By Jon Newberry Post staff reporterBoston Beer to produce a malt base for distillery
Cincinnati's Boston Beer Co. has entered an agreement with Louisville-based Brown-Forman Distillery Co. to produce clear malt base for use in flavored malt beverages marketed by both companies, the brewer said Thursday.
Under the deal, Boston Beer will produce malt base - basically a flavorless, high-alcohol beer - at its Sam Adams Brewery in Cincinnati using technology developed by Brown-Forman.
The companies will share the investment costs of the equipment and the fermenting and storage tanks needed for the additional production, but Boston Beer didn't specify how the costs would be split. Capital expenditures are expected to be between $2.5 million and $4 million, with Brown-Forman bearing its share over the life of the contract, it said.
Boston Beer said the deal isn't expected to have a material effect on its operating costs or earnings. It didn't say what impact, if any, the added production would have on jobs at the West End brewery that now employs about 100 people.
Brown-Forman will have the right to purchase a certain percentage of the malt base the brewery produces, and Sam Adams can use the balance for its own products, including Twisted Tea.
The Sam Adams Brewery is already in the midst of a $6.5 million expansion that will increase its production of Sam Adams beer by about a third, or 200,000 barrels annually. That project is expected to be completed this summer.
Makers of flavored malt beverages, such as Seagram's Coolers and Jack Daniel's Country Cocktails, have to reformulate the drinks by January because of new federal regulations that affect how they're taxed.
Many products now taxed as malt beverages, at lower rates than wine and distilled spirits, in fact derive most of their alcohol content from distilled spirits. Beginning in January, they'll have to get at least half of their alcohol from malt or they'll be taxed at a higher rate.
Publication date: 04-15-2005