The Craft Brewery Sellout

Word came down Tuesday that Heineken would acquire a 50 percent stake in Lagunitas Brewing. This has been, by far, the biggest merger of acquisition of a craft brewery to date, since Lagunitas was the 6th largest craft brewery according to 2014 production. Lagunitas founder and now co-owner, Tony Magee, has previously been extremely outspoken on his brethren selling their breweries to big beer. One can find many examples on his Twitter feed or through Google searches of his disdain for the practice in the past. It seems as if Tony has had a change of heart, and he wrote more about it in this piece.

Heinekenitas? Laguneken?

It seems like every other month now, there is a respected craft brewery that sells all or part of their company to a big brewer or investment firm, and I suspect there will be many more to come. This used to bother the hell out of me, and still does to an extent. But if you take a look at the list of craft breweries who have either sold all or part of their business to another brewery or an investment firm, you may be surprised. Lagunitas isn’t the first, and won’t be the last. It’s pretty widely known that Goose Island was one of the first to be acquired back in 2011, when it sold to Anheuser Busch-InBev. Since then there have been many more. The Duvel Moortgat Brewery of Belgium, makers of Duvel golden ale, purchased Ommegang Brewing all the way back in 2003. In late 2013, Duvel purchased Kansas City’s Boulevard Brewing, and in July of this year, “made a significant investment” in California’s Firestone Walker Brewing. Each of these breweries still operates independently, but with Duvel’s bankroll, should theoretically be able to get their beer in the hands of more Americans, as well as expand globally. That’s all fine and dandy, but I still can’t buy a Boulevard Tank 7 or Firestone Walker Double Jack here in Louisiana, and I’m not holding my breath on that happening any time soon.

Closer to home, however, Abita Brewing announced earlier this spring that it became a founding partner in the new organization called Enjoy Beer. Translated, it means the brewery was purchased by an investment firm based in California.

If you look at some of the other beers on shelves here in Louisiana, you’ll be surprised to learn that some have significant private equity investors or big beer ownership. Miller-Coors has been a minority owner (less than 25%) of Terrapin Brewing out of Athens, GA since 2011. In 2014, SweetWater Brewing sold a piece of their ownership to TSG Consumer Partners. Around the same time, Southern Tier Brewing sold a partial stake in their company to a New York investment firm. Late last year, Founders Brewing sold 30% of their company to Spain’s Mahou San Miguel group. Earlier this year, Fireman Capital Partners, who already owned a steak in Squatters and Wasatch, made a large, but unknown, capital investment in Oskar Blues. All of these breweries have a presence here in Louisiana.

What does this mean for you and I, the beer drinkers? At the end of the day, probably not a whole lot. On the surface, the breweries are allegedly still running independently, regardless of the amount of investment from those other breweries or private equity firms. They are still making tasty beers. I sure don’t have a problem popping open an Oskar Blues Dale’s Pale Ale can or drinking the newly released SweetWater Hash Brown. Southern Tier’s Pumking still tastes the same, and Founders Breakfast Stout is as good as ever.

But on a matter of principle, it can be tough to swallow (see what I did there), knowing your favorite beer is no longer owned by the small, independent brewery you though it was owned by. Craft beer is supposed to be independent. It’s supposed to be about the beer, not the investment. You picture the owner still cleaning tanks and visiting accounts and tasting his brewery’s beer to make sure it’s the same quality product that it always has been. But, unfortunately, that’s pretty much a pipe dream. We like to support the little guy, while at the same time wanting our favorite breweries from out of state to become available to us. It’s becoming a fact of craft beer life, that if we want those out of state beers, those breweries will need significant investment in order to expand operations. And as some of those brewery owners grow older, they want to ensure their company will continue on well into the future. While it’s commendable that breweries such as New Belgium and Odell are 100% employee owned, the reality is that just isn’t possible for everyone.

It’s downright scary to me that AB-InBev is buying up craft breweries, and that’s mainly because of their involvement in the “independent distributor” side of the three tier system. What’s to stop them from snatching up a couple of our favorite breweries, dumbing down those beers, slashing prices and pricing out the husband and wife owned small brewery who just can’t compete on price with Bud? There’s evidence of this already happening with Goose Island. AB-InBev has recently sold Goose Island kegs to their “independent distributors” at a greatly reduced price, who in turn pass along those savings to their retail restaurant and bar accounts. If the pizza joint who only has 8 taps can sell Goose Island IPA for $5 a pint, but it only cost him 60 cents, he stands to make a lot more profit than selling that IPA from the craft brewery in the same town that cost him $2.50. This is the scary part to me. AB-InBev knows they can sell beer on price instead of quality, and this is why they are buying up craft breweries left and right. It’s just like Walmart setting up shop right next door to the mom and pop grocery store. Eventually, mom and pop can’t compete and go out of business.

But it’s a struggle for me, and I am definitely hypocritical in a way. I’m happy as a lamb to be able to buy Goose Island’s Bourbon County Stout, and that wouldn’t have been possible without AB-InBev purchasing them and infusing a bunch of money into their barrel program. It’s nice to be able to buy Sofie or Matilda bottles now, when I couldn’t just a few short years ago. So while on one hand, I’m very leary of what they are doing, I’m still buying some of those beers.

I don’t think this is the case with Founders, SweetWater and Oskar Blues, since it seems majority ownership still lies with the people who founded those companies. They are getting their beer into the hands of more people all across the country now. And as long as the quality of the beer is kept up, I’m happy to see them continue to grow. But this is why I’m excited to see more and more small breweries set up shop here in Louisiana. I want to drink beer brewed by people who live here, who employee my neighbors and who pump money into the local economies. And while I see this happening in places like New Orleans and on the Northshore, it’s quite a shame that there aren’t any new breweries in planning here in Baton Rouge, at least that I’m aware of. But if any private equity firms are willing to throw some money my way, I’ll be happy to grow Running Monk Brewing Company outside the bounds of my garage and refrigerator turned kegerator.

What are your thoughts on the proliferation of brewery mergers and acquisitions? Let me know in the comments below.


4 thoughts on “The Craft Brewery Sellout

  1. Great read, thanks for sharing. I was unaware of the Abita/Enjoy Beer transaction along with most others you’ve cited. I’m not sure it’s related to this, but I’ve noticed Abita beers, specifically in Winn Dixie stores, are at and occasionally below the price of the big 3. I for one would pay more if their 6-packs were a couple dollars more and tasted like it.

    1. Also, as some of these beers seem to drop in quality, I wonder if it can be attributed to increased production – whether they’re able to accomplish it on their own or through an investor who may/may not have input. I would imagine some obstacles will be encountered regardless of who owns the brewery. As you try to reach new markets, you may encounter longer transits meaning possibly less fresh beer, possible variance in recipes due to difficulty in procuring sufficient ingredients, and new employees with less experience. Perhaps the best beer will always come from small breweries that area willing to stay that way.

      1. I can certainly agree with this. To that point, Lagunitas Sucks recently hit shelves in 6-packs here, and it was a shadow of its former self. I used to love that beer, because it was dank and piney with a fantastic aroma. I wonder if producing it on a much larger scale has taken something away from its character. Perhaps the larger batches aren’t scaling up correctly, the same way new breweries have trouble scaling up from 10 gallon homebrew batches to 30 barrel commercial brewery batches. This makes me really appreciate a brewery like Stone, who can still manage to brew an enormous amount of beer and have it still be fantastic.

        And to your other point, I bought that beer the day it hit the shelves in town, and it was already 4 weeks from the bottling date. I’m not sure where in the chain it got held up, but it really shouldn’t take that long to go from bottling line in Chicago to store shelf in Baton Rouge.

  2. Great article! I could not agree more as I was shocked by the Lagunitas story. But, as you have pointed out well, money is a necessity to expand. While it is frustrating that I cannot get Left Hand here in Louisiana, it also makes me appreciate that it keeps itself on a smaller scale. The bigger craft breweries become, the less they pay attention to the minute details of each batch. Abita is a prime example. Some may fight me on this, but with distribution nationwide now, I really think Abita’s quality has fallen off significantly, except in their Bourbon Street series. Dogfish backed out of some states just because they couldn’t maintain quality and I commend them for it. If we’re able to get every beer out there, they would start to lose their craft appeal. I don’t want that to happen. Craft beers should be a reflection of those making it and where it comes from, even if I have to drive to Texas to get them!

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