Earlier tonight, the government of PEI announced that Diversified Metal Engineering (DME) has been thrown into receivership.
DME operates two brewery equipment manufacturers, Newlands Systems (NSI) in Abbotsford, BC, and DME Brewing Solutions in Charlottetown. They represent one of the largest brewing manufacturers in North America and, between them, the companies have built more than 1,600 breweries.
PEI’s Minister of Workforce and Advanced Learning, Sonny Gallant, along with Economic Development and Tourism Minister Chris Palmer issued a written statement tonight, saying they were aware of the company’s receivership.
With the news, the growth of craft beer in the country might be about take a hit, and there is potential that more than a few current craft breweries could face financial problems from which they will not be able to recover.
The merger of DME and Newlands in 2016 was backed by Clearspring Capital Partners, a private equity firm. At the time of that deal, Zac McIsaac, who was then the Senior Vice President of Clearspring Capital Partners, was quoted in a release as saying, ““The merger is transformative. Two storied Canadian businesses, one the market leader in the east, the other the leader in the west, have come together to support the craft movement.”
Now, just two short years later, the merger of these two 25-year-old companies has led to their dissolution. A CBC article from earlier this year detailed how craft beer was helping DME grow and noted “the company doesn’t show any signs of slowing down.” DME even had a booth at the Ontario Craft Brewers conference in Toronto just a few weeks ago marketing their services to local Ontario brewers. To hear that the company, so entrenched in craft beer and actively soliciting business so recently, is closing will come as a shock to many in the industry. The closure is perhaps even more shocking given that it comes so quickly after that 2016 merger and an infusion of cash from a private equity firm. This suggests to me that something profoundly shitty has been going on behind the scenes at DME for some time now and surely there will be more to this story in the days that follow.
The company employs about 165 people in Charlottetown, 150 in Abbotsford, and a couple dozen people in South Carolina as well and presumably these folks, who work with and service craft breweries in Canada, are now out of a job.
This in and of itself is bad news of course, but the receivership of DME also means that many breweries who were working to open or who were planning expansions with DME equipment may find themselves not only unable to proceed with that planned expansion, but also might find themselves over-extended in their investments of said expansions to the point that they might have to close their doors.
At the request of craft breweries I have spoken to who now find themselves in financial jeopardy as a result of this announcement, I won’t name names tonight, but since the news broke I have spoken to multiple brewery owners who have hundreds of thousands and in some cases over a million dollars invested in future brewing equipment from DME that they are now unlikely to ever see and who are now facing the very real prospect of bankruptcy.
It is tough to say how many breweries in Ontario or elsewhere might have been planning expansions with DME equipment and how many might have paid for that equipment in advance, but I predict that Canadian breweries might very well close as a result of tonight’s announcement and I predict that breweries that you may have been watching get built on social media might very well never open now.
There are of course other places Canadian breweries can buy brewing equipment, and the craft brewing industry in our country will no doubt continue to grow, but the news that DME is ostensibly gone today has very real potential to considerably shake up the current Canadian craft beer landscape.