(Middlebury, VT) – It may be the biggest acquisition of the year in the ‘craft’ alcohol space. C&C Group plans to acquire Vermont Hard Cider Company for $350 million in a deal that plays a key piece in its growth strategy to internationalize cider.
Vermont Hard Cider Co. owned 40% share of a relatively young U.S. cider market in 2011, led by two main brands: Woodchuck Cider (24%) and Strongbow (12%), according to Euromonitor International. VTHCC reached an agreement with Heineken in August to relinquish rights to the Strongbow brand in the U.S.. This despite growth of 500% over the last decade. The move could prove to be an important precursor in helping the acquisition in gaining antitrust approval.
Without that arrangement, C&C Group would now have had control over the top four cider brands with Woodchuck and Strongbow, the two market leaders, joining its own existing brands, Hornsby’s and Magners. Instead of controlling nearly over 60% of cider sales in the U.S., the deal, as it stands, will give the company over 50% control.
C&C acquired Hornsby’s from E&J Gallo Winery last fall for an estimated $25 million.
C&C has recently launched new styles and packages for Magners and will soon introduce new styles and packaging for Hornsby’s, including flavored malt beverages. C&C also owns Tennent’s which, while smaller in terms of sales volume, has seen some success in the States. According to The Herald, “Sales to new markets including Italy and the United States meant Tennent’s was responsible for 12% of its Dublin based owner C&C Group’s total export volumes in the three months to May 31 this year.”
As for VTHCC, the company announced an expansion plan that would require more than $20 million of investment. Growth is expected to fall between 25-30% in 2012. Over the past year, the company has added new styles and rolled out cans for the first time. It also introduced an Artisan line of ciders last November called the Farmhouse Select Hard Cider Series.
It was revealed on a C&C conference call on Tuesday morning that there are “potential” plans in place to keep Bret Williams, President and CEO, and Dan Rowell, CFO, on board for at least the next 3-5 years. They will become minority C&C shareholders as a result of the deal.
Big beer players are also dabbling in cider. Earlier this year, MillerCoors acquired Crispin Cider Co., ranked in the top ten in sales in the U.S., for a reported $40 million. Anheuser-Busch has extended the Michelob Ultra line to include cider and The Boston Beer Company introduced Angry Orchard Hard Cider last fall.
The mergers and acquisitions come thanks to a booming U.S. cider market that Euromonitor estimates did approximately 59 million liters of business in 2011 or just shy of 500,000 barrels, less liquid than New Belgium produces annually alone. Compare that to a mature UK/Ireland cider market that did over 900 million liters. C&C Group, which also reported fiscal mid-year earnings on Tuesday reported declining sales overseas but highlighted Magners double-digit growth in North America as one of the bright spots.
Cider is only 0.2% of the beer category as a whole in the U.S. and the Beer Institute estimates that the cider market grew 57% in the first half of the year. VTHCC’s Williams thinks that the cider market could eventually grow to as large as 10% of the beer market.