| How Could They?
by Keri Planton-Smith
Hello Bob! I read your last month's column about consolidation and
then I saw it happen to my favorite brewery. Picture this: an
international brewing conglomerate famous for watery beers that are
losing market share buys an American craft brewer. If it’s not a
brewing conglomerate, it’s a private equity firm. Big Money rules. And
valuations of craft breweries have soared to the stratosphere.
It’s a dream come true for founders, early investors, and some
employees. It’s American entrepreneurialism. Guts, grit, years of hard
work, luck, stick-to-itiveness, Yankee marketing, and a passion to
produce the best suddenly turn into mega-dollars. The response from
beer lovers however has been "how could they sell out"?
Like most beer folksI love IPAs for their complex hoppy flavors and
one of my all time favorites is made by Lagunitas in Petaluma, CA.
Then I read the news - Lagunitas Brewing Company too sold out.
No longer was this trend just something to intellectually contemplate,
now it was real. Heineken International, the world’s third-largest
brewing conglomerate, is buying a 50% stake in Lagunitas.
I did a bit of research and found that after an immense acquisition
spree, Heineken labors with stagnant revenues. But it has breweries
around the world – “180 everywhere,” as the press release put it.
So now it seems they finally forcing their way into the only vibrant
sector of the otherwise declining US beer market - craft. The company
didn’t officially disclose the financial terms of the deal but several news
sources said that Lagunitas’ valuation would be about $1 billion!
The obvious benefits to both sides is that Lagunitas will get access to
the world markets via Heineken’s distribution network and Heineken
will be able to build a strong foothold in the dynamic craft brewing
category on a global scale.”
In the press release there was only a tiny reference to the
Heineken-izing process that will eventually set in: Lagunitas would
“share in the best quality processes in the world….”. Danger ahead.
Try this nightmare on for size: Once a brewing conglomerate creates
a global brand out of a craft brew, the exigencies of markets and
money, of shareholders and bondholders, begin to exert their
influence. Corporate cost cutters step in. Cheaper varieties of hop
will eventually make their way into the IPA. To reduce the
delicious hoppy bitterness that turns off Heineken or Dos Equis
drinkers, and to make the beer more of a mass-market product, the
company might even whittle down the amount of hop in the recipe.
Yes, processes will be improved. Efficiencies and synergies will be
obtained by combining certain elements with existing corporate
structures. This is all part of the American craft brew revolution.
It's likely that in the end, Lagunitas, the brand, may well thrive,
but the beer will be Heineken-ized. Hopefully by then, I will have
moved on to other wonderful creations of the amazing craft brew
scene and my former favorite IPA will just be a pleasant memory.
Greatly enjoyed you article Kerri. You make some excellent points.
Sadly there's nothing we can do about any of the sell outs but when the
beer does begin to change for the worse (as I too think it will) we can
be assured that there will always be small craft brewers making great
beer who welcome our patronage.
I'd like to invite everyone to send me their own columns about anything
related to beer/drinking/booze just as Kerri did. I select the best and
publish them here. So join in and get writing.
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