Jim Lutz, CEO Fordham/Dominion Talks About The Brewery’s Involvement With AB InBev, Out With The OLD, and New Beers in 2015

This post has been quite a while coming. As you may or may not know the Brewer’s Association awhile back released a list of breweries in the US that did not meet their definition of “craft brewery”, and of course, a little uproar ensued.

For those of you who are not aware of this, or really don’t see why people should care, let me fill you in.

The Brewer’s Association is the self-appointed watch dog of all things “craft beer”. In order to be labeled a “craft brewer” you have to meet a number of requirements set out in a multi-part definition that they have put forth. Requirements such as barrel output (size), types of ingredients used, and ownership.

Now that last one might seem a little strange but indeed, it matters to many people (and to the Brewer’s Association) who owns breweries that are trying to pass themselves off as “craft” breweries. And by definition, if your “craft brewery” is owned more than 25% by an entity that is itself NOT a craft brewery, than by the trickle-down theory of zymurgnomics you are non-craft.

Although I feel that the 25% number is a bit arbitrary, the reasoning behind this stipulation is pretty straight forward. The Brewer’s Association does not want big corporations swooping in and buying smaller craft breweries, changing things around and then trying to continue to pass them off as “craft breweries” to the unsuspecting public.

Again, if you know nothing about this situation the whole thing may seem pretty odd, but believe me there are many evil specters in this world that want to infiltrate your favorite small brewery and then, while you sleep soundly at night, replace your brewery’s six-packs with six-packs made under the guise of your brewery, but having a big corporation taint about them. Kind of like a craft beer changeling if you will. They look like your beer, cost like your beer, hell they may even taste like your beer, but there are people out there who can sense their malevolent aura liquor stores away. Like how a mother always knows which baby is not hers.

Or at least that’s what some people would have you believe.

The problem with approaching this situation from this perspective is that not all ownership partnerships are created equal.

The beers produced by breweries like Magic Hat and Pyramid catch a lot of flak from the craft beer purists because they are now completely owned by a non-craft beer company. But are those same people going to show the same lack of loyalty concerning Breakfast Stout and Dirty Bastard, now that their cherished Founders Brewing recently sold a 30% stake in their brewery to Mexican company Mahou San Miguel? I’m willing to bet not.

[Author’s note: Since I wrote this article, AB snatched up Elysian Brewing to much outcry and now there are reports that they’re courting Cigar City]

And why should they? Although it is above the 25% limit the BA sets, 30% is far from a majority interest in the brewery. Add to that Founders co-founder and CEO Mike Stevens’ assurance to the craft beer world that “Founders will remain Founders”, and most people are probably willing to simply hold their breath and hope for the best.

And if nothing changes at Founders? Well isn’t that the more important concern we should be considering here? If Mahou San Miguel is willing to let the people at Founders run the brewery as they have in the past, does the ownership issue really matter? I guess it depends on your point of view.

Anyway, back to the list that the Brewer’s Association put out. I was of course curious to see who was on it, and see which aspect of the definition the offending brewery had broken (NOTE: Due to continued desire of the Brewer’s Association to not kick Sam Adams out of the sandbox, it’s never ‘size’). Of course, I never expected to see a brewery from Delaware on the list, let alone two. But there they were – Fordham Brewery and Old Dominion Brewery, under the umbrella company Coastal Brewing. Reason? “Brewery is owned 49% by AB InBev”.

What? That was news to me. Now granted, I wasn’t intimately familiar with the backgrounds of these two breweries (for clarification, while the breweries currently operate as separate entities with different packaging and portfolios, they share a single facility, brewing equipment, sales representatives and head brewer) but I never suspected that AB InBev had a large stake in their operations.

A quick internet search revealed that indeed, back in 2007 before the two breweries merged and moved to their current location in Dover, DE; Anheuser-Busch entered an agreement with the then Annapolis, MD based Fordham Brewing which did eventually give Anheuser-Busch (which hadn’t been bought up themselves yet) an apparent stake in the breweries. But I couldn’t find any reference or statements to back up the 49% asserted by the BA.

Not long after that, Fordham/Dominon Maryland representative Casey Hollingsworth tweeted that the breweries were not owned 49% by AB InBev and challenged the Brewer’s Association to “do their homework” (sadly I could not find this tweet using Twitter search to include in this post).

At that moment I thought, “Yeah, maybe someone should do that homework. And maybe that someone should be me.” But sadly, time passed and the idea of finding out what was really the truth concerning Coastal Brewing got pushed onto the back burner.  And I’ve seen it stated several times since, but when someone recently posted the statement in a Facebook Group, I decided it was time to see if I could get some clarification concerning the matter.

I reached out to Fordham/Dominion through their website, and Jim Lutz, President/CEO of Coastal Brewing agreed to take some time to talk to me about his company’s relationship with AB InBev and (more importantly to me) the conglomerate’s dealings with the everyday operations of his company. And to help clarify the situation as much as possible, Jim invited Ryan Telle, VP of marketing for Coastal Brewing to join in on the conversation.

Jim began by filling me in on the back story of how AB InBev first came to acquire a stake of Coastal Brewing. [Author’s Note: Some of this information is on the Old Dominion Brewery Wikipedia page, but the page information was incomplete and out of date. Not really knowing about the page, Jim and Ryan said they’d look into updating it and in fact, Ryan must be updating in now, because I’ve notice that changes have been made to it as I’m writing this].

Back in 2007, Fordham Brewing and Ram’s Head Taverns owner Bill Muhlhauser entered an agreement with Anheuser-Busch, which at that point, gave AB a 49% stake in the brewery plus control of the brewery’s distribution.

Bill then reached out to purchase Old Dominion Brewing which owner Jerry Bailey had been trying to sell since the mid-2000s. Once the transaction was complete, Muhlhauser found himself in ownership (along with other partners) of both breweries, with AB still having a stake in the companies as well as the distribution rights to the breweries’ beers. So where does that arrangement stand today?

“In-Bev’s current stake in the two breweries is less than 40%,” Jim related.

OK, it would have been nice if it had been below 25% so we could have killed this thing dead once and for all, but as I said above, what was more important to me was to find out what that truly meant to the day-to-day operations of Coastal Brewing.

Did they have input in the recipes that head-brewer Dan Lauder formulates for the two breweries, brewing philosophy, or marketing direction? What exactly is Coastal Brewing’s obligations to AB InBev because they have an approximately 40% stake in the company?

“We send them a financial report every month,” Jim stated.

Really? No quarterly meetings with AB Inbev where you have to present a ridiculously huge slide deck laying out all your business and marketing strategies for the coming year?

“In the years I’ve been here (Jim came over from Flying Dog in January of 2011) I’ve only met with the AB InBev people twice, both times in New York City. In fact, the two people I met with no longer work for AB InBev.”

So at the moment Jim wouldn’t know anyone from AB InBev if they walking into his office? “I wouldn’t know them from Adam.”

Ryan echoed that statement, “In the two years I’ve been here, I’ve never talked with anyone from AB inBev.”

Of course I really wanted to nail this point home so when I asked if an entity that owns close to 40% of a business operation doesn’t at least check in every now and then, the assurance was quick, “No.” Jim would then go on to add, “AB InBev has never stepped inside the brewery.”

In fact, since the years that have followed their initial agreement, Coastal has worked to distance themselves even further from AB InBev by reacquiring the distribution part of the business. “We now have the ability to go into any state and negotiate with all distributors until we find the one that we feel will serve us the best,” Jim said. “When we went into New Jersey, we chose a non-AB InBev distributor. When we pulled out of Georgia, South Carolina, Tennessee, and Alabama because we felt it didn’t make sense for us to be there, WE made that decision.”

I asked Jim how he felt about the Brewer’s Association and the fact that his breweries would never be considered craft under their current definitions. It was here that Jim’s passion for what Coastal Brewing has accomplished really came through. “I’m sure they have to draw a line for a definition. The managing board meets and they need to have a definition. It’s a shame. We pay our dues to the Brewer’s Association. We’ve won craft beer medals. We won a Gold medal in the 2014 World Beer Cup. We won a Silver medal at this year’s GABF. But if they don’t want to acknowledge us a ‘craft’ well…”

Winding up the interview I wanted to ask a few other questions that I myself was interested in knowing the answer to, after all it’s not every day I get to talk to the CEO and Marketing VP of one of Delaware’s major breweries. Having recently noticed some changes in the social media concerning the two breweries and the wording on the new packaging of one of the breweries, I asked if we had officially come to the time when we could drop the “OLD” from “Old Dominion.”

“Oh, yes,” Jim responded.

Ryan added, “We’ve recently consolidated the two brewery’s websites into one site. We’ve started using ‘FoDo’ as a marketing designation and everyone who works for us has it in front of their names on Twitter.”

So is there any chance of this on going consolidation including the two brewery’s portfolios in the future? “No, we’ll be keeping them separate as they are two different [brewing philosophies],” Jim replied. “Fordham is more sessionable, while Dominion is where we brew bolder beers.”

Regrettably, I walked away from this interview feeling less than totally satisfied. The bottom line is that until such time as the ownership agreement changes, Fordham and Dominion will not be considered “craft” by the Brewer’s Association. And that’s sad, because they are two fine breweries that in every other way, symbolize what it means to be a “craft brewer”.

But armed with the fact that AB InBev has no input into the day-to-day operations of the breweries, and that Fordham’s Rosie Parks Oyster Stout and Dominion’s Double D IPA are two of my favorite beers brewed in Delaware – that’s “craft” enough for me. Especially when you take into consideration that I’ve never liked using the word “craft” to describe a brewery anyway. But that’s another post.

I’d like to thank both Jim Lutz and Ryan Telle for taking some of their valuable time to talk to me.

Time for another beer…

Candi-ps
THE FINAL SIP: Coastal Brewing will be releasing two new beers this year. First, Fordham will be releasing Sun Seeker, a Hefewiesen, in the summer after which it will join their other year-round offerings. Second, we get a new Pin-up girl from Dominion! The sixth beer in the series, Hop Lips, will be an IPA that Jim describes as something more sessionable, but at the time of this article they’re still doing test batches so he couldn’t tell me much else about the beer. I look forward to trying them out!

 

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Author: Ed (The Dogs of Beer)

Beer Blog focused on Delaware & surrounding area. Drinker of beer. Writer of stuff. Over user of commas. Dangler of prepositions.

5 thoughts on “Jim Lutz, CEO Fordham/Dominion Talks About The Brewery’s Involvement With AB InBev, Out With The OLD, and New Beers in 2015”

  1. Fascinating stuff, Ed. I had previously heard that ABI was involved with Fordham/Dominion, but I had no idea to the extent. I assumed (which clearly I shouldn’t have) that ABI had a major hand in their activities. My guess is that as long as they maintain a certain level of profitability, ABI has no reason to interfere. However, I am sure they can, if need be. It will be interesting to see if the relationship changes any in the future.

    Great reporting!

    1. Thanks. I should have followed up with Jim exactly who the other players in the game are. While (less than) 40% may be a majority stake in the business, it does not give them controlling interest if the other 60% are against them. Well it sounds that simple anyway, but as you suggested if push came to shove it might not be that easy. ABI is pretty resource heavy.

  2. That’s quite interesting. I would personally consider them craft beer. We have a brewery here in Vancouver Canada that is 100% owned by Molson Coors that is an interesting case study in itself. All of their multi bottle packaged goods like 6 packs are brewed by Molson with input by the brewmaster. When it comes to their bomber 22oz products though it is still brewed at the original “Granville Island Brewing” brewery using a small system with no interference from Molson. The brewmaster is a highly trained brewmaster and very respected in the Craft Scene locally. Their bombers are considered fully craft here while the other beers are considered crafty much like shock top. If we had an association like that in BC they would never be recognized but if you taste one of their barrel aged Barleywines, chocolate stouts, cascadian dark ales and the like without knowing the ownership stake you would be very happy drinking these awesome beer. I mean I often worry when a brewery is purchased because the new owners can destroy a brewery but they can still make some amazing beer.

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