Tuesday, October 6th, 2015

Pacific Brewing and Malting Co. acquires American Brewing Company

Ron Swarner

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Few craft beer entrepreneurs contemplate selling their business when they first get started. Unlike, for example, the typical entrepreneur in the software industry, craft brewers — at least the ones we know — were inspired by the love of magnificent beer, a spirit of adventure and the romance of creating a small manufacturing business. When home brewer Steve Navarro approached venture capitalist Brent Hall of Pinnacle Capital Partners to help finance his dream of resurrecting the Pacific Brewing and Malting Co. in Tacoma, Hall was so moved by Navarro’s passion for his craft, that he became a co-partner in the new downtown Tacoma brewery. The two Tacomans, as well as several minority partners, set out to resurrect Tacoma beer history, and so they did. After celebrating their one-year anniversary Saturday with what seemed like half of Tacoma, with medals hanging from their shelves and beer that rivals those brewing for years, Pacific Brewing seemed certain to follow on the rumors of expansion in the city so dear to the heart.

But the life cycle of most businesses eventually requires at least the consideration of a sale or other transaction designed to recoup the entrepreneurs’ investment, allow for growth and transition the company to the next generation.

Pacific Brewing and Malting Co. has reached an agreement with American Brewing Company to purchase all of its assets. Pacific Brewing will move some of its brands north to Edmonds and brew on American’s 30-barrel system. American has 5,000 barrels of unused space for the Tacoma brewery’s needs. Pacific Brewing co-owner and head brewer Steve Navarro will oversee both brewing operations as director of operations, spending a majority of his time in Edmonds until his beers are streamlined. Bethany Carlsen, who was slated to be head brewer at the Gig Harbor Brewing Company in Tacoma, will return to Pacific Brewing’s downtown Tacoma location, not at her previous assistant brewer position but rather as head brewer. Adam Frantz will continue to work as the brewer at American Brewing in Edmonds.

“We still plan to increasing capacity at our Tacoma facility,” says Navarro. “We’re still adding six, 15-barrel vessels to bump us up to 1,500 barrels. I imagine we’ll concentrate on seasonal and pilot system productions in Tacoma, as well as production efficiencies such as growing yeast.”

We know. Our heads are spinning too. Navarro’s head is super spinning. We’re surprised his head hasn’t spun into Commencement Bay since the whole deal happened over the course of one month.

“I’ve been on an emotional roller coaster,” says Navarro via phone. “I go from excitement to anxiousness to excited and right back to anxiousness. It’s such an incredible opportunity for us, but today’s craft beer acquisition environment can lead to misrepresentation.”

Although asset acquisition money isn’t being discussed as American Brewing is a public company with a Form 8-K notifying investors this morning, as well as final word pending from the Washington State Liquor and Cannabis Board, Navarro wants to make it crystal malt clear Pacific Brewing and Malting Co. is alive and well and brewing in Tacoma, and American Brewing Company in Edmonds — which launched in 2011, and currently sells its craft beer in Washington state and South Carolina — has been purchased by another craft brewery in the same state.

American Brewing purchased the assets of Búcha, a certified organic sparkling kombucha company in Torrence, California this past spring. In a statement, American Brewing CEO Neil Fallon said the purchase is one that “falls in line perfectly with our strategy of acquiring profitable, existing assets and revenue streams with large footprints and merging them into the American Brewing Company family of beers and beverages.”

Neil Fallon, a resident of University Place, told his good friend Brent Hall that his shareholders were confused by the diversification into the full beverage industry. There are difficulties with a non-alcoholic beverage company operating within, or as part of, an alcoholic beverage company. It took a month for the two CEOs to write up an asset buyout plan that frees American Brewing to focus entirely on the non-alcoholic beverages businesses, and substantially increases Pacific Brewing’s brewing capacity and distribution. Pacific Brewing currently self distributes. Click Wholesale Distributing in Kent has the largest share of American’s distribution.

Both companies will continue operations, and their existing brands and beers will live on.

“I’m really excited for this opportunity,” says Navarro, “not only for Pacific Brewing but also American. We’re going to actively grow both brands.”

Let’s look at photos from Pacific Brewing and Malting Co.’s one-year anniversary party Saturday.