Business Brewing – Inside Craft Beer’s M&A Bender

It took barely a day for shots to fire after beloved North Carolina craft beer brand Wicked Weed’s sale to Budweiser-making multinational Anheuser-Busch InBev. Fiercely independent taprooms ditched Wicked Weed, drinkers spouted calls of treachery via social media and the NC Craft Brewers Guild ousted the former craft brewery from its ranks.

It’s a cold, cold war between the big beerzillas and the indie brewers, one that puts hopheads in the centre. Unless you happen to be investment savvy with a taste for beer.

This is the tenth craft brew that  A-B InBev has put back recently. The multinational established a “High End” business in 2015, adding craft brewers like Goose Island, Blue Point, 10 Barrel, Elysian, Golden Road, Virtue Cider, Four Peaks, Breckenridge Brewery, Devils Backbone, SpikedSeltzer and Karachi Brewing Co. to its ranks.

And it’s proven to be a brilliant dealmaking strategy, one that forces beer hawkers to question their principals when stocking brews. After all, why would establishments apathetic to the craft brew cause select one of the indie guys when they can pick up a keg of “crafty™” Goose Island for $90 along with their standard domestics?

Acquired tastes

The craft brew category has seen no shortage of growth over the past couple of years, outpacing the overall $106 billion beer category. In the U.S., craft beer produced by the country’s roughly 5,300 breweries accounted for 12.3 per cent of overall beer volumes in 2016 and created 129,000 jobs.


And Big Beer has responded to this spike in interest with acquisition sprees.

While A-B InBev was inking its deal with Wicked Weed in early May, Dutch beer giant Heineken was toasting a deal of its own, topping up its 50 per cent stake in California craft brewer Lagunitas Brewing Co to full ownership.  

Miller Lite and Coors Light producer MillerCoors went on a spree last summer, acquiring majority stakes in Oregon-based Hop Valley Brewing Company, Athens, Georgia-based Terrapin Beer Company and Texas-based Revolver Brewing.

In October 2015, Ballast Point Brewing & Spirits Inc. filed an initial public offering of stock but before it could go public, beverage giant Constellation Brands acquired the indie brewer for $1 billion, financing the acquisition through a combination of debt and cash.

Private parties

It’s not just the multi-conglomerates that have their eye on the small independent brewers. Private equity has also tapped craft brew, looking for investment opportunities.

TSG Consumer Partners, which has also funnelled money into Glaceau vitamin water and Smashbox Cosmetics, paid $265 million for a 23 per cent stake in Scottish craft beer maker BrewDog. The investment, which pushes BrewDog’s valuation to $1.2 billion, equates to a 2,800 per cent return for the 1,329 initial crowd-funders who pumped upwards of $350 each into the company in 2010.

Fighting the hangover

Some craft brewers have tried to weather the siege by craft beer aficionados with posturing.

Wicked Weed co-founder Walt Dickinson told the Asheville Citizen-Times it was a strategic move to compete in an increasingly saturated market.

“If we see a small dip in the immediate future, I’m comfortable with that, because I feel like a week from now, a month from now, a year from now, they’re going to come back and realize the beer hasn’t changed, it’s gotten better,” he said. “I think we make some of the best beers in the region, and we do so consistently and we get great support. At the end of the day, great beer will win.”

Chris Cox, co-founder of Oregon’s 10 Barrel Brewing, another A-B InBev acquisition, backed Dickinson, saying: “We still run our company, we still make all our own decisions, we still brew our own beer, and we’re still there every single day with our team.”

Unconventional tastes

Other craft breweries have eschewed major dealmaking in favour of unconventional ownership. Last May, beloved Ontario craft brewer Beau’s announced that it would be selling ownership to its employees over the coming years, offering 4 per cent to 5 per cent of the business to employees during the first year.

Employee shareholders will reap the benefits of any dividends declared by the company’s board of directors and although they’ll lack voting rights, they will be able to vote any time a transaction changing the controlling rights of the company is tabled. The idea is to keep the breweries independence in the hands of the employees.

Beau’s decision to remain fiercely independent despite increasing interest from Big Beer dealmakers echoes the sentiments of Jacob McKean, CEO and founder of California-based craft brewer Modern Times who, in his keynote address at the California Craft Brew Summit last year, said:

“I owe a tremendous debt of gratitude to everyone in this industry, and when it comes time for me to do something else, I refuse to throw a hand grenade over my shoulder on my way out the door.Selling Modern Times to Big Beer would make life harder for everyone who stayed behind: it would give the macro brewers another zombie brewery with which to deceive consumers, it would be used to keep real craft breweries out of distribution books, and the price of Modern Times beer would inevitably be slashed to the bone with the malicious goal of putting my friends and colleagues out of business.”

McKean’s address has become a rallying cry for independent craft brewers and is often cited when Wicked Weed’s name comes up. Unfortunately for McKean, somewhere out there is a friend or colleague in Big Beer’s crosshairs, and if the past few years are any indicator, when it comes to M&A, not all tastebuds are the same.

Andrew Seale

Andrew Seale is a Toronto-based business writer who contributes frequently to Yahoo Canada Finance, The Globe and Mail's Report on Business and The Toronto Star.