone Walker, Boulevard, and Ommegang? How much independence will Boneyard have and who will be making decisions for the brand? How will the union affect company culture? Deschutes hasn’t done a great job of managing its own brand; how will it change now that Boneyard’s a part of the mix? It’s rare, but we’ve seen cases like Craft Brew Alliance where the balance of power among brands shifted as markets changed. Deschutes is better with tactics than long term strategy, and they’ll need to improve on that score to make the relationship work.
There are just too many factors at play to assess this now with anything more than a look of surprise. I checked out the breweries’ social media to see how this is playing with core fans, and it was mostly positive. That’s a big asset. People who like one brewery have affection for the other. They’ll enjoy a honeymoon period as fans allow them to figure it out. Boneyard has a fair amount of cred and a number of Californians seem excited thinking their beer is headed south. So we’ll see. I love both breweries and certainly hope they figure it out.