By Anna Akins
Devils Backbone Brewing Co. had to make a choice last year: Stay independent and small or sell to outsiders and expand.
In April, the owners of the craft brewer decided to sell to the world’s largest beer manufacturer Anheuser-Busch InBev, the Belgium-based company whose 200 brands include Budweiser, Stella Artois and Miller. But first, the king of beers had to agree to a few terms: current management stays, and the team has autonomy on production and marketing.
Less than nine months since the deal, Devils Backbone plans to expand the taproom in its Rockbridge County facility and is building a storage warehouse nearby. InBev’s investment means the brand will soon be sold in several more states, including New York and South Carolina. New equipment will boost annual production to about 100,000 barrels this year, up nearly 60 percent from last year. And for the company’s 243 employees – including 113 in Rockbridge County — the sale means better health and retirement plans.
“There were always moments of trepidation and doubt,” said Hayes Humphreys, chief operating officer of Devils Backbone. “But I feel that we made the best decision.”
Humphreys, who has served as chief operating officer of Devils Backbone since 2011, did not disclose the terms of the deal, but said InBev would invest “an amazing amount of money and resources” in the company.
Steve and Heidi Crandall opened Devils Backbone in 2008 after being inspired by a ski trip to northern Italy where they had their first taste of Germanic beer.
After the successful launch of their Basecamp Brewpub & Meadows in Nelson County, the couple opened their Outpost Brewery & Taproom in Rockbridge County in 2011.
The company’s name comes from a dangerous ridge in Nelson County that was named by Thomas Jefferson’s father, Peter, who lost several men there during his trek through the Blue Ridge Mountains.
Midway through 2015, Devils Backbone had maxed out production of its signature brands, including Vienna Lager, Eight Point IPA and Schwartz Bier, at nearly 60,000 barrels of beer.
“We figured out we’d never be able to keep up,” said Humphreys. “We were running 24/7 at max capacity and demand was even more than that.”
Humphreys said the company sought bank loans and private equity investors. But current investors balked, saying the company had hit its maximum leverage ratio. Banks said “no” to loans.
At that point, there was no other choice but to find a buyer.
Devils Backbone then hired First Beverage Group, a Los Angeles financial planning firm, to help it scout out potential buyers.
After narrowing down a list of bidders, the company interviewed with brewers throughout the world to determine which of them would bring the most value to Devils Backbone.
Of all the candidates, Devils Backbone knew InBev would best help them achieve their expansion goals.
“All of the other potential buyers we spoke to came in with a plan to provide some value in exchange for some or all of the company, but without a plan to finance continued expansion,” Humphreys said. “And that was the whole key.”
Humphreys didn’t disclose the other potential buyers, but said InBev was the only one that shared Devils Backbone’s vision. “InBev was the only one who came in and said, ‘Not only do we want you to be a part of our portfolio, but we also want to take your dreams and realize them.’”
While Devils Backbone’s management team still runs the company’s daily operations, they now report to InBev’s High End division, InBev’s specialty division of craft and import brands, including New York-based Blue Point Brewing Co., Washington-based Elysian Brewing Company and Chicago-based Goose Island Brewery.
InBev also owns Colorado-based Shock Top, and, most recently, London-based SABMiller.
Humphreys said the two organizations are working to merge their various computer systems, which he admitted has been challenging.
The acquisition also means that Devils Backbone no longer meets the Brewers Association’s definition of a craft brewery.
The Brewers Association, a national trade group for the craft beer industry, defines craft brewers as those that produce less than 6 million barrels of beer per year and are less than 25 percent owned by a non-craft beverage producer. Devils Backbone can stay in the trade group, but is no longer a voting member.
InBev has been on the hunt throughout the craft beer niche this past year, with its recent purchase of Texas-based Karbach Brewing Co. giving it a ninth craft brewery to add to its diverse portfolio.
Humphreys said he thinks InBev has specifically focused on the craft beer industry in order to give its company a more personal feel.
“If InBev can learn from craft brewers on how to better resonate with people and can apply the unique branding techniques of craft brewers, it wins,” he said.
However, the craft beer industry has grown stagnant in recent months, due to the high number of craft breweries opening across the country. According to the Brewers Association, the volume of beer produced is less than half of what it was two years ago, partly because consumers have become overwhelmed by choices.
Overall, Devils Backbone employees have been very receptive to the acquisition.
Matt Casto, one of the brewers at Devils Backbone’s facility in Rockbridge County, said he thinks InBev will give the company the resources it needs to improve.
“Anheuser-Busch is a very intelligent company and I don’t see why they would become partners with us and then try to change what we do. The only thing they really want to do is to give us better tools.”-Matt Casto
“Anheuser-Busch is a very intelligent company and I don’t see why they would become partners with us and then try to change what we do,” he said. “The only thing they really want to do is to give us better tools.”
Casto, who has been a brewer at Devils Backbone for four years, described such tools as better production equipment, enhanced technologies and increased access to ingredients.
“The things we didn’t have the budget for in previous years are now available to us,” he said.
Casto said the employees’ main concerns regarding the acquisition centered around Devils Backbone being able to retain its identity and close-knit feel.
“Obviously when you have new partnership you’re going to be a little nervous,” he said. “But Steve Crandall told us that this acquisition is just helping us get to where we want to be. Since that day, the vibe has been pumped.”
Casto said the acquisition will means Devils Backbone can expand distribution, including recent growth in New Jersey, Pennsylvania, New York and South Carolina. The brand will be launched in Ohio and Kentucky next year.
When asked about his company no longer being considered a craft brewery, Casto laughed.
“I take offense to that because I’m crafting beer every day,” he said. “I’m still that same guy who’s making the same beers. Not much has removed the craft aspect of my job.”
Taproom Manager Dizzle Clark said she believes the acquisition will give Devils Backbone more consistency in its production.
“When you drink a Bud Light, it always tastes the same no matter where you are,” she said. “I think InBev will help us be more consistent on our beers.”
Clark added that the acquisition will give Devils Backbone employees better benefits. “There will be better job security, more benefits and more opportunities for education,” she said. “I’m super excited.”
A few of the benefits will include a 401k company match program and a more comprehensive health care plan.
Humphreys described consumer reactions to the acquisition as mixed, with some accusing Devils Backbone of selling out and others lauding the company for its decision.
One consumer, Roger Jarrell, a West Virginia-based lawyer who frequents the Rockbridge County outpost several times a week, said he believes the acquisition was a necessary next step for Devils Backbone.
“Devils Backbone either had to expand or get out. But I think it’s a win-win for the county and area because it brings in more jobs.”-Roger Jarrell
“Devils Backbone either had to expand or get out,” he said. “But I think it’s a win-win for the county and area because it brings in more jobs.”
Jarrell added that he most appreciates Devils Backbone’s highly personalized service and family-like atmosphere.
“They seem to have a real pride in what they do,” he said.
Humphreys said Devils Backbone’s revenue was around $20 million last year and predicted revenue to reach nearly $23 million this year. InBev, in contrast, reported annual revenue of more than $43 billion last year.
While Humphreys admitted the acquisition will change Devils Backbone in some ways, he said the company will fight to remain true to its roots.
“We still have the same mission that we had before InBev, but now we’re going to up the overall quality of our beer,” he said. “It’s just about continuing to improve, always.”