Private Equity Firm Buys Cold Spring Brewing Amidst Lawsuits and Drama

Austin Ray

THE GIST
In the latest marriage between a private equity firm and a craft brewery, Brynwood Partners has acquired Cold Spring Brewing Co., a Minnesota-based manufacturer of beer and other non-alcoholic beverages. Terms of the deal were not disclosed, but Brynwood will operate Cold Spring under the umbrella of Harvest Hill Beverage Company, which it established in 2014 to invest in Juicy Juice, Sunny Delight, and more.
 
“While Cold Spring will be operated as a standalone company, we believe it will benefit greatly from the scale and national distribution and manufacturing foot print of Brynwood Partners’ Harvest Hill Beverage Company investment,” says Henk Hartong III, chairman and CEO at Brynwood, in a statement. “We look forward to working collaboratively with Cold Spring’s management team to grow the business.”
 
Founded in 1874, Cold Spring brews proprietary beer brands under the Third Street Brewhouse moniker, but the bulk of its beer production is slated for contract. In that capacity, the company has in the past partnered with 21st Amendment, Tallgrass Brewing, and others.

WHY IT MATTERS
The acquisition comes at a pretty remarkable time in Cold Spring’s 143-year history, as the mixed-portfolio manufacturer has spent its most recent years in search of a more modern identity. To that end, the company has attempted to shift its proprietary beer focus from lower-brow domestic style offerings to higher-end craft products. As its former vice president and general manager Doug DeGeest told MinnPost in 2013, “We were an old brewery known to make kind of crappy beer…and knew we had a lot of work to do to change consumers’ perception.” Since then, the company has been in a near constant state of transition—or “refocusing” as the company has said before—for both good and bad.

On the positive side of things, Brewbound reports that Brynwood plans to invest “quite a bit of capital” in upgrades that will see Cold Spring’s brewing capacity grow by 70%, dramatically increasing its current capacity of 180,000 BBLs. And that news comes less than eight months after the city of Cold Spring approved the brewery’s own plans to buy a 300,000 square foot business park, where it plans to house a shipping facility and production line.

And all of this, of course, follows the company opening a $14 million brewhouse it designed specifically to grow its Third Street brand. As noted by Brewbound, Cold Spring’s beer ops represent a “smaller piece of the overall business,” but it has been making moves on the brewing front.

All this movement toward scale—and toward respectability for that matter—hasn’t been without hiccups, however.

In 2015, the company suspended production of two year-round beers, Bitter Neighbor Black IPA and Rise to the Top Cream Ale, due to declining sales. This particular portfolio shakeup was noteworthy as it played out only three years the company introduced the two beers in the first place as a way of specifically bolstering its reputation as a higher-end beer maker. The company explained the decision then as a “refocusing,” and planned to push its weight behind its Minnesota Gold lager. A year later, though, the company had another “refocusing” of sorts, again adding an IPA, as well as a light version of Minnesota Gold, back to its year-round lineup.

And the shakeups and hiccups haven’t been exclusive to the company’s portfolio. In fact, the company has weathered a number of controversies in recent years. Since 2016 alone, a) it has been sued by its former brewmaster who alleged he was fired because of his age and race, b) its former brewery controller has been found guilty of fraud and, just last week, a couple days before selling, c) a handful of the company’s 350 employees staged a walkout over working conditions. “We're working excessive hours, 72 hours a week, sometimes working in 90-degree weather,” one of them told the SC Times. The company says it plans to address their concerns internally.

Which is all to say it’s been an interesting few years at Cold Spring, and the years ahead are likely to only bring more attention. Or, perhaps, a more public “refocusing.”

—Dave Eisenberg