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Friday, 04 September 2015 11:50

Anheuser-Busch subsidiary Goose Island Beer Co. acquires majority interest in Fennville's Virtue Cider

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FENNVILLE — A wholly-owned subsidiary of Anheuser Busch LLC has acquired a majority interest in a West Michigan-based hard cider producer, MiBiz has learned.

Anheuser Busch’s Chicago-based Fulton Street Brewery LLC, which does business as Goose Island Beer Co., has taken a 51 percent stake in Virtue Cider Co., according to documents filed with the Michigan Liquor Control Commission on Aug. 20.

The remaining 49 percent remains with the 31 original investors, which includes CEO Greg Hall, who founded Virtue in 2012.

In an interview this morning with MiBiz, Hall said the company will remain based in Fennville and will continue to use all Michigan-based apples. The investment from Anheuser-Busch-backed Goose Island will allow Virtue Cider to focus on the business of making cider, Hall said. The company plans to leverage Goose Island’s Chicago-based packaging lines, barrel-aging warehouse and sales personnel in continuing to grow the cider business, which currently sells product in 20 states.

Terms of the deal — which is expected to close “very soon” — were not disclosed.

However, Hall said the investment allowed him to pay off outstanding invoices and make whole vendors and suppliers to which Virtue owed money.

“We’re taking on a new partner who brings some great resources and will give us the ability to grow,” Hall said. “We needed more resources to grow. As a startup, we were playing on the edge. We’re ready to move forward.

“We never anticipated that we would not stay in business.”

Hall said demand for Virtue Cider outstripped the company’s ability to keep up, particularly on the packaging side. While the company doesn’t release its production volumes, Virtue had the infrastructure to produce 30,000 barrels, Hall said.

Now, with the relationship with Goose Island, Virtue will truck its cider to the Chicago brewery facility and use its “state-of-the-art” packaging lines, many of which Hall installed when he worked for the company that was founded by his father.

Hall served as brewmaster when he left Goose Island in 2011 after his family sold the company to Anheuser-Busch for $38.8 million. He continued to serve as a consultant, but was not involved in the brewing operations.

As part of the deal for the cidery, former Goose Island CFO and COO Tony Bowker will come out of retirement to serve as president of Virtue Cider.

The joint venture allows Goose Island to make a “very deliberate” move into the rapidly-growing hard cider industry, said Ken Stout, the Chicago-based brewery’s general manager.

“We’ve had our eye on cider for a long time. It’s seen explosive growth,” Stout told MiBiz, noting the deal for Virtue Cider “made a ton of sense” and “felt completely natural” given Hall’s connections with Goose Island.

Looking ahead, Stout said “the script is not written,” but Goose Island plans to let Virtue Cider call the shots in terms of product.

“The product questions … are all up to Virtue,” Stout said.

The deal came together after several months of talking, Hall said. Virtue went looking for a partner of some sort after it became clear that it needed to address capacity constraints to continue its growth, he said. That led to conversations with other companies in the industry — whom Hall refused to name — as well as financial partners.

He said the financial partners may bring capital to the table, but they lack the industry expertise that another beverage company can offer.

“The money people look at the short term, but we’re planting trees that we will not get fruit off of for many years,” Hall said. “It’s not something that works well with investment banks. This is for the long term. We have big plans to grow and expand.”

Anheuser-Busch’s 2009 Goose Island acquisition could serve as an indication of the kind of resources the company is willing to put into the companies in which it invests, according to industry sources.

Since the acquisition, Anheuser-Busch has invested in Goose Island’s growth, more than doubling production to 375,000 barrels as of 2014, according to data presented in April at the annual Craft Brewers Conference in Portland, Ore.

If Anheuser Busch continues this pattern with Virtue, it could position the cider maker at an advantage compared to the other, mostly smaller companies in the industry, said Paul Vander Heide, president of the Michigan Cider Association and owner of Spring Lake-based Vander Mill LLC.

“One of the most challenging things for craft producers is access to capital for both brand promotion and capacity growth,” he said. “If there is continued investment in the brand, it will be an advantage for them in the marketplace.”

Vander Heide notes that ultimately the success of a brand, regardless of its ownership, is “leveled by the consumer.”

Virtue founder Hall, who described the deal as a “match made in heaven,” said he’s excited to have partners in the business so he can focus on what’s fun for him: making high-end hard ciders.

“This wasn’t in our original plan, but it works out for the better,” Hall said.

 MiBiz reporter John Wiegand contributed to this story

Read 8429 times Last modified on Monday, 28 September 2015 11:09

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