Target Overview

City Brewing Company, LLC is recognized as the leading co-manufacturer of high-growth beverages in the United States. The company is making strategic business updates aimed at accelerating its growth trajectory, ushering in a new generation of management, and providing comprehensive long-term supply solutions to its customer partners. As part of this initiative, a consortium of investors, including Charlesbank Capital Partners, Oaktree Capital Management, LLC, and Blue Ribbon Partners, LLC, along with City management, will acquire 100% ownership of City Brewing through a significant equity investment, with the transaction expected to finalize in April 2021.

Industry Overview in the U.S.

The beverage industry in the United States is experiencing a remarkable transformation characterized by the rise of high-growth segments such as hard seltzers and flavored malt beverages. Market dynamics are influenced by changing consumer preferences towards healthier and low-alcohol options, driving demand for innovative and diverse beverage offerings. The co-manufacturing sector, in particular, has gained traction, as established brands seek partnerships to bolster their production capabilities and address market demands more effectively.

In recent years, the beverage market has also seen an influx of investments aimed at enhancing processing and packaging technologies. As a result, companies are increasingly prioritizing agility and innovation in their operations, striving to respond rapidly to evolving consumer trends. The expansion of such facilities aligns with the industry's positive growth forecast, suggesting a promising outlook for beverage manufacturers.

As part of its growth strategy, City Brewing is focusing on building a national footprint and enhancing its production capabilities. The investment in the Irwindale brewery, which was previously operated by Miller Coors, illustrates the shift towards larger, more versatile production facilities capable of meeting the burgeoning demand in the low-alcohol beverage market.

Furthermore, the successful navigation of these industry dynamics is critical for co-manufacturers as they play a pivotal role in the supply chains of diverse beverage brands. By gathering customer loyalty through strategic partnerships, companies like City Brewing are positioned to capture significant market share in a competitive landscape.

Rationale Behind the Deal

The rationale behind this investment and acquisition is rooted in City Brewing's commitment to enhancing its operational capabilities and addressing increasing customer demand across various beverage segments. The $630 million investment will not only fund capacity expansion but also elevate the company's innovation and technology offerings, ensuring that it remains at the forefront of the beverage industry.

Acquiring the Irwindale brewery is expected to significantly enhance City Brewing's production capabilities. The facility is set to become the largest low-alcohol beverage contract production site in the western United States, allowing City to cater to a wider range of beverage categories and meet the growing needs of its esteemed customers.

Investor Information

The consortium of investors backing City Brewing is led by Charlesbank Capital Partners, a firm with a strong track record in investing in contract manufacturing and food & beverage businesses. Their involvement highlights the investors' confidence in City’s management team and its strategic vision for future growth.

Josh Beer, a Managing Director at Charlesbank, emphasized the firm’s commitment to supporting City Brewing’s growth program, which reflects a long-term dedication to enhancing customer service and expanding the market reach of the company. Such backing is critical as it ensures that City Brewing has the necessary financial resources to realize its ambitious expansion plans.

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The investment in City Brewing is viewed as a significant opportunity to capitalize on the dynamic growth within the beverage sector. The transition in leadership, alongside the substantial financial backing from respected investment firms, positions City Brewing favorably for navigating future challenges and seizing emerging market opportunities.

The strategic acquisition of the Irwindale facility is particularly notable, as it introduces a state-of-the-art production site capable of covering a diverse array of product categories. This flexibility will enable City to quickly adapt to consumer trends, increasing its responsiveness in a market characterized by rapid changes.

Moreover, the new management team, with expertise and deep industry knowledge, appears well equipped to lead City Brewing into its next growth phase. The combination of experienced leadership and a robust investment program suggests that City Brewing is prepared not just to sustain its operations but to thrive as a key player in the beverage market.

In conclusion, the investment by Charlesbank and other stakeholders represents a strong vote of confidence in City Brewing's potential, and the planned enhancements to the company’s operational capabilities may very well secure a prominent position in a competitive landscape. As consumer preferences evolve, City Brewing seems poised for a successful future.

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