Victory Brewing’s school bus takes a new route

The story is familiar to Philadelphia-area beer drinkers: Two fifth graders named Bill and Ron meet on a school bus, become fast friends, grow up together, learn to make beer, and many years later open Victory Brewing in an old Pepperidge Farm bakery in Downingtown.

Tales like these are part of the hagiography of craft brewing, a backstory that distinguishes Victory Helles Lager from Budweiser, that helps explain why you should pay more for a beer made by small-business entrepreneurs than the cheaper, mainstream brands that dominate the market.

But what happens when that story takes a twist? When the down-home craftsmen go to Wall Street?

Those two kids – now 50-something business partners Bill Covaleski and Ron Barchet – are going to find out. This week, they announced a not-unexpected deal to join New York’s Southern Tier Brewery in a unique partnership that will be managed by a Manhattan private equity firm.

I say it was not unexpected because, if you asked Philly beer insiders who’d be the first local brewery to make a deal, the answer was always Victory. That’s mostly because of its size: It was the area’s second-largest brewery (behind Delaware’s Dogfish Head), making it a ripe acquisition target for anyone seeking a quick share of Philadelphia’s craft beer market. But it was also because Victory has a reputation for innovation and growth, whether in expanding its wholesale distribution network or in building new brewpubs and production facilities.

In its first 20 years, Victory could depend on the promise of double-digit sales growth to underwrite its need for capital. When it needed cash, as in the case of its construction of a brewery in Chester County, banks were eager to lend.

But the craft beer landscape is changing rapidly.

A dozen other small breweries have been bought up in the last 18 months by the likes of Anheuser-Busch InBev and Heineken. The industry was rocked when Ballast Point – a San Diego brewery about the size of Victory – sold out to a Mexican beer importer for a stunning $1 billion.

Meanwhile, larger Western breweries – including Sierra Nevada, New Belgium, Oskar Blues and Lagunitas – have moved eastward with second facilities.

With more than 4,000 breweries competing for tap handles and support from wholesalers, Covaleski and Barchet realized they needed to grow even bigger, and fast, or they’d be left behind.

The pair had suitors willing to hand them cash (they won’t name names), but that option left a bad taste.

Covaleski said he didn’t want to “turn to our employees and say something like, ‘Hey, the same guys who brew Coors Light are now calling the shots here.’ “

Barchet added: “I’m sure a strategic partner could have delivered money, but at the same time we were very concerned about our legacy and our brands. I wanted to feel good about going into a supermarket, buying Prima Pils in five years, and not worrying whether it tastes the same.”

Victory opted instead to accept money from a private equity outfit in New York called Ulysses Management that already owned a minority stake in Southern Tier. Together, they formed a holding company, Artisanal Beverage Ventures, that now owns both Southern Tier and Victory.

Private equity is not without its risks because it leaves the founders with less control over their companies’ future. The quality of Vermont’s Magic Hat, for example, has suffered greatly since its private-equity parent was sold to a Costa Rican-controlled brewing conglomerate.

The greater threat, though, may be to the company’s story.

Each bottle of Victory beer is printed with a message and the signatures of Bill and Ron. It’s their personal trademark, one that – despite the brewery’s considerable size – makes it seem Victory has a personal relationship with everyone who drinks its beer.

Now, with their holding company under the leadership of two former Anheuser-Busch execs, could Victory’s big-money deal damage that image?

The initial reaction on social media has been mixed. Some beer enthusiasts are worried about the New York influence on their local beer; others are supportive and taking a wait-and-see attitude.

“It’s a concern, for sure,” Covaleski said. “But people should have 20 years of confidence in the way we manage a company, that we are focused on quality and innovation.

“There’s no reason for us to crash our most important creation ever.”




  1. Mike Barton  February 18, 2016

    Anytime an equity group gains control of an operation, there can be cause for concern. A push for profit over quality could occur. I don’t know the specifics of the agreement between Victory and Ulysses but I hope Bill and Ron can exercise the needed control to insure their beers will always be top notch as they are now. I understand why they did this, with new breweries (competition) opening everyday. It’s grow or be trampled these days. Good luck guys!

  2. Jason  February 18, 2016

    As a customer I feel Victory has forever blemished themselves and betrayed the spirit of craft beer. This is a sad day because I love Victory beer. Now, I will no longer buy their beer, just like I will not buy other once great beers that have sold out. There are way too many other great options for me to choose from to bother wasting my time and money on a sellout.

  3. Observer  February 18, 2016

    The hedge fund guys will flip this to InBev in no more than two years, just like Magic Hat. Why do you think two A-B guys are in charge? Odyssey didn’t have a great reputation, so I have no faith in their promises. I hope the Victory guys got their cash up front, because they will be out of the picture very soon. In five years – if they negotiated a nice short non-compete – I hope to see them open up their own little shop again…

  4. Douglas Tedeschi  February 18, 2016

    Get left behind by whom? It’s not like Sierra Nevada or Oskar Blues or whoever will come in to the greater Philadelphia area just to open a brewery to compete with Victory. Victory is already one of the flagships in the area, and in a strong position. The appeal of a local brewery is very strong here, as is the loyalty to breweries that have not sold out. It’s all about the money. That is their right, of course, they earned it. But I don’t believe it’s about the competition.

  5. Jay W.  February 18, 2016

    Good for Bill and Ron, good for Victory and good for beer (and good Richard too, I suppose ;))

  6. KEITH DILWORTH  February 18, 2016

    I think it’s a sad day for Victory I should say for the consumer of Victory! I think Bill and Ron have seen a big payday and after 20 years they are ready to count their money and enjoy early retirement. I can’t blame them but if they are going to sound off about everything remaining status quo I find that hard to believe! They were just bringing back some old favorites (Yakima glory, Hop Ranch, Hop Wallop and some others) but will the new directors of everyday operations continue this? I doubt this. So when IN-BEV comes waving big money at the controlling conglomerate what will they do? SELL OUT IN A SECOND JUST LIKE ALL THE OTHERS! MONEY TALKS CRAFT BEER WALKS!! These forefathers of the craft beer movement while I guess I can’t fault them for wanting the money should not talk about how the beer world is changing when they are becoming part of it! Once again as with everything MONEY TALKS AND PEOPLE LISTEN NO MATTER WHAT THIER PREVIOUS PRINCIPALS WERE!