Stone Brewing Co. completes $165M sale to Japan’s Sapporo

Sapporo USA has completed its $165 million buyout of Stone Brewing Co. — marking the end of an era for the San Diego region’s largest craft brewery.

The sale, which was announced in June, closed on Wednesday. With it, Stone’s well-known founders Greg Koch and Steve Wagner are no longer in the picture. But little else has changed on the ground at the Escondido-based brewery, at least for now.

There were no layoffs among Stone’s 670 employees who were part of the assets sold to Sapporo USA, according to a spokesperson. Stone’s executive team remains in their roles — including newly promoted brewing veterans Nicole Williams and Robert Kuntz, who last month were named senior directors of Brewery Operations in Escondido and Richmond, Va., respectively.

With the acquisition, beer production at Stone’s breweries is forecast to roughly double as Sapporo begins migrating its beers into the fold. Sapporo could invest $20 million to $40 million in Richmond and $10 million to $20 million in Escondido as part of the expansion, according to the companies.

Tanks being installed at Stone Brewing’s Richmond facility

(dave parrish)

Stone Chief Executive Maria Stipp and Sapporo USA Chairman Kenny Sadai will lead the combined company — along with one other Sapporo executive. They will oversee the Sapporo, Stone, Anchor and Unibroue brands in the U.S.

“We are very much arm-in-arm in this expedition,” said Stipp in a recent interview. “We are working as a team to figure out how these breweries need to be built out for the volume that is coming.”

One piece of Stone’s business isn’t being acquired by Sapporo — the wholesale distribution arm. It manages about 40 craft beverage brands, getting them stocked at restaurants, bars, supermarkets and convenience/liquor stores in Southern California. Stone’s former owners and financial backers also could earn undisclosed additional payouts from the sale, depending on how well the business performs.

Sapporo, the top selling Asian beer brand in the U.S., expects to produce 360,000 barrels of its beer at Stone’s breweries within 18 months. Its brands include Sapporo Premium, Sapporo Premium Black, Sapporo Reserve and Sapporo Premium Light.

This year Stone expects to make 410,000 barrels of Stone-brand beers at the two production breweries — which have been running under capacity for the past few years amid flat or declining sales.

“We get to maximize our breweries and the capacity we have available,” said Stipp. “There are a lot of benefits to that. Beer tends to be a game of scale. When you’re working on (supply) procurement or you’re working to prioritize yourself with retailers, being a 700,000-to-800,000-barrel brewery in the U.S is better than being a 350,000-barrel brewery.”

In 2019, Stone posted $251 million in sales and a $12.3 million operating loss, according to disclosures from Sapporo, which is publicly traded in Japan.

Last year coming out of the pandemic, Stone’s sales dipped to $230 million while its operating loss narrowed to $9.6 million. The brewery said revenue was up 9 percent through May of this year but didn’t provide further details.

Meanwhile, Sapporo has been growing its beer business in the U.S. It has targeted California, New York, Florida and Texas for future expansion.

“We have been thinking about establishing an optimal manufacturing base in this area for some time, including building our own factory, and we decided that acquiring Stone Brewing Co. would be the best choice,” said Masaki Oga, president of Sapporo Holdings Ltd., in an August financial presentation.

On top of the production breweries, Sapporo acquired Stone’s bistro restaurants and brew pubs. It plans to keep them going. Its parent company operates dozens of restaurants in Japan.

“Stone meets all the requirements we were looking for in a partner for growth,” said Sadai, Sapporo USA’s Chairman. “It has the bi-coastal breweries, best-in-class team and a commitment to quality just like ours.”