• Soft beer market impacts City Brewing’s clients, including Boston Beer Company
• Boston Beer Company reports 3.8% sales decline, may owe fees to City Brewing
• City Brewing tries to diversify beyond beer as sales struggle

City Brewing Company’s debt has slid into deeply distressed territory a year after completing an out of court restructuring, amid a soft beer market impacting the contract brewer’s clients.

“Restaurant beer sales are shrinking as the older generation consumes less booze, with many taking GLP-1 drugs tending to curb appetites and alcohol consumption,” an industry consultant said. Generation Z has been leaning into flavored hard seltzers and other ready-to-drink alcoholic beverages, he added.

Boston Beer Company, one of City Brewing’s customers, has said it is navigating a challenging operating environment due to dynamic consumer demand and input cost headwinds.

The owner of the Sam Adams beer brand reported a 3.8% decline in sales for the 26 weeks ending 27 June compared to the same period last year. Shipment volume for the period was 3.6 million barrels, a 5.6% decrease from the prior year.

City Brewing supplied 11% of Boston Beer’s domestic beer for the 2026 period, down from 20% for the comparable 26 weeks period in 2025. In an SEC filing, Boston Beer warned that it will likely fall short of production commitments made to City Brewing and may owe fees to the company.

When production falls so do sales, noted a source familiar with the matter, adding that City Brewing’s sales were just north of USD 500m when it executed a liability management exercise last year. The company has been trying to diversify beyond beer into producing ready to drink cocktails and energy drinks, the source added.

Last August, City Brewing completed an out-of-court transaction involving lenders equitizing debt and taking the keys from existing sponsors Charlesbank Capital Partners and Oaktree Capital Management. The deal was the second LME in two years for the company.

At the time, City Brewing CEO Ross Sannes said that the company was well positioned to serve as the go-to producer of beverages and would pursue sustainable growth ahead in its turnaround plan.

Under City Brewing’s new capital structure, it has a USD 42m SOFR+ 700bps super priority term loan due 2030 and USD 141m SOFR+ 700bps first out term loan due 2030, both agented by JPMorgan. The super priority term loan was last quoted 15/25 by one broker, down from 40/50 in July, according to Markit. The first out loan is quoted 0/1, down from 10/20 in early July.

Sullivan & Cromwell served as legal advisor, Evercore served as investment banker and FTI served as financial advisor in the 2025 LME.

Meanwhile, Gibson Dunn served as legal advisors and Perella Weinberg Partners served as investment banker to an ad hoc group of term lenders, while Freshfields served as legal advisor and BRG served as financial advisor to an ad hoc group of revolving lenders.

Representatives for City Brewing didn’t respond to requests for comment. JPMorgan declined to comment.