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Moving forward, "our strategy is fundamentally one of flagship beers," Firestone Walker CEO Nick Firestone explained during chat at our Beer Insights Spring Conference in Chicago yesterday. After acquiring the Stone and Trumer brands earlier this yr, Firestone now sells a cadre of "timeless beer brands" that in Nick's view can be as essential for craft retail assortments as Juicy Fruit and Peanut M&Ms are in c-stores: "805, Mind Haze, Cali Squeeze, Trumer Pils, Stone IPA." The co's focus on core, flagship brands reflects an "evolution" in craft "that we're starting to notice" and believe could be moving toward a "new equilibrium" in the segment, Nick explained. "Back in the day," craft was "driven primarily by assortment." Brewers "could diversify your product line, every cycle with something new." There's a high "cost of that complexity" all the way down "the value chain" and it was a "real complicated endeavor" for retailer buyers. But "the upside of that" was that "the demand" for variety within craft "could sort of bear that cost." That's no longer true. So retail buyers now look for more focus to "build something meaningful" with key suppliers. So "I'm bullish on craft beer in that sense," Nick said.From One Call to Two Very Different Deals The Trumer and Stone brands may fit that flagship strategy, but the deals were very different. It all started with a phone call, Nick explained. He "went from taking a call from JB Shireman [of Arlington Capital] one day to canceling all my family vacations and acquiring two breweries."Already having an appreciation of Trumer's long history and a connection to its US roots in Berkeley, "I did say 'yes,' immediately" to that deal, Nick said. "For a California-focused craft brewery, this made total sense for us," he agreed, and it came together rather quickly. Stone was "basically the polar opposite," with "a lot more that went into" getting that deal done. "We don't have a big M&A department," Nick pointed out, as it's mostly "just me and my uncle," longtime leader of the co David Walker, who work together to "try to figure it out. The bankers have to drag us along and we finally get there," he quipped.He understands if others in the industry look at the deals with skepticism. But the "three families" who own Firestone Walker &mdash; the Firestones, the Walkers and the Moortgats of Duvel Moortgat &mdash; are in it for the long hall. "We're patient," Nick said, "don't do anything quickly" and "don't have to pursue a growth-at-all-costs mindset." They also "don't have to worry about what our quarterly trends look like" and measure the co's health by looking at margin, debt load and efficiency. As they assess next moves, "we talk about it over the dinner table a lot," Nick said. And as they take on a lot more complexity after these moves, he knows they've "got to have real priorities so we're building this in the right way."Feeding the "Big Hungry Monster" in Paso Robles The "foundational reason" that the Stone deal works relates to Firestone's facility in Paso Robles, Nick explained. Located "in the heart of a state with 40 million people," built on "80 acres" that are "right off the freeway," the brewery is built for this kind of scale. The co "spent the past five years investing in tremendous efficiency" thru technology like CO2 recovery, on-site wastewater treatment, a large solar array and solar thermal tech. "It's a big hungry monster" now, Nick said, so "filling that thing up has a tremendous impact on our business." Adding a large chunk of Stone's couple hundred thousand bbls per yr goes a long way. In the next couple mos, co will be able to run its canning line 24/7 at 100% capacity, for instance. In all, it's "a big game changer for us."Adding Scale with Retail and Distrib Partners Of course, there's another "upside" of the "added scale" from bringing on Stone, "particularly in Southern California," Nick commented. Firestone now has "more cache with some of our biggest retail partners." Indeed, he cited "a handful" where the co is pushing 50 or 60 share of craft. Consider other markets too, like Colorado, where co "overnight basically doubled our business." Firestone was a top 20 craft supplier there, but now is "substantially" higher than that. "The Stone deal gives us" what Nick called "added importance" with distribs as well, "particularly in markets where we haven't been strong," like those out East.Gotta "Wait and See" On Unaligned SoCal Footprint When Firestone picked up Cali Squeeze in 2021, the brand was only a few thousand bbls, so co could transition it into its own distrib network by day one. But Stone has "thirty years of deep distributor relationships" that Firestone isn't looking to change in a hurry. Outside of SoCal, the networks are "about 95% aligned in terms of volume, which is pretty good" and clearly "a benefit," Nick shared. But of course SoCal is a large chunk of volume and a major market for both Stone and Firestone/805. So co is "taking a wait and see approach," because such a large set of decisions "warrants a little bit of patience."Plus, the "California distribution landscape is changing," Nick acknowledged. It'll have "probably changed by the time I get back to my room," he quipped. And "the jury's still out on what the network and the landscape is going to look like in California, especially Southern California" for the long haul.Firestone has its own long-term partnerships in the state to consider too. Nick's uncle David "handshake-signed a lot of these deals," which Nick joked are sometimes about as simple as being in "crayon, one page" and saying "let's get after it." Over decades, the cos "helped build each other's businesses." Watching all the change in CA distribution has "been a real learning process." Plenty of earlier deals affected the co and recent ones do too: AB One just acquired Advance in Bakersfield, one of Firestone's "core three distributors." Firestone portfolio went to Reyes Beverage Group in that deal.Deal Tightens Relationship to Duvel USA/Boulevard The plan for Stone also "puts us a little closer together with our sister brewery" in Kansas City, where Duvel USA is based with its lead brand Boulevard, Nick reminded. "They'll be servicing and selling into the market on the East Coast" for Stone, while Firestone handles the West Coast plus Texas. So for the "first time," it'll be "harder to maintain an arms length relationship" as the separate orgs will be doing brand planning and "selling together." But it's "a good first step," Nick thinks.The arrangement "takes advantage of freight lanes," too, Nick explained. "Twelve, thirteen years ago, we looked at an East Coast expansion," like so many other large, growing craft brewers. Freight costs play a huge role in that calculus. It costs "60 cents a case blended to ship beer in California," but it's more like $5-6 to get it out to the East Coast, which "eats into a lot of your ability to invest" in those markets, Nick commented. Producing in KC for the East is more cost effective and allows Firestone to continue to be what Nick calls the "In & Out Burger of brewing companies." It's "West Coast based" and "we love it that way."The closer partnership could open up other oppys, too, Nick said, allowing "some other brands to look at a national platform." Cali Squeeze, for instance, which Firestone bought in 2021 at around 4K bbls and could finish this yr at 75K bbls, mostly in 3 states. The more aligned platform could also prove useful with on-premise retailers. Under prior ownership, Stone built up 30K bbls of biz in the top 10 on-prem chains, Nick shared, "a tremendous thing" that "we haven't been able to" accomplish at Firestone."Not Worried" About 805; Muscle for Stone IPA; Simplified Cali Squeeze; Trumer Oppys Firestone's longtime top brand fam 805 remains about "80% of our business," Nick noted. And tho "805 is definitely struggling. We're not worried about it," he said, referencing the family co's long-term view. The brand "does very well in the Central Valley" of CA and "overindexes with the Hispanic consumer," so last yr it faced some of the same headwinds as major Mexican import brands, positioned somewhere between those brands and core craft. As co keeps digging into that position, it recently launched a new 24oz can of a chelada variant that's "absolutely ripping."Newly-acquired "Stone IPA, to me, is an iconic craft beer, one of The Iconic Craft Beers," Nick said. "IPA is still a massive portion of the craft market," he reminded, and has outperformed the segment during recent declines, holding closer to flat. So he's bullish on what can happen after they "put some muscle behind Stone IPA."The co's simplified Cali Squeeze brand fam underscores its flagship focus. Cali Squeeze once had a beer vty pk, a couple of seltzer vty pks and "something like 30 SKUs" for just a few thousand bbls. Co recently "pared everything back to Cali Squeeze Blood Orange as the driver" and it worked. "We're not missing the lost distribution on the other package formats. We're making up for it with a ton of growth on the flagship."Meanwhile, Trumer is close to 30K bbls and "very heavily concentrated in Northern California," where it has the same distrib network as Firestone and a "very strong rate of sale," Nick said. Yet the brand is more "nascent in Southern California." So the co sees "tremendous opportunity to grow it." Part of its plans include bringing back the "iconic" green bottles and making "small changes" on distribution, but mostly keeping it "very focused" with just a few SKUs.

Firestone Focused on Flight of "Timeless" Craft Flagships After Stone, Trumer Deals

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