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Pressing ahead: Vermont Hard Cider sold in $305 million deal

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Posted on October 25, 2012 |
By Angelo Lynn



woodchuckguy5060.jpg
BRETT WILLIAMS

MIDDLEBURY — For a company that had been “on its deathbed” in 2003, Woodchuck Hard Cider has made a remarkable turnaround. The Middlebury company now has 125 employees, $70 million in annual sales, more than 60 percent of the hard cider market in the United States, and sales growth of 29 percent and 25 percent annually in the past two years.

And, as of Monday, it is part of a global hard cider company based in Ireland.

In a press conference at the 64,000-square-foot Middlebury plant on Tuesday, Vermont Hard Cider Company President and CEO Bret Williams announced the sale to C&C Group of Ireland for $305 million.

“It’s an exciting time,” Williams said of the sale. “It’s great for the employees, the timing’s right, and we’re real excited about what the future will bring for Woodchuck.”

Williams stressed that the new company is fully committed to keeping the plant in Middlebury, will retain all jobs and current benefits for the foreseeable future, and intends to follow through with plans for a new 100,000-square-foot, or bigger, cider-making facility on Exchange Street between the Bridge School and Maple Landmark. Plans for adding an additional 30 jobs in 2013 are also on target.

Williams said the Woodchuck and C&C were a good fit for each other in terms of culture and expertise.

“They’re not a large global brewer that is looking at a new revenue stream in a category that they don’t know anything about,” Williams said of C&C Group, emphasizing the company’s experience with hard cider making throughout Ireland and the United Kingdom. “They’ve been at it for 85 years, and some of the brands they own in England are older than this country, starting back in the 1700s. So they are true believers in cider, as are we, and they are the innovations experts throughout Europe, and we’ve been innovating in the hard cider category here since 2008 with a lot of new styles at  Woodchuck … Putting those two areas of expertise together, it’s going to be exciting.”

Still, the decision to sell, Williams said, “wasn’t easy.”

“It was a very, very tough decision … It was an unsolicited offer. If you would have asked me even a couple of months ago, I wouldn’t have believed we were going to sell the company. But C&C came in with a very aggressive offer and it caught our attention. But it wasn’t just the offer, it was really looking into the business. They are a very like-minded company. They are mainly a cider-only company, just like us … so, it’s a cultural fit. They believe in the tremendous upside of the cider market in the United States, as do we, and all jobs are going to stay intact.”

HISTORY & A BIG GAMBLE

Williams recalled that the cidery started in Proctorsville in 1991 in a small two-car garage. He joined the company in 1996 as its first salesman. The bottling line then, he remembered, was “an old 1940s broken down piece of equipment. We had to do everything by hand …. What you can see today is this state-of-the-art, world-class operation, but when I stepped in in 1996, I had no idea what the future would bring. I didn’t know if the company was going to make it.”

It almost didn’t. When Williams put together a deal to buy the business in 2003, he said it was “on the verge of bankruptcy” and “losing $300,000 a month. It was basically a patient on its deathbed. And I took a shot — put my life’s savings, everything I had, change out of the ash tray, my mortgage, my 401k, and went all in — against a lot of people telling me that it’s never going to work.

“But, here we are, this year on track to have $70 million in revenue and 125 employees, and we made the decision to sell the business last night.”

Still reeling from that decision, Williams said the prospect of selling it had been “tormenting” him since the offer landed on his desk in August. “It was very quick. Having been through this on the other side of the table before, I wanted to be sure that if we were going to do something, it would be quick and behind the scenes and not torture our employees with shopping it to other companies. When the number looked attractive enough, and the deal would save jobs and put the cidery in the ground, it became an easier decision. It tormented me for a long time … but I think it was the right move.”

When asked how he could be sure the new company would stay in Middlebury and continue to grow in Vermont, Williams was upbeat.

“As far as the jobs, that’s in the contract,” he said. “I can’t promise what the future’s gonna bring 10-15 years down the road. All I know is that they are talking about breaking ground on that facility (this coming spring or summer), which is a huge investment. We were throwing around a number that was $24 million; they’re talking about $30 million, so they are going to go big. That’s pounding a stake in the ground, that’s a real commitment to stay here for the long haul; that’s going to more than double our capacity and we’re going to need a lot more jobs to keep up with demand.

“So they seem absolutely committed to the long haul,” Williams continued. “Woodchuck was born in Vermont and it needs to stay here, and they know that.”

Williams also noted that it is “a huge endorsement that they would like me to run the company, and our CFO is staying onboard as is our sales director and our marketing director. They want the people who built it to stay here and run it. They are not bringing their executives over to do it their way … They understand that this is a totally different market, with 50 different states, with 50 different laws. They want to keep what got Woodchuck onto the dance floor, so I think that’s a real positive thing.”

Woodchuck Hard Cider, which Williams said will operate as a stand-alone business, currently ships just under 4 million cases (nearly 96 million bottles) of hard cider annually, up from 1 million cases in 2003. It was also the first hard cider company to market the beverage in cans when it launched that operation this past year. Under current plans, the company will add another bottling line with 600-bottles-per-minute capacity in the new building as well as create new office space and a museum space for visitors to learn about the history of making hard cider. The cidery will keep its current plant in the industrial park on Pond Lane, as well, bringing the total space to 164,000 square feet within the two buildings.

LOOKING FORWARD

Asked if the product would see any changes, Williams was emphatic.

“The recipe that was invented in 1991 for Woodchuck amber has never changed, and it won’t,” he said. “The ingredients are going to remain unchanged. We will continue to buy local fruit. There is fresh Vermont juice in every bottle and that’s not going to change. They wouldn’t mess with (the quality of the product) … the proof has always been what’s under the cap and what’s in the bottle … A lot of companies spend a lot of money on what’s going on outside the bottle. We were always investing in product quality and what’s going on inside the bottle. That’s not going to change. That’s the reason Woodchuck is the number-one selling hard cider in the country; it’s the formula and the ingredients, and they’re not going to touch that.”

Noting that the current facility was operating at capacity with three shifts and the lights on 24 hours a day, Williams characterized the changing landscape of the cider business in the U.S. as one with tremendous upside, but also with growing competition. The cider category is only 2/10ths of one percent of beer consumption in the U.S., he explained, while in Europe it’s 15 to 20 percent of the beer category.

“When cider gets to be 1 percent of the total beer category in the U.S.,” Williams added, “we could be 10 times the size we are now and we’ve only hit 1 percent. There is so much upside it is incredible.

“But the competition is coming from all angles,” he continued. “There is tremendous pressure on the large global brewers because their beer business is off, and the cider category is doing well. Even in established countries like England and Ireland it’s growing off of a huge base, so they’re starting to notice that cider is a hot segment.

“And they look at how much beer is consumed in the U.S. and they see a little old company in Vermont with a big chunk of the business as the number-one selling cider, and you can see why they want to get involved.”

Williams noted that as a beverage category in the United States, hard cider sales are up 60 percent over last year, and Woodchuck Hard Cider’s growth continues at about 25 percent a year. Such growth has the larger U.S. brewers, such as Sam Adams and Anheuser-Busch, getting into the market.

“All through last year we really didn’t have any competition,” Williams explained. “There’s over 100 cider brands out there now, and that wasn’t always the case … And some of the big boys are coming in and coming over the hill right after us. Having deeper pockets to invest in Woodchuck and having a global partner with a little bit more muscle cannot be a bad thing. If anything it’s going to help us.”

Of the company’s rapid growth, Williams, 42, said it was never really a company goal.

“In the beginning,” he recalled, “the goal was never to get big. My sole motivation was to save jobs; it was going under, I just wanted to protect some of my co-workers and see if we could take a shot and see what would happen … The same holds true today. It was really just trying to get better, and as we improved and got better every day that was our goal. And one day, nine years later, you pick your head off your desk and there’s an offer on the table. I just didn’t see it coming.”

But the timing of the offer and sale, he said in retrospect, sets up the company for solid future growth.

“I think the future looks more positive every day,” Williams said, noting that the sale to C&C combines a lot of talents and strengths. “There’s a tremendous upside. It’s real good news for everybody.”

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