Big Beer Buys More Craft Breweries: What’s Behind the Growing Trend?

At a casual glance, it seems like the worlds of big beer and craft beer, while related, are completely separate. No one would accuse Budweiser of making anything resembling 90-Minute IPA from Dogfish Head. No one would confuse Sweetwater 420 with Michelob Ultra. They’re different, right? Well, maybe not so much. There’s an increasing blurring of the lines between these two seemingly different worlds, and more Big Beer companies are looking to get in on the lucrative action offered by the realm of craft beer. 

Goose Island, Elysian and More

Perhaps the most obvious way that Big Beer is getting in on the action is by outright buying out craft breweries. Two excellent examples are Goose Island and Elysian Brewing. Both of these were rising stars in the craft beer world with very large customer bases and decent distribution footprints. Both are now owned by Big Beer (Ab-InBev, actually). Others have fallen to the beer behemoth, including Blue Point and 10 Barrel Brewing.

However, that’s not really the most obvious (or profitable) way that Bud and other major breweries are getting into the craft market. There are some less obvious methods they employ that build their profitability while keeping their involvement comfortably behind the scenes (in most cases).

Terrapin Beer Co.

One prime example of how major beer companies are getting a piece of the craft beer action without actually buying out a company can be found with Terrapin Beer Co., out of Athens, Ga. They’re not a huge beer company, but they do have a decent regional distribution footprint throughout most of the Southeast and up the Atlantic Coast. 

For all intents and purposes, Terrapin is a craft brewery, and they’re privately owned. That’s not the whole story, though. Oddly enough, Miller Coors actually owns a minority stake in Terrapin through their Tenth & Blake arm. In a 2011 story in Online Athens, it was reported that, “Miller Coors craft brewing unit Tenth & Blake Beer Co. has purchased a minority stake in Terrapin Beer Co. Terrapin asked Tenth & Blake to convert a portion of its loan into a minority stake in the company. 

Terrapin Beer Co. president John Cochran said this allows the company to significantly reduce its debt burden and enables it to invest more intensely in production capacity and innovation. Cochran has sent an email to Tenth & Blake in which he mentioned that the sale of the minority interest will provide Terrapin with a way to fund a $4.5 million expansion to double its brewing capacity.”

So, that means that Miller Coors TECHNICALLY owns a share of Terrapin. Does that make Terrapin part of the Big Beer world? No, it doesn’t. They’re still privately owned, and still do their own thing. All the minority ownership does is deliver another stream of profit to Miller Coors via Tenth & Blake. Not only that, but the deal made a lot of sense, as Terrapin’s founders now actually own more of their business than they did prior to the deal. So, it works well for both companies.

Lagunitas

If you’re a fan of NorCal’s Lagunitas Brewing (and their line of creative, hop-filled brews), you’ve no doubt at least caught wind of something that smells suspiciously like a merger between them and Heineken. That’s actually not what’s happening, but you can be forgiven for thinking it was. The fact that so many reputable news sources have run with the “50% buyout” headline doesn’t help matters. What’s going on here?

Compare the Forbes headline “Lagunitas Brewery Sells 50% Stake to Heineken to Fuel IPA Ambitions” to the headline of Lagunitas founder Tony Magee, “Lagunitas Brewing Company Creates a Joint Venture with Heineken”. These seem pretty different, but they’re both technically accurate. What’s the real story?

A little more clarity can be found in Heineken’s press release dated September 8. “Heineken and Lagunitas Brewing Company Partner to Take Craft Beer Global” reads the headline. It goes on to specify that “Heineken and Lagunitas will form a joint venture and Lagunitas will continue to operate independently in the US, maintaining the integrity of its brews and culture. 

Tony Magee, founder of Lagunitas, will remain at the helm with the same leadership and staff, same brewers, same recipes and same suppliers and distributors helping to drive the brand forward. Both companies will benefit from the partnership. Heineken provides Lagunitas with a global opportunity to present its beers to new consumers, and Lagunitas provides Heineken with the opportunity to build a strong foothold in the dynamic craft brewing category on a global scale, with the category growing in popularity almost everywhere now.”

That provides a little more insight. It seems that this is a joint venture in the truest sense of the word, despite the “doom and gloom” hyperbole from sources like Forbes (and uncounted beer fans online who simply don’t seem to be willing to dig a little bit to get at the truth). It’s a partnership that will support both big and small brewers, fostering better distribution, better profitability and, most importantly, great beer for everyone.

Big Beer Is Not the Enemy

There’s been a perception in the craft beer sector for a long time that Big Beer is the enemy. It’s not. It’s just another sector of the market. It’s entirely possible for a single beer drinker to appreciate the finesse, craftsmanship and quality that goes into a beer like “Little Sumpin’ Sumpin’” as well as the tradition and taste of a beer like Heineken (or even Bud Lite, for that matter).

Again, Big Beer isn’t the bad guy, and most of the relationships forged between the two worlds have worked out to the benefit of both the big and little guy. Goose Island remains a force in the craft industry, and even Elysian is beginning to move past the ramifications of its sale to AB-InBev. 

What are your thoughts on the Big Beer versus craft debate? What role do major breweries have in supporting smaller ones and fostering growth and diversity for the industry as a whole?

Source:

https://lagunitas.com/heineken-and-lagunitas-brewing-company-partner-to-take-craft-beer-global
http://www.theheinekencompany.com/media/media-releases/press-releases/2015/09/1950299
http://www.beeradvocate.com/community/threads/lagunitas-brewing-company-creates-a-joint-venture-with-heineken.332950/
http://www.forbes.com/sites/briansolomon/2015/09/08/heineken-grabs-50-of-lagunitas-brewery-to-take-ipas-global/
http://allaboutbeer.com/news/miller-coors-buys-minority-stake-in-terrapin-beer-co/
http://www.bloomberg.com/news/features/2015-06-25/can-craft-beer-survive-ab-inbev-

Posted on October 1, 2015 and filed under 2015, The Business of Beer.