| 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. Cheers! Bob |
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