Thread by @HatchKolby

Friday biz hole: Let’s talk Kegs

Might be the wildest business sectors I’ve researched.

Tariffs, Keg Pools, and Planet Fitness.

The business of getting beer from brewery to tap is CoMpLiCaTedD.

Take a sip 👇

There is (famously) only one company in the U.S. that makes kegs

American Keg Company based in Pottstown, Penn

They were in the spotlight in 2018 over tariffs

When the US imposed a 25% tariff on imported raw Steel.

Imported steel products (like kegs) were unaffected.

American Keg saw their material costs skyrocket and couldn’t stay competitive against imported kegs.

They successfully convinced the Trump Admin to slap tariffs on imported kegs.

Huge win for a 32-person company.

But why so much attention on kegs?

In brewery circles, Kegs are a touchy subject.

First the laws are straight outta the 18th-century

Federal law requires breweries to fill kegs they own and have they’re “markings”

A brewery can’t fill a keg with another name on it

And rebranding a keg has strict steps and requirements

Src: law.cornell.edu/cfr/text/27/25…

And Kegs are wicked expensive.

In our earlier example of American Keg Company, at the time of tariffs, a US-made keg was $115.

Imported $95-$75.

I found as low as $20/unit on Alibaba

Now, Consider that breweries must have enough kegs to both fill, distribute, and be on tap at bars.

You need SO MANY kegs.

And Keg loss is a huge deal, even with hefty deposits.

Enter MicroStar Logistics

MicroStar is the largest owner of Kegs in the US (estimated at 4m 👀)

They lease kegs to breweries across the US

They’re like the US Keg King, having pioneered “Keg Pooling”

How Keg Pooling works:

MicroStar maintains a massive fleet of kegs at distribution centers across the US.

Breweries rent the kegs they need and once a keg is empty it's returned to the MicroStar network. Simple.

MicroStar will even buy a brewer’s existing keg inventory.

What I couldn't figure out is how, MicroStar gets around the branding laws.

My guess is they use some standardized identification that can be swapped out.

Or the law doesn't cover "leased" kegs.

Hang on, we’re going deeper...

MicroStar is also majority owned by the PE firm Freeman Spogli & Co

The same firm with stakes in:

✅ El Pollo Loco
✅ Boot Barn
✅ Planet Fitness
✅ PETCO

And about every other big box chain.

My favorite part:

According to the Wiki article of the firm's founder Bradford M. Freeman

After raising millions for George Bush's Presidential campaign, Freeman thought Bush would give him "a chance to run the CIA."

Instead Bush offered Freeman a cat.

SO tonight when you’re drinking a beer -- as we all should -- LOOK at the keg.

I’ll bet it looks like this.

If this gets enough likes, I'll dive into other keggy business sectors.

Also hit that follow for stories like this, IPO breakdowns, and more.

@hatchkolby