THE GIST
Even at a time when brewery acquisitions and deals are a regular occurance, Ninkasi Brewing’s newly announced merger with portfolio alcohol brand Wings & Arrow is notable for what it illustrates about the current struggles facing that brewery, and regional breweries writ large. The combination of brands, types of beverages, and scale of the newly formed company offers hope for Ninkasi that if at first you don't succeed, there's at least strength in numbers.
The merger, first reported by Brewbound, signals the growing importance of diversification across products and revenue streams for a Eugene, Oregon-based brewery that as recently as five years ago focused exclusively on craft beer. The joint company, which will be called Great Frontier Holdings, will unite products from almost every sector of alcohol under its umbrella: hard seltzer, spirits-based canned cocktails, beer, and flavored malt beverage. It will also offer contract brewing services for beer and hard seltzer, continuing what has become a valued source of income for Ninkasi as the brewery’s chain retail volume, tracked by market research firm Circana, has fallen -40% between 2018 and 2022. Its production volume, as reported to the trade group Brewers Association (BA), fell 32% during that time to end last year at 61,250 barrels, moving Ninkasi from the 35nd largest BA-defined craft brewery in 2018 to 43rd in 2022.
Great Frontier also adds another chapter to Ninkasi’s winding ownership road.
In 2019, Ninkasi’s two co-founders and six other investors sold a majority stake to Legacy Brewers, a company that intended to become a brewery collective, a la CANarchy Craft Brewery Collective (itself acquired by Monster Energy last year).
Three years later, Ninkasi co-founders Jaime Floyd and Nikos Ridge reversed course and bought their majority stake back, returning Ninkasi to independent ownership.
Ninkasi’s co-founders will have unspecified leadership roles in Great Frontier.
Ninkasi’s three ownership changes in four years paint a picture of a craft brewery working to find its foothold in a post-craft-beer landscape. This challenge isn’t unique to Ninkasi, but is to varying extents afflicting midsize breweries nationwide: Last year, only three breweries crossed the 15,000 barrel threshold to become regional breweries as defined by the Brewers Association, down from 12 net-new regionals in 2021 and at least 22 in 2019, per Beer Marketer’s Insights.
WHY IT MATTERS
All the new approaches to grow its business haven’t altered Ninkasi’s fortunes. In the most recent 52-week sales period ending May 21, the brewery’s sales volume declined -13%, more than craft beer overall (-7%). So, it’s time to try another move in the playbook.
Great Frontier simultaneously represents a more diversified and a more targeted future for the combined Ninkasi and Wings & Arrow. The diversification comes from product mix and revenue streams, while the focus comes from a plan to deepen its geographic footprint in the Western half of the U.S. rather than adding new markets.
A release announcing the merger said the combined company “touches almost every canned alcohol segment in the market.” Ninkasi has also tried to expand its own portfolio, launching Pacific Sparkling Craft Seltzer and a line of canned cocktails within the last four years. This is in line with the stated goals of Wings & Arrow founder Josh Landan, who previously founded Saint Archer Brewing Company, which Molson Coors Beverage Company bought in 2015 and phased out in 2021.
After combining Wings & Arrow with Village Spirits, which makes an array of canned cocktails, Landan was candid about wanting to build a portfolio of brands across multiple sectors of alcohol, similar to that of Boston Beer, which sells Truly, Twisted Tea, Samuel Adams, Dogfish Head, and manufactures HARD MTN DEW.
“I don’t think people really want [brand] extensions,” Landan told Brewbound. “Most people, when they create their one brand, they go ‘This is the brand I had in me,’ and then create extensions off that. But if you have the ability to create independent businesses, it’s much more exciting and there’s no confusion and you can be authentic to that category, instead of just dipping your toe around with your existing brand.”
A diversified stable of brands has allowed Boston Beer to bolster those in decline (Samuel Adams and Truly) with those that are growing (Twisted Tea and Dogfish Head canned cocktails). Great Frontier currently makes Ashland Hard Seltzer, Mucho Aloha Hard Lemonade, and Villager Spirits canned cocktails.
For Great Frontier, a priority will be rebuilding Ninkasi’s sales while enhancing the success they’ve already had.
Even as hard seltzer faced declines, local and regional brands have continued to outpace the category. This includes Ashland Hard Seltzer, which was +42% in sales volume in the most recent 52-week sales period against hard seltzer’s -17% decline.
Mucho Aloha, a flavored malt beverage, has also performed well, selling as much volume in chain retail stores as established brands like Founders Brewing's Mas Agave Lemonade variety pack and Ashland's own collection of seasonal brands.
Villager Spirits, which debuted last year in chain retail, earned almost $700,000 in that time. That was roughly the same as some individual brands released by well-established companies such as Cutwater Spirits and JuneShine.
As consumer preferences and the beverages created to meet them increasingly cross traditional category lines, flexibility and a variety of brands become imperative for large-scale beverage companies. Ninkasi’s linkup acknowledges the difficulties facing a solely craft beer-focused brewery of its size. During his address at Craft Brewers Conference, BA chief economist Bart Watson characterized regional breweries on the whole as “actively contracting” in terms of production, down -2% in volume compared to BA-defined craft breweries overall, which were roughly flat. (If non-alcoholic beer is removed from the data set, BA-defined craft brewery production dipped slightly negative last year.)
By linking Ninkasi with Wings & Arrow, the combined venture targets 250,000 BBLs of annual production within three years. This would be an annual output roughly equivalent to the 2021 volume produced by Deschutes Brewery or SweetWater Brewing. But that production won’t be all, or even primarily, beer. Along with its lineup of beverage alcohol brands Great Frontier is going to be adding another—the company plans to launch a hard tea under a new brand called Voyage this summer. With such moves, not only are the combined companies not putting their eggs in one basket, but they’re growing the size of that basket as a buffer against turbulent market forces.
Words by Kate Bernot