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November 4, 2020
If you’ve ever cracked open a SweetWater 420 Extra Pale Ale after a long day in Atlanta, this news hits close to home. SweetWater Brewing Company — one of the largest independent craft brewers in the U.S. and a beloved Atlanta institution since 1997 — has been acquired by Canadian cannabis giant Aphria Inc. for approximately $300 million. Whether you see this as a bold new chapter or the end of an era, it’s a deal every Atlanta beer fan should understand.
Quick Summary
- What happened: Aphria Inc. (TSX/Nasdaq: APHA) acquired SweetWater Brewing Company for ~$300 million USD
- When: Announced November 4, 2020, with closing expected before end of December 2020
- Who stays: Founder Freddy Bensch remains as CEO; all ~125 employees stay on
- Why it matters: SweetWater’s cannabis-adjacent 420 brand aligns with Aphria’s long-term U.S. cannabis strategy
- For Atlanta fans: The brewery at 195 Ottley Drive stays put — you can still visit on our Atlanta Brewery Tour
The Deal
SweetWater Brewing Company, founded in 1997 by Freddy Bensch, will become a wholly owned subsidiary of Aphria Inc., a leading global cannabis company headquartered in Leamington, Ontario. The deal was unanimously approved by Aphria’s Board of Directors.
Under the terms of the agreement, SweetWater’s unitholders will receive $250 million in cash and approximately $50 million in Aphria stock at closing. They are also eligible to receive up to $66 million in additional cash through an earnout running through the end of calendar year 2023. The initial transaction value represents approximately 12.5x adjusted EBITDA.
Aphria plans to finance the cash portion through a committed $100 million term debt facility at the SweetWater level, up to $100 million from its existing At-The-Market (ATM) equity program, and available cash on hand.
Key Details
SweetWater By The Numbers
SweetWater has built an impressive operation from its state-of-the-art, 158,000-square-foot brewery on Ottley Drive in Atlanta. For the year ended December 31, 2019, the company generated net revenue of $66.6 million and adjusted EBITDA of $22.1 million. Production volume increased 7% year-over-year to nearly 261,000 barrels — twice the growth rate of the national craft beer market, according to the Brewers Association.
The brewery distributes across 27 states plus Washington, D.C., with products available in approximately 29,000 off-premise retail locations. SweetWater also has a significant on-premises presence in more than 10,000 restaurants and bars, and its 420 Extra Pale Ale and IPA are served on all Delta flights — both nationwide and internationally across more than 50 countries on six continents.
The 420 Brand Connection
SweetWater’s 420-branded craft brews use terpenes and natural hemp flavors that, when combined with select hops, emulate the flavors and aromas of popular cannabis strains. In 2019, the 420 Strain G13 IPA became the top new craft brand in the U.S. in its first 12 months. It quickly became SweetWater’s #2 best-selling beer and the #1 best-selling new craft beer in the country.
This cannabis-lifestyle branding is exactly what attracted Aphria. The company sees SweetWater as a way to build U.S. brand awareness for its adult-use cannabis brands — Broken Coast, Good Supply, Riff, and Solei — ahead of potential federal legalization.
The 420 Fest
Beyond the beer, SweetWater hosts the annual “SweetWater 420 Fest,” which has grown into one of the largest and most anticipated music festivals in the U.S. The festival has been a major driver of nationwide brand awareness.
Strategic Benefits for Aphria
On a combined basis, Aphria and SweetWater projected approximately CAD $650–$675 million in annualized pro-forma net revenue and CAD $65–$70 million in annualized pro-forma adjusted EBITDA. SweetWater’s adjusted EBITDA margins exceed 30%, making the acquisition margin accretive for Aphria.
The deal also gives Aphria distribution infrastructure and key partnerships with leading U.S. distributors, retailers, and on-premises customers. SweetWater’s innovation pipeline includes entry into the rapidly growing hard seltzer category, and Aphria plans to introduce its brands via craft beers, seltzers, spirits, and non-alcoholic beverages in both the U.S. and Canada.
What the Leaders Are Saying
Irwin D. Simon, Aphria’s Chairman and CEO:
“Our strong balance sheet and access to capital have enabled us to enter the U.S. through this strategic and accretive acquisition. We will establish and grow our U.S. presence through SweetWater’s robust, profitable platform of craft brewing innovation, manufacturing, marketing and distribution expertise.”
Freddy Bensch, SweetWater’s Founder and CEO:
“We are excited by the opportunity to join a leading global cannabis company and build a successful future based on the strengths we both bring to this combination. Our 420 brand offerings and SweetWater 420 Fest complement Aphria’s cannabis business and create mutual opportunities for accelerated expansion.”
Bensch will continue as CEO of SweetWater under a consulting agreement through the end of 2023, reporting directly to Simon. All approximately 125 SweetWater employees will remain in place.
What This Means for Atlanta Beer Fans
Here’s the good news: SweetWater’s Atlanta brewery isn’t going anywhere. The 158,000-square-foot facility on Ottley Drive — complete with its integrated restaurant and live music venue — operates on a lease running through 2040. The bottling and canning lines can package 23.5 million gallons annually, and the kegging capacity reaches 1.5 million kegs per year.
Freddy Bensch and the entire leadership team are staying on, which suggests continuity in the brewing philosophy that’s made SweetWater a local favorite for over two decades. The biggest changes will likely happen behind the scenes: more resources for expanding into new markets, new product categories like hard seltzers, and eventually, cannabis-infused beverages if and when federal law permits.
For now, you can still enjoy SweetWater’s full lineup right at the source. Our Atlanta Brewery Tour includes a stop at the SweetWater brewery, where you’ll get to taste their award-winning beers and see the operation firsthand.
Source: Aphria Inc. Press Release, November 4, 2020
