Wednesday, August 9, 2017

What's next for Anchor Distilling?

One of Anchor Distilling's most popular imports
Anchor Brewing Company was sold last week to Japan's Sapporo Brewing Co. for $85 million. But Anchor Distilling was not part of the deal.

I was surprised to learn Anchor Distilling is actually more profitable now than Anchor's much better known beers. The beer-based reason for the sale has been covered well by other sites, notably the San Francisco Chronicle. I called Anchor Distilling President and CEO Dennis Carr to learn more about what the newly independent spirits company will do next.

The answer turns out to have international implications, starting in London.

A brief background on Anchor Distilling: It was founded in 1993 as an offshoot of the brewery. It opened with two locally made products -- Junipero Gin and Old Potrero Rye -- that were as ahead of their time in the craft booze movement as Anchor Steam beer once was. It has expanded its business immensely by importing and selling craft spirits made in other countries, including bartender favorites like the Tempus Fugit spirits and Luxardo Maraschino liqueur (and the cherries.)

In 2010, the entire Anchor business was sold to former Skyy Vodka execs Tony Foglio and Keith Greggor. They sold the beer business last week and Carr said they took on the famous London-based beverage merchant Berry Bros. & Rudd as a partner for the distillery business.

Now Anchor Distilling has to look for a new building, but Carr said the distillery's 50 employees nationwide are expected to move with them.

The Gray Report: I was shocked to learn the distilling business is more profitable than the beer.

Dennis Carr: The beer category has become a crowded category. Premium spirits have been on the rise. These trends have been going on for the last two or three years. At this point, the spirits business is larger than the beer business.

TGR: Where are you planning to relocate?

Carr: We're currently looking for new property in San Francisco. We plan to stay in San Francisco, with the plan to build a new distillery along with a whole education center so we have the chance to taste and educate. It'll give us the opportunity to design a distillery the way we want it to be. Back 20 years ago when (former owner) Fritz (Maytag) decided to add a distillery, I'm not sure it was the long term plan, so we ended up in a beer warehouse.

TGR: Many businesses don't want to be in San Francisco because it's expensive. Wouldn't it be cheaper to move somewhere else?

Carr: It would until you realize that the products that we're putting out are all from San Francisco. We are a San Francisco company and our brands are associated with that. The other opportunity is the direct to consumer experience. If we built a distillery outside of San Francisco we wouldn't have access to the number of consumers we have here.

TGR: How important are the import brands to the business?

Carr: Incredibly important. We've got some fantastic agency brands that we represent that have allowed us to build our platform across the country. It enables us to build our agency partner brands, but also our own brands.

TGR: What are "agency partner brands?"

Carr: We don't own the brand. We represent them in sales, market and licensing in the United States for a fee. We've built a full service business model. We handle everything from importing to licensing to state distribution, sales and marketing. Everything. We're the experts in the US market.

Having a larger portfolio gives you more resources. From a sales perspective, you can walk into a bar and talk to the bartenders about what they're trying to accomplish, and see if you can help them. If you only have one or two brands, you're just trying to sell those brands.

TGR: What's hot in your portfolio?

Carr: The products we produce have been hot. Junipero Gin has been growing high double digits for the last couple yearrs. Old Potrero Rye whiskey has been hot as rye has been hot in the last couple years. Nikka Japanese whiskey, Kavalan Taiwanese whiskey, Luxardo Maraschino liqueur as well as the maraschino cherries are hot.

TGR: How big a building are you looking for? Will you build it or buy an existing building?

Carr: We'll probably look for an existing building. We're looking at property from 20,000 to 30,000 square feet, which would enable us to do everything we want. We have up to three years to move the distillery. That's enough time for us to find a new property and build a new distillery. We will likely move our office employees into office space sooner than that.

TGR: Do you see Anchor Distilling going up for sale?

Carr: No, we're going to remain under the current ownership. Part of the plan was to generate resources to invest in the distilling business. We see this as a long term growth play. Our ownership group is made up of Berry Bros. & Rudd. It's a 320-year-old business. They only know about understanding longterm visions. Tony Foglio and Keith Greggor being longterm spirits industry people, they know this business doesn't grow quickly. You can only build a brand over time.

TGR: How committed is Berry Bros. & Rudd to Anchor's own products?

Carr: Berry Bros. & Rudd bought the Glenrothes brand in 2010. They recently sold it back to (Scotch whisky producer) Edrington. They're focusing now on the Anchor Distilling business to build their platform.

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1 comment:

Unknown said...

Interesting, Blake. For more on BB&R, Patrick Schmitt, MW just published an in-depth interview with BB&R chief exec, Dan Jago,