By Andrew Bary
September 22, 2017
Back in the days when media streamed over radios instead of mobile phones, summer nights in New England were punctuated by Boston Red Sox announcer Curt Gowdy taking a break from balls and strikes to suggest that listeners crack open a beer. “Hi, neighbor, have a Gansett,” he would intone in his Midwestern drawl. Not that the neighbors needed much urging. In the mid-1950s, Narragansett beer had a stunning 65% market share in New England. But Budweiser and Miller went on to systematically drain regional beers like Narragansett, and by 2005, this once-proud brand was reduced to just $50,000 in sales—annually.
That’s when Mark Hellendrung, a former president at Nantucket Nectars who is now running Narragansett, started tapping a dozen or so main investors, most of them well-heeled New Englanders, to help revive the regional beer that had gone flat. Among them was Steve Galbraith, managing partner of Kindred Capital Advisors, a Connecticut investment firm. Galbraith, the beer’s biggest booster, is now Narragansett’s board chairman.
Galbraith is known in his hometown of Darien, Conn., for zipping around in a Mini Cooper plastered with Narragansett advertising; his home is full of Narragansett kitsch, such as bar glasses and serving trays. His wife and investment partner, Lucy Galbraith, posed as a “Gansett girl” nearly a decade ago, and his daughter Katie was the Gansett representative as an undergraduate at Yale, where the beer sponsored the university’s spring fling in 2015. Other investors’ kids have interned at the company headquarters in Pawtucket, R.I.
“When I originally invested in 2009, I thought it would be like charitable giving and the investment would be a zero,” says Galbraith. “Owning a beer company is part of a teenager’s dream. The visceral appeal of being involved with the beer massively exceeds the financial benefits. Some of the investors are very well-off. This is a rounding error in their portfolios, but they’re still very interested in how the company is performing and helping out.”
They certainly are. One of Narragansett’s coups was getting back into Fenway Park, after Budweiser had muscled Gansett out of the ballgame. It has been a group effort, but Galbraith initially made it happen with a 2009 email to Red Sox owner John Henry. “I wrote him that this must sound totally out of nowhere, but that we’re trying to bring back this New England institution, and it would be exceptional if we could get back into Fenway,” Galbraith says.
The strategy worked. But he didn’t stop there. When Galbraith and other Gansett investors go to Fenway, they often buy trays of Narragansett beer—sometimes 12 or 24 cans at a time—from vendors and give them away to fans in their section. Bill Luby, a partner at Seaport Capital, a New York private-equity firm and an investor in minor-league baseball teams, is one of the beer’s passion investors and remembers a 2009 email that Galbraith sent to him and other New England friends. The pitch: join him in making a Narragansett investment of a few million dollars in total. “You don’t have a choice. Just let me know how much you want to invest,” the email said.
“Virtually everyone came in,” says Luby. “I’m from Warwick, R.I., and we grew up with the beer—we saw our fathers drinking it, and many of us drank it as teenagers. We felt the investment was one part a compelling story and another part almost a civic duty to bring the brand back.”
They’ve done just that. From nearly extinct, Narragansett sales have surged to $8 million in the first half of 2017, its 16% revenue growth making it one of the fastest-growing beers in New England at a time when most big brewers are struggling in a flat-to-declining market. And it has moved back into the black. Over the past decade, Narragansett raised about $14 million from its investors. It isn’t an easy company to value, but it could be worth $30 million in an acquisition.
But it isn’t only about the money. “This is a mission-based brand as much as a profit-based brand,” says investor Scott Sipprelle, a former hedge fund manager and now a private investor. “One area to find value is in small private companies, and Narragansett fits that theme. I invested in Narragansett to make money, but part of the enjoyment is putting your shoulder to the stone and pushing it along.”
There is good reason for all of their care.
Back in the day, Theodor Geisel, better known as Dr. Seuss, devised clever print advertisements and created the beer’s Chief Gansett mascot. But that star power wasn’t enough to fend off juggernauts Budweiser and Miller, whose growth in the 1980s and 1990s destroyed most of the once-dominant regional brands. Gansett became hard to find even in its home state of Rhode Island.
In 2005, CEO Hellendrung and his small management team, with the backing of their passionate investors, took over the basically bust beer brand. Luckily, their timing was good—the craft-brewing revolution was well under way, and beer drinkers were abandoning Bud and Miller for local brews, new tastes, and importantly, an authenticity that the big corporate brands seemed to lack. So, hipsters in places like Brooklyn’s Williamsburg neighborhood were gravitating to labels like Brew Free! Or Die IPA and to classics such as Pabst Blue Ribbon.
To get back into the game, however, Hellendrung first had to fix the product. When Narragansett fell on hard times, so did the beer’s quality—it was known as Nasty Narry. Hellendrung found the old brewmaster from the beer’s heyday and brought back the original formula. The beer has since received the highest score in Beer Advocate’s lager taste rankings, topping Bud, Miller, and Pabst.
Then came the guerrilla marketing campaign. The beer was quaffed by Quint, the shark hunter played by Robert Shaw in the 1975 hit movie Jaws. In a memorable scene, Quint downs a Narragansett in one gulp and crushes the can. Hellendrung had Narragansett regularly sponsor summer showings of the movie, which was filmed on Martha’s Vineyard, and “Crush It Like Quint” events.
The beer has in this way established a surprising beachhead in Manhattan and Brooklyn. New York is now the beer’s second-largest market. Two summers ago, the New York Post featured Narragansett’s growing popularity in the city at the expense of Pabst and pronounced the “reign of PBR in NYC may finally be over.” And there’s plenty of room for growth in Rhode Island, its largest market, where Gansett still accounts for just 3% of total beer consumption.
What’s going on? The revived Gansett is appealing to young drinkers who like the taste of the lager, its low price (it generally costs less than Budweiser), and the authenticity of a 127-year-old brand whose slogan is “Made on Honor, Sold on Merit.” Galbraith says, “When we took it over, we thought it would tap a reservoir of nostalgia. But it didn’t sell to people like me. It’s appealing to 25-year-olds in Brooklyn.”
Which is an important point. A successful beer needs a young demographic, since younger people consume the most beer. That’s why it’s generally tough to resurrect historic beers and why Galbraith and his fellow investors are so pleased with the revived company’s results. Young beer drinkers are price-sensitive. Narragansett’s most popular product is a 16-ounce “tall boy” or “pounder,” favored by young drinkers because it costs as much as a 12-ounce can; the beer goes for roughly $6 a six-pack. Many craft beers, in contrast, cost about 30% to 40% more for a six-pack.
“Narragansett’s success is downright miraculous. It’s hard to make a lager beer work in this day and age. Getting into a market where Bud and Miller compete is pure insanity,” says Steve Grasse, founder of Quaker City Mercantile, a Philadelphia marketing firm specializing in spirits and beer brands that works with Narragansett.
A few summers ago, Hellendrung brought a case of Narragansett up to former President George H.W. Bush in Kennebunkport, Maine—helped by an introduction from Galbraith. They spent over an hour talking about the Red Sox, Narragansett, and Ivy League baseball. Bush was a first baseman at Yale, and Hellendrung played for Brown. “This is a David and Goliath story in an unbelievably competitive industry,” Hellendrung says.
It is. Narragansett expects to sell about 105,000 barrels—a barrel is 31 gallons—this year. That’s still a fraction of Pabst, probably the largest retro beer, which does about 2.5 million barrels annually, but Narragansett is already the 36th largest craft brewer in the country out of 5,000 craft brewers. The company achieved a long-desired milestone earlier this year by taking a share in a new, $14 million brewery in Pawtucket that is producing its craft beers.
Galbraith and the other investors have had a lot of fun along the way, tough slog or not. He’s admittedly unsure of the beer’s long-term future, but he likes the idea of running “a profitable family business and have that be the endgame.” He adds that he and other large holders would consider a sale at the right price, but the returns for Gansett’s investors are as much psychic as they are monetary. After all, what other investment allows you to buy a tray of beers at historic Fenway Park, give them away to fellow fans, and take pride in saying, “Hi, neighbor, have a Gansett”?
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