When news broke that Maui Brewing was vying to acquire Modern Times Beer via a receivership auction, San Diego beer fans breathed a sigh of relief. Not only is Maui a proven, fast-growing company with a spotless record, but owner Garrett Marrero grew up in San Diego and is a towering, well respected figure within the American craft-brewing industry. As the stalking-horse bidder, Maui’s initial $7.62 million offer was the starting point for a heated auction that saw Anaheim’s Brewery X named the winner after bidding $20 million. We got in touch with Marrero to learn more about what led up to the auction, his feelings following its outcome, why he feels bullish on his company and his thoughts on brewery acquisitions, in general, including the one involving his longtime friends and contemporaries at North County’s Stone Brewing.
When did Maui and Modern Times start discussing a possible acquisition?
We worked on the process for several months and put a lot of time in. We were excited about the opportunity and had started talking about it pre-receivership, with me first going out to Modern Times in January. I knew the brand and the people, and I’ve followed all the company’s history. I’ve always been a fan of what they’ve been doing. It’s a great brand making great beer, so when this opportunity came along, we thought it could be really great for us.
What were your intentions and goals had you won the auction to purchase Modern Times?
We wanted to capitalize on synergies. We have some equipment we’re replacing that would have worked perfectly for Modern Times’ building. I know San Diego loves Modern Times and I think we could have restored it to its previous glory and stature. They’ve been through some shit and needed to be rebirthed in some way, not just from a capital standpoint but operations, too. We have the people and culture that could give Modern Times a fresh start free from that negativity we weren’t part of so it could emerge from the ashes like a phoenix.
Our intention was to run the brand in a more efficient business-management style. There was obviously some mismanagement there—all that’s out in the open—but we think we would have been uniquely capable of righting the ship and growing it in conjunction with our brand. The priority would have still been Modern Times and its people. We really planned to keep it going versus getting rid of the brand and just brewing Maui. That’d be stupid. They have great volume, a following and [their members-only contingent] the League, which is a great asset for them. There are so many members of that club, and we wanted to participate in that.
What was it like before and during the auction, and how did you feel once it was over?
We agreed to be the stalking-horse bidder [with our $7.62 million bid]. That was our starting point and we checked out when bidding reached over double of what we had originally bid. It was an interesting process to get to be the stalking-horse bid. There was a lot of modeling, a lot of ifs and looking at it all penciled-out to where we thought we could do it. As the stalking-horse bidder, we had procedures cleared and drove most of those things. And we knew two weeks prior to the auction that there would be two other bidders. But when we got on the phone, it was different than what was published in the media right after. We were left asking ourselves, “what the hell happened?” We were out of the race already, but out of morbid curiosity I stuck through to the end and made sure our [break-up] fee was protected. I heard the “going, going gone” at the end. We were surprised at the outcome and where it’s all ended up.
Did you and your team ever consider upping your bid to compete with the eventual winner?
I’d say we were never going to go where they took it. The valuation is not there, and the risk is too high. Everyone knows the financials and the budget we wrote—they’re published. We got out at a good time. And we got everything we wanted out of it…except the company. Our name was out there in a positive way and our strength was demonstrated. It’s disappointing but it’s not the end of the world for us. Whoever emerges victorious has a great asset on their hands. They’ve got a great team making great beer. We wish them success and hope the Modern Times team is in good hands. At the end of the day, if that valuation holds, more creditors get some money, which isn’t a bad thing.
So, what is next for Maui?
We’re on to the next one and it should be a pretty fun process. We’ve heard from a lot of breweries and people that are interested in partnering or otherwise. Seeing that Maui is an acquirer, there’s a lot of potential for finding the right opportunity. We’ll produce 90,000 barrels without any other brands this year. It’s not something we need to do, so we’ll be very selective if we consider any acquisitions or partnerships. We have an amazing team and I think the news that Maui Brewing might buy Modern Times being so well received in our hometown is a testament to those 400 people. I can’t speak any higher of them. It’s an exciting time for sure.
What are your thoughts on the reemergence of craft-brewery acquisitions we’ve seen, such as Sapporo USA buying Stone Brewing?
It’s becoming more and more commonplace for there to be an exit strategy for brewery owners. There needs to be one. How you do that is completely up to the breweries. Looking at what Sapporo was looking at in the Stone acquisition, they get a fantastic management team and two good breweries. There’s been no secret on Stone’s side what position they were in. These mergers and acquisitions are going to continue.
Craft-on-craft acquisitions are attractive to us. We’re open to acquisitions or being acquired, but it’s always going to be under our terms. We’re in a strong financial position. We don’t have to do anything. I don’t want to go anywhere, but in this world that we’re seeing, you have got to be thinking about opportunities. This is a real business. It’s cool to brew beer, but if you don’t do it right, you’ll be an acquisition target for me. You have to run it like a real business. If you’re not running a tight ship, the party’s going to come to an end at some point and you might be left without a seat.
What would you say to fans who are upset about acquisitions as we’ve seen in the cases of Modern Times and Stone?
We’re seeing a lot of negativity out there. Nobody needs more of that. Whoever prevails in the Modern Time or Stone situations, give them a chance. Relax, have a fucking beer and hope for the best.