Frederick Brewing Company

Frederick Brewing Company was a craft brewery based at Wedgewood Business Park in Frederick, Maryland. Founded in the early 1990s by Marjorie McGinnis, Kevin Brannon, Steve Nordahl, and Steven Tluszcz, it became one of the most ambitious examples of the United States microbrewery expansion wave of that decade. The company invested heavily in a modern, large-scale production facility, raised capital through a 1995 initial public offering, and pursued a strategy built around rapid capacity growth, brand creation, acquisitions, and contract brewing. The brewery’s principal early brand was Blue Ridge. It later added or acquired Wild Goose, Brimstone, and Hempen Ale, and at different points produced beer for other companies, including contract brands. Its acquisition of Wild Goose Brewing Company and Brimstone Brewing Company helped make it one of the largest craft breweries in the Mid-Atlantic region. The company’s new Frederick facility opened in 1997 and offered substantial production capacity, brewery tours, and modern equipment. At its height, the plant was designed for far more output than the company’s brands could reliably sell. Frederick’s expansion coincided with a crowded and increasingly competitive craft-beer market. Blue Ridge initially performed well but later struggled to maintain retail momentum. Hempen Ale generated substantial publicity and short-term demand because it used imported hemp seeds, but the product also attracted scrutiny from federal regulators over its ingredients and packaging. The brewery’s financial performance remained weak: it recorded substantial losses, carried significant debt, faced tax and utility arrears, and was unable to sustain the share price required for continued NASDAQ listing. Cost reductions, management changes, executive salary cuts, a reverse stock split, refinancing efforts, and attempted strategic changes did not restore profitability. In 1999 Snyder International Brewing Group acquired control of Frederick Brewing Company. The businesses were subsequently merged, although Frederick continued to face financial and operational difficulties. The company was placed into receivership in the early 2000s, while creditors and local authorities pursued unpaid loans, taxes, water charges, and sewer fees. The brewery remained operational and produced a range of brands, including Wild Goose, Blue Ridge, Crooked River, Little Kings, and Hudepohl products, but the underlying business was eventually offered for sale to address its debts. Flying Dog Brewery purchased the brewery in 2006 and renamed it Wild Goose Brewery, using the Frederick facility as its East Coast production hub. Flying Dog later consolidated its production in Frederick. In 2011 the Wild Goose brand was sold separately after demand for Flying Dog products limited the plant’s available capacity. The former Frederick Brewing operation was subsequently associated with Flying Dog rather than continuing as an independent Frederick Brewing Company brand. Its history is frequently cited as an example of overexpansion during the 1990s microbrewery bubble.

Frederick Brewing Company emerged in Maryland during the early-1990s growth of American craft brewing. The company was founded by Marjorie McGinnis, Kevin Brannon, Steve Nordahl, and Steven Tluszcz, although published accounts place its formation in either 1992 or 1993. Rather than remaining a small local brewpub, the company pursued a high-capacity industrial model. It raised capital through a 1995 public offering and used the proceeds to acquire land and install equipment for a brewery capable of producing approximately 100,000 barrels annually. The company’s first major brand was Blue Ridge. It expanded its portfolio by acquiring Wild Goose Brewing Company and Brimstone Brewing Company and by developing Hempen Ale, a beer made with imported hemp seeds. The Wild Goose acquisition moved production from Cambridge to Frederick in 1998, while the combination of brands and facilities temporarily made Frederick Brewing one of the largest craft breweries in the Mid-Atlantic. The new plant opened in 1997 and was promoted as a state-of-the-art facility with public tours. Its substantial capacity, however, became a liability because sales did not grow fast enough to support the investment. Hempen Ale created unusual publicity. It generated significant advance demand and international attention, but its hemp ingredients prompted interest from the Bureau of Alcohol, Tobacco, Firearms and Explosives, the Food and Drug Administration, and the Drug Enforcement Administration. Regulators also reviewed the product’s packaging. The company obtained approval for the label, reportedly incurring considerable legal expense. The beer was later sold in Canada, but the publicity did not solve the company’s broader structural problems. Frederick encountered financial trouble almost immediately. It posted large losses despite recording sales, defaulted temporarily on a bank loan, reduced management positions, cut executive compensation, and attempted to streamline operations. Its stock fell below NASDAQ’s minimum price requirements. Shareholders approved a reverse stock split and considered an appeal of the delisting, but the company never achieved sustained profitability. Its difficulties reflected both company-specific overinvestment and a broader contraction in the 1990s microbeer market, when consumers faced an increasingly confusing number of craft brands. Snyder International Brewing Group acquired control in August 1999. McGinnis and Brannon relinquished their top operating roles, and C. David Snyder became chairman and chief executive. Snyder International later proposed and completed a merger that consolidated ownership. Cost cutting and management changes continued, but the brewery remained burdened by debt and operating obligations. It also fell behind on water, sewer, property-tax, and other public charges in Frederick County. The company was placed into receivership in the early 2000s, and creditors sought a sale of the brewery and its equipment to address several million dollars in obligations. Despite these difficulties, the plant continued producing a broad mix of beers. By the early 2000s it made products under the Wild Goose, Blue Ridge, Crooked River, Little Kings, and Hudepohl names, as well as contract-brewed styles. Its reported annual capacity remained far above actual sales, illustrating the gap between infrastructure and market demand. Flying Dog Brewery purchased the operation in July 2006. The facility was renamed Wild Goose Brewery and became Flying Dog’s East Coast hub. Flying Dog subsequently moved more of its production to Frederick because the site could brew more efficiently than the company’s earlier Denver facilities. In 2010, rising demand for Flying Dog products left insufficient capacity for Wild Goose production. The Wild Goose brand was sold in 2011, while the former Frederick brewery became integrated into Flying Dog’s operations. Frederick Brewing Company therefore ceased to exist as an independent operating brand, although its facility and successor operations remained important to regional craft brewing.

• 2011

  Wild Goose brand sold

  [1]Frederick Brewing Companyen.wikipedia.org

  The Wild Goose brand was sold after Flying Dog’s own production requirements reduced available capacity.

• 2006

  Purchased by Flying Dog

  [1]Frederick Brewing Companyen.wikipedia.org

  Flying Dog acquired the brewery and renamed it Wild Goose Brewery.

• 2001

  Merger with Snyder International

  [1]Frederick Brewing Companyen.wikipedia.org

  Snyder International completed the takeover and merger process.

• 1999

  Snyder International acquires control

  [1]Frederick Brewing Companyen.wikipedia.org

  Snyder International Brewing Group acquired a controlling interest and installed C. David Snyder as chairman and CEO.

• 1998

  Wild Goose production moves to Frederick

  [1]Frederick Brewing Companyen.wikipedia.org

  Production of Wild Goose products was transferred from Cambridge to the Frederick facility.

• 1997

  Frederick brewery opens

  [1]Frederick Brewing Companyen.wikipedia.org

  The new facility at Wedgewood Business Park held its grand opening on February 12 and became the company’s main production site.

• 1997

  Hempen Ale launched

  [1]Frederick Brewing Companyen.wikipedia.org

  The hemp-seed beer received strong publicity and regulatory scrutiny.

• 1995

  Initial public offering funds expansion

  [1]Frederick Brewing Companyen.wikipedia.org

  The company raised public capital to acquire land and build a high-capacity modern brewery.

• 1992

  Company founded

  [1]Frederick Brewing Companyen.wikipedia.org

  Frederick Brewing Company was established in the early 1990s by Marjorie McGinnis, Kevin Brannon, Steve Nordahl, and Steven Tluszcz; sources differ on whether the founding occurred in 1992 or 1993.

A regional craft brewery positioned around modern large-scale brewing, broad product variety, acquired brands, and contract production. Its early identity combined independent microbrewery credentials with an unusually ambitious production footprint for the period.

• Craft beer brand

  Blue Ridge

  Blue Ridge was Frederick Brewing Company’s foundational beer brand and initially performed well in the regional market. Its sales later weakened as the craft-beer market became crowded. The brand represented approximately 10–15 percent of company sales in 2001, and beers in the Blue Ridge line received recognition at the World Beer Cup and favorable professional tasting assessments.

• Craft beer brand

  Wild Goose

  Wild Goose was acquired by Frederick Brewing Company and became one of its principal labels. Production moved to Frederick in 1998. After Flying Dog bought the brewery in 2006, the facility operated under the Wild Goose Brewery name, and the Wild Goose brand was later sold separately in 2011.

• Hemp-seed ale · 1997

  Hempen Ale

  Hempen Ale was brewed with imported hemp seeds and became the company’s most publicized product. It generated substantial early demand and was exported to Canada, but its ingredients and packaging attracted federal regulatory attention. The product was notable as an early United States commercial beer using hemp seeds.

• Craft beer brand

  Brimstone

  Brimstone was a beer brand acquired or produced as part of Frederick’s portfolio during its expansion period. A Brimstone beer received a favorable professional tasting assessment in 2000.

• Contract brewing

  Contract-brewed brands

  Frederick Brewing Company supplemented its own brands with contract production. In 2001, ten of the company’s reported 26 beer styles were made for other brewing companies, helping use the facility’s considerable unused capacity.

• 2006

  Sale to Flying Dog BreweryM&A

  Background

  The brewery was being sold to address substantial obligations while preserving the operating business and its modern production assets.

  Action taken

  Flying Dog purchased the operation and renamed it Wild Goose Brewery, designating it as an East Coast production hub.

  Aftermath

  Flying Dog moved its production to Frederick and eventually operated the former Frederick Brewing site as its principal brewery.

  Purchase price. $1.6 million (July 2006)

  Source

• 2001

  Merger with Snyder International Brewing GroupM&A

  Background

  Snyder International already controlled Frederick Brewing Company and proposed consolidating the remaining ownership.

  Action taken

  A merger proposal was evaluated by a special committee because C. David Snyder led both entities; Snyder International subsequently took over the company.

  Aftermath

  Frederick continued operating under Snyder ownership but later entered receivership amid unresolved debts and public-charge arrears.

  Source

• 1999

  Sale of controlling interest to Snyder InternationalM&A

  Background

  Frederick Brewing had never turned a profit and required outside capital and management support.

  Action taken

  Snyder International Brewing Group acquired 51 percent of the common stock and purchased the entity holding the brewery land.

  Aftermath

  The founders left their senior operating roles, C. David Snyder became chairman and CEO, and Snyder International later merged the company into its group.

  Acquisition consideration. $2.4 million (1999)

  Source

• 1998

  Cost-reduction and management restructuringStrategy

  Background

  Continuing losses and weak financial performance placed pressure on the brewery to reduce its fixed costs.

  Action taken

  The company eliminated management positions, reduced executive salaries, and removed another layer of management during the following year.

  Aftermath

  The measures did not produce sustained profitability, and the company continued to face debt and liquidity problems.

  Source

1. 1Frederick Brewing Companyen.wikipedia.org