Brewery Acquisitions

[Cass]

I was thinking about this recently and wanted to ask the group for their thoughts. What is at the heart of why beer fans react negatively towards craft breweries being acquired? For every one in recent time the brewery that sells itself (except for the partnership disagreement with Elysian), goes in eyes-open and willingly does it, paying off what is often years of hard work and effort on the part of the founders. You'd think that's something to celebrate. But there's constant negativity and hand-wringing on social about "there goes another one".

Some thoughts of mine as to why people care so much about this, but I'd be curious if you agree or have others:

1. Betrayal. Consumers feel that they've financially supported a brewery, and once they sell there is a sense of betrayal that the consumers' dollar contributed to that sale value.

2. Quality. A fear that the beers that someone has grown to love won't be the same under a new ownership structure.

3. Jealousy. Maybe a consumer is actually jealous that a brewery gets millions of dollars which takes away from the relatable nature of a small business.

4. Philosophy. A simple dislike of big business in the beer business.

One other one is "don't care", but that's not what I'm after. People do care, or this wouldn't be an issue every time it happens. Curious to hear your thoughts.

[Provost Drunk]

I think you pretty much nailed it with your list of reasons. For myself personally, #2 is the paramount concern. It can be hard to massively scale up production and maintain quality and consistency, particularly as it relates to specialty/one-off brews. I do think that supporting the small guy is a big part of the appeal of craft beer for some, and that appeal is certainly lost if the microbrewer is swallowed up by one of the big conglomerates. Reasons 1, 3 and 4 all relate to this concept. That's certainly part of the equation for me - I do think there is a certain intrinsic value in knowing that your money is helping out a small local brewer. But in the end, the primary factor in determining how I allocate by beer spending money is taste and I am going to buy the beers that I like best regardless of who brews them.

[screw2000]

Funnily enough I was just reading this while out in Portland this week:

http://www.westword.com/restaurants/ab- ... ut-8233345

I guess the question is: do you think that these acquired breweries are being 'weaponized' by AB et al? IMO most of the places in TO that added Goose are bars that replaced a competing 'captive craft'/crafty brand.

[Belgian]

I'm going to say 2) quality, the sense that the original goal and creative ethic of the brewery becomes lost.

Goose Island is making good efforts to not be lost within the clutches of AB-InBev massive conglomerate ownership.
UniBroue now owned by Sapporo is or was a standard-bearer for great affordable Belgo-craft ales in NA (the Éphémére series and the 17th Anniversary ales seem to maintain this, sort of.)
Creemore is Creemore. They were always straightforward enough that what they do remains pretty great even with Molson owning them.

What remains true in any case Cass is that the big guys don't need your money, and you probably can't talk to the bigger company in the same way and be in the loop for special releases, etc. On a fiscal level independent brewing is like supporting a local hardware store with knowledgeable folks instead of getting lost in the Home Depot where YOU are on your own, and you're not supporting local business. Same result maybe, but is it the same soulfulness and connection with people? - No.
In case that's a little bit of 4) - sure, I have overseas relatives who buy beer from local co-operative breweries whose members they can look in the eye, and certainly that's a positive rather than seeing 'all big business as a negative' (when it's really not, let's be frank buying commodity-type or quality goods such as Honda cars or Moen faucets, these are only affordable when mass-manufactured.)

[S. St. Jeb]

I think for me, 1 (betrayal), 2 (quality) and 4 (philosophy) all play some role.

2 (quality) is (and I believe should be) the primary concern.

3 (jealousy) is not a direct factor for me. In fact, it's hard not to admire someone who took the risk, started a brewery, made it successful, and reaped the financial rewards later on. But it's a bit of a conundrum as this can be directly countered by 1 (betrayal) if a small brewery that you have supported and like gets sold.

4 (philosophy) isn't really a strong factor for me. It's not so much that I'm against big business, but more that I'd rather support a small business. I really like Belgian's analogy of a local hardware store vs. Home Depot.

I have an additional concern that big business marketing budgets for a "craft" brewery may end up hurting some smaller brewing businesses. In Burlington, Nickelbrook used to be a sponsor and the beer supplier at the Sound of Music Festival. For the last couple of years, it has been Mill St. My understanding is that Nickelbrook simply couldn't match what Mill St was offering. In fairness, this changed happened before Labatt's bought them, but just using it as an example.

[Tapsucker]

I definitely do not hold anything against the individuals who sell their business. I am happy for their success, they deserve it. Still, we do get attached to underdogs and these acquisitions tinker with that loyalty.

Also, ultimately financing comes from somewhere. Wouldn't it be better for a brewery to be owned by another brewery rather than a bank?

Another thought. I'm surprised by how few mergers there are in the craft beer scene. If scaling up or gaining critical mass in distribution is a challenge, I would image there would be more. Perhaps the personalities are just too strong.

[Brux]

It's their Intentions.

Their end game is a less vibrant and accessible beer landscape. They'll run a once-beloved flagship IPA at a loss for years if it'll stymie the growth of a competitor or put them out of business completely. They're not in the 'craft' segment to make better beer, they're in it to hurt consumer choice.

[Tapsucker]

It's their Intentions.

Their end game is a less vibrant and accessible beer landscape. They'll run a once-beloved flagship IPA at a loss for years if it'll stymie the growth of a competitor or put them out of business completely. They're not in the 'craft' segment to make better beer, they're in it to hurt consumer choice.

That's a pretty strong statement. I'm not outright disagreeing, but it might not make sense. If, as I have heard, the craft segment is somewhere around 10% market share at best and only in the most vibrant markets, then I would consider it less of a threat than the overall reduction in consumption in mature markets. As a beverage manufacturer (let's just call them that, rather than big brewers), it would make sense to get a foothold in higher margin brands and then also 'hero' those brands, as in, not dilute their value by reducing quality. Just a thought...

[Brux]

Just read a good article by Jacob McKean from Modern Times, echoing a similar thought:

"The reality is that selling a product at or below cost is an anti-competitive business strategy that is intended to put smaller competitors out of business. If there's one thing independent craft brewers can't do that macro-brewers can do it is lose money. And this strategy is, by far, the most effective way for macro-brewers to reduce consumer choice and extinguish the craft beer movement they’re now trying to co-opt. Goldfarb remarks upon this later in reference to $56(!) Goose Island kegs, but fails to grasp that this strategy is THE reason for these acquisitions. Not quality, not making dreams come true, not sharing information. The goal is to destroy craft beer from within by operating acquired breweries as zombie brands that wreak havoc in the marketplace long after the life has been squeezed out of them."

Here's the link: http://moderntimesbeer.com/blog/what-selling-out?cc

[Provost Drunk]

While on the subject of brewery acquisitions, I was shocked to learn that AB InBev is acquiring Bosteels:

https://www.thestreet.com/story/1369781 ... kyard.html

I had the pleasure of visiting Bosteels in 2012 with some friends and Ivo Bosteels, the patriarch of the family, gave us a private tour. He showed us the old house that's on the premises with the brewery telling us he was born in the living room and joking about being conceived upstairs. There were about three or four different half-finished glasses of Karmeliet lying around the house and he was seamlessly putting one down and picking another up as he showed us around. He didn't seem to have a care in the world.

Granted his son is charge of the business now and the valuation sounds very generous (hard to turn almost a quarter of a billion dollars), but I really didn't think Bosteels would sell out.

I really hope that we don't see a dip in quality - Karmeliet is probably one of my top 3 tripels and DeuS is pretty special too.

[ErkLR]

Just read a good article by Jacob McKean from Modern Times, echoing a similar thought:

"The goal is to destroy craft beer from within by operating acquired breweries as zombie brands that wreak havoc in the marketplace long after the life has been squeezed out of them."

This is the primary reason I don't like (most) acquisitions. I think the big breweries are buying craft to knock off the small competition because they can't innovate themselves (look at Keith's largely pathetic attempts). They had decades in which they could have tried getting more market share by being better, instead they chose to buy out similar competing brands, use cheaper ingredients, decrease flavour and use boobs to sell it. I have no faith in the good intentions of corporations, I don't think they thought "wow, look how good these guys are, we need to be part of this craft revolution" my opinion is they thought "this is a threat, we will just buy them, push out others and ride out this craft fad."

Craft breweries have multiplied, in part, because it's easier to open one now than it used to be, so I don't know if you can put the toothpaste back in the tube by buying everyone and trying to kill the movement off slowly; but I don't want to help do that experiment. Having said that, I'm not a purist and when friends or teammates want to go to a bar serving macro and/or crafty beer, I'll buy it and not complain.

[Craig]

Just read a good article by Jacob McKean from Modern Times, echoing a similar thought:

"The goal is to destroy craft beer from within by operating acquired breweries as zombie brands that wreak havoc in the marketplace long after the life has been squeezed out of them."

This is the primary reason I don't like (most) acquisitions. I think the big breweries are buying craft to knock off the small competition because they can't innovate themselves (look at Keith's largely pathetic attempts). They had decades in which they could have tried getting more market share by being better, instead they chose to buy out similar competing brands, use cheaper ingredients, decrease flavour and use boobs to sell it. I have no faith in the good intentions of corporations, I don't think they thought "wow, look how good these guys are, we need to be part of this craft revolution" my opinion is they thought "this is a threat, we will just buy them, push out others and ride out this craft fad."

Craft breweries have multiplied, in part, because it's easier to open one now than it used to be, so I don't know if you can put the toothpaste back in the tube by buying everyone and trying to kill the movement off slowly; but I don't want to help do that experiment. Having said that, I'm not a purist and when friends or teammates want to go to a bar serving macro and/or crafty beer, I'll buy it and not complain.

I don't think it's fair to say that big brewers can't innovate. From various reports lots of the brewers at the big guys are world-class home brewers and they occasionally will make something on a pilot system that wins competitions. Much more likely is that they know it doesn't matter if they innovate, because their brand is toxic to craft beer drinkers, so they need to buy up brands that aren't if they want in that market. If you're going to come out with a new brand under the Bud label, a killer IPA isn't going to play to it's target market as well as a strawberry lime whatever bullshit will play to it's own. But if you buy up Goose Island and just ramp up distribution, you might get some traction.

[Cass]

I don't think it's fair to say that big brewers can't innovate. From various reports lots of the brewers at the big guys are world-class home brewers and they occasionally will make something on a pilot system that wins competitions.

Yep, look no further than AC Golden, which regularly has beers at FoBaB and one of the brewers was a speaker at the CBC a couple of years ago (which seemed a bit weird).

http://www.acgolden.com/

[ErkLR]

I don't think it's fair to say that big brewers can't innovate. From various reports lots of the brewers at the big guys are world-class home brewers and they occasionally will make something on a pilot system that wins competitions. Much more likely is that they know it doesn't matter if they innovate, because their brand is toxic to craft beer drinkers, so they need to buy up brands that aren't if they want in that market. If you're going to come out with a new brand under the Bud label, a killer IPA isn't going to play to it's target market as well as a strawberry lime whatever bullshit will play to it's own. But if you buy up Goose Island and just ramp up distribution, you might get some traction.

Oh, I don't doubt the quality of the brewers themselves, I mean the whole corporation can't innovate. They come up with "strawberry lime whatever", which is Malibu Stacy with a new hat (if you're a Simpson's fan), rather than even making good standard styles. No doubt because of the many levels of control above the brewmasters themselves.

I think you're mostly right that Bud IPA would be ignored by people interested in craft. Even if it's great, I personally would rather buy a similar beer from someone more local, partially because of my belief that they'd be doing it to push out others.