Millennial-fed demand for locally sourced and affordable luxuries is helping drive a convergence between agriculture and the alcoholic beverages sector, according to the chief executive of food and agribusiness-focused investment bank Cascadia Capital.
Speaking to Agri Investor on the occasion of Cascadia’s merger with Los Angeles-headquartered sector specialist First Beverage Financial, Michael Butler said that his firm views the market for breweries, distillers and wineries as being propelled by the same forces of disruption seen throughout the food industry. Announced last week, the merger will see First Beverage executives join Seattle-based Cascadia’s Los Angeles offices.
First Beverage is a Los-Angeles headquartered investment bank that has completed 25 beverage transactions over the past four years, with 18 concentrating on the craft beer market. The firm has also raised a private equity fund, First Beverage Ventures, which was launched in late 2015 and had raised $64 million from 33 investors as of July, according to a regulatory filing.
Butler said that the First Beverage Ventures fund will stay under the control of First Beverage founder and chief executive Bill Anderson (who will also join the Cascadia board of directors) and focus mostly on early-stage investments, while Cascadia’s focus is on later-stage businesses in the sector.
Many of the beverage companies Seattle-based Cascadia will focus on are family-owned operations, said Butler, who added that though the bank does maintain a strong focus on the Northwest region of the US, it plans to pursue beverage deals nationwide.
Hops producers that have opened breweries, Butler said, have started to develop strains with distinct flavors and aromas to help build their brands. The arrival on the market of spirits derived from grains specific to different regions of the country, he added, also suggests that demand among younger consumers for local brands viewed as authentic has started to shape that segment as well.
“We see this convergence of agriculture and beverages, which I don’t think we ever expected to see.”
According to Butler, the market landscape is slightly different in the wine sector, where family offices are active investors and operations often begin as a “labor of love” that develops slowly to the point of, in some cases, needing to seek institutional capital.
“We think that wine is starting to consolidate, that there’s going to be a lot of activity in the wine sector and the distillery sector,” said Butler. “Craft breweries will still be an active sector, but we think it probably won’t be as active as it has been and a lot of that activity will migrate to the wine sector and to the spirit sector.”
Cascadia was founded in 1999 and includes food and agribusiness among its 10 specialty sectors. Within agriculture, it focuses on upstream investments in fruits, vegetables, protein, dairy and other subsectors.