USA: High Falls Brewing Company expected to lose contract to brew Sam Adams
The High Falls Brewing Company is expected to lose a lucrative contract to brew Sam Adams beer, 13WHAM broadcasted June 29.
Boston Beer Company confirms news accounts that it has gotten a tax incentive package to build its own $70 million brewery in Massachusetts. An exact location has not been finalized.
The former Genesee Brewing Company was awarded the Sam Adams contract in 1996. High Falls CEO Tom Hubbard, who helped engineer the Genesee buyout in 2000, would not say how much money is at stake, nor would he say when the brewery's Sam Adams contract expires.
Hubbard said that because the Boston plant won’t be up and running until 2008, it won’t impact short-term revenue. Long term, the loss of the Sam Adams contract could free up valuable capacity.
“We could potentially sell our capacity to someone who would pay more,” Hubbard said.
Boston Beer Company threatened to pull its Sam Adams contract two years ago. In a last-minute deal, High Falls kept the work, but likely with some financial concessions. The new management had already missed $4 million in payments to the former owner. It’s no secret High Falls has been struggling every since.
“As a private company, we don't have access to financial statements to High Falls Brewery,” said financial analyst George Conboy, of Brighton Securities. “I believe it would be a significant piece of their revenues, that the loss of that contract would be a serious blow."
High Falls is struggling to find a niche. It’s too small to compete with Anheuser-Busch in terms of volume. It’s too large to subsist on profits as a micro-brewery.
Sales of cream ale are up 12 percent this year. By contrast, the market for energy drinks is up 40 percent.
“These other industries would require different processes, investment in equipment and more marketing. So it would be difficult to make this transition. By difficult I mean costly,” Conboy said.
Hubbard said High Falls is investigating the energy drink market, but that it would be costly to purchase new equipment. High Falls has a significant debt load. Five years ago, the brewery spent $11.5 million to upgrade equipment. The company is also still paying off the nearly $26 million it paid to purchase the brewery.
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