As the craft beer industry has gained popularity, local investors are looking at all those pints and hoping they bubble into profits.
Buoyed by a craft brewing industry that’s maturing, L.A. businesses have begun soliciting and taking funding from strategic buyers and wealthy investors.
Canoga Park craft brewery Fireman’s Brew Inc. last month engaged El Segundo investment bank Monarch Bay Securities to help raise $5 million for a research and development brewery in Los Angeles, a public tasting room and marketing as it expands throughout the country.
That follows last fall’s sale of Atwater Village craft brewery Golden Road to the U.S. arm of Belgian beverage behemoth Anheuser-Busch InBev and the 2012 purchase of downtown L.A.’s Angel City Brewery by Alchemy & Science, a subsidiary of Samuel Adams brewer Boston Beer Co.
Los Angeles County craft brewers were expected to generate almost $92 million in sales last year, according to a 2015 report by the National University System Institute for Policy Research. And of the 54 craft breweries and brewpubs the survey counted in the county, more than half had received their licenses in the last few years. In other words, the landscape is rapidly growing.
Nationally, craft beer retail sales grew by about 18 percent to an estimated 22 million barrels worth $19.6 billion in 2014 in an overall beer industry that only eked out 0.5 percent growth, according to the Brewers Association, a Boulder, Colo., trade group.
“Business is exploding,” said Larry Palmer, a Morgan Stanley financial adviser and managing director in downtown Los Angeles, noting that his client base of high-net-worth Angelenos has been watching the sector with interest. “Wherever there’s economic activity, there’s usually profit.”
He added that the craft beer boom is partly owed to the product’s higher price point and greater profit margin. Another piece might be millennials.
“A lot of what’s driving that demand is the younger generation. It’s an affordable luxury,” said David Johnson, chief financial officer of Fireman’s Brew, who launched the company with Robert Nowaczyk and others in 2007. “If you’re a tequila drinker, the difference between a good and bad one is $40 to $50 a bottle. The difference between craft beer and other beer is a couple of dollars a six-pack. Anyone can afford good beer.”
Fireman’s Brew, conceived by Nowaczyk and another Los Angeles County firefighter, had previously sourced investments on its own.
The company has been working with a contract brewery in Northern California to manufacture its three beers (a lager, German double bock and red amber ale), which Fireman’s sells to supermarkets, restaurants, bars and chain liquor stores in 15 states.
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