Ben's Beer Blog

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One of Canada’s largest manufacturers of brewing equipment announces receivership

14 Comments

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.

Author: Ben

http://www.bensbeerblog.com

14 thoughts on “One of Canada’s largest manufacturers of brewing equipment announces receivership

  1. Pingback: Read Beer – Reading and Beer: two great tastes that taste great together

  2. This is terrible news for the industry, and I work for a competitor. Hopefully they can at least get their in progress orders completed, otherwise those customers will be totally screwed.

  3. I have quoted out components for several craft brewery startups over the past years and while craft brewmasters live to promote thier” local” Canadian made product, when it came to purchasing brewing tanks, pipes and valves the answer was always the same. “Oh we can get that from China for less money” The craft brewery industry has no one to blame but themselves for sourcing equipment outside if the country.

    • To be fair DME was leading the charge of getting their equipment from China. Our brewhouse was fully purchased through DME and all “tanks pipes and valves” were made in China and shipped directly to us from the Chinese factory. We were very happy with all of it and DME as a whole, but just saying.

    • All of these companies get their tanks from China. I spoke to 11 in NA and they all say the same thing. Then mark the price up 3x. So why use a domestic company? If the mark up was reasonable then the support would be there. Just saying. I bought all of my equipment from the manufacturer that produces Stout Tanks and Kettles’ equipment….but for hundreds of thousands less.

  4. Canada is unable to compete with countries in which people are perfectly happy living in on-factory-site dormitories, riding bicycles to work, and minimal to no personal income or sales taxes.

    Add in a “green” Federal Govt with a mandate to cut all energy emissions and discouraging oil production in this Country and its going to be a really, really tough time for Canadian manufacturers. Factor in the high tax, high regulation and high energy cost that are staring manufacturers in the face for the privilege of doing business here and, I can’t imagine we’ll be seeing many traditional business manufacturers wishing to do business here. I mean, why would they?

  5. Competition with China isn’t the issue; DME/NSI had/has plenty of orders to fill AFAIK. Something else is going on here.

  6. Had a couple of the boys who were laid off come in for some beers directly after, they (nsi) employ so many local guys it’s really sad. I know they are also partnered with a local brewery so this, anyway Drink more craft beer!

  7. Portland Kettle Works has always valued DME and Newlands as topline competitors. We are greatly saddened by the loss to the industry, and to our personal relationships. Whenever we competed, we knew that we were in good company. This news came as a surprise to us, but we wish their employees and customers our very best.

    Cheers,
    The PKW Team

    • Thanks for the kind words Ken, we always valued the competition and respected the quality of our competitors, but in this it’s the customers that have taken the brunt. I know there’s some employees who are really hurt by this too but our customers put it all on the line in a show of faith for us and we let them down. I can’t speak much for the imports but at least at the NSI end we didn’t notice a shortage of demand for high quality NA built equipment. This is a great industry to work in and I know the people in need will get support. At the very least, support these breweries. We love beer and they make great stuff!

  8. Anyone out there who is in the same boat as me waiting on DME equipment that has already been ordered please reach out to me so we can share information. https://www.facebook.com/532005170

  9. Imports have hurt but there are a number of quality North American Manufactures that are thriving in the current beer market. DME either way over extended themselves or something shady was going on. Receivership may or may not be bankruptcy…. I hope current equipment deposits get built or returned to those brewers.

  10. The article says little about why the company failed.
    Given the number of breweries in NAm planning to open within the next 12 months, never mind existing breweries who are in expansion mode, it is difficult to see how lack of demand is the problem.
    I don’t know but I’d hazard a guess that the problem is supply. Along with the mushrooming of breweries has been a mushrooming of brewing equipment supplies. Much of this has come from off-shore sources with now competitive product and at more than cometitivew pricing.

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