The US Craft beer industry can definitely learn lessons from the Australian Wine & Beer industry over the last 20 years. I stated last year in the top trends of 2010 that Merger & Acquisition would unfortunately occur in the industry, and though its been slower than anticipated there will be a second wave of merging that will occur.
While living in Vancouver I was a somewhat fan of Granville Island Brewing for their limited release beer such as the Belgian Jolly Abbot, and the revised IPA. This brewery was owned by a Kelowna Winery but then was purchased by a division of Molson-Coors. We also saw brewers such as Pyramid and Widmer get taken over in mergers. Today I read about one of my favorite brewers Goose Island in Chicago was purchased by AB-Inbev for $38 Million. These amounts are really chump change when considering the size and behemoth size of these companies. 1 in every 4 beers globally is an AB-Inbev product.
The interesting part of an article was the growth in the premium sector in the beer company ABInbev. I was aware that some of their big import brands such as Corona were fading somewhat, but interesting to see Stella Artois rise by 22% and a brand I had not heard of Shock Top 76%. The major point the CEO was discussing was how the unemployment in the US is hurting the sales of the company brands, and with it reaching around 10% nationally and I hear 20% in some major US cities, it is definitely affecting the disposable spending on the lower end of the beer market.
With 1700 Craft Breweries in the US now and some termed regional craft for their size and distribution, we can definitely see this number not rising as fast as it has over the last 5-10 years. To think 20 years ago there were only about 100 breweries in the US.
In the Australian Wine industry I recall hundreds of wineries 20 years ago when I first started with Penfolds Wines, that has just bought/merged with Lindemans/Seppelts/Tollana and they were seen as the big boys of the industry. Then the recession hit and disposable income was hard to get consumers to hand over $10 for wine. Penfolds Grange was only around $30-60 a bottle back then (those were the days). Consolidation started occurring through the 1990’s and eventually Penfolds merged with Rosemount that was then taken over by Wolf Blass as part of the Fosters Brewing Brand. They have now demerged the beer and wine divisions with Fosters about to be bought by SAB-Miller or another Beer giant.
The point is looking at how Wine has gone from hundreds of brands to now only a few companies that control so much of the industry. The craft beer market is definitely in the glory days for beer drinkers and the styles/types that are developed now with abandon and seasonal releases are very exciting and I buy any premium release I see without ever looking at the price tag.
Potential Targets of Mergers Take-Overs
Off the top of my head I can list a few brewers who have very good products in the eyes of consumers and wider distribution network, and I’m assuming a profitable business administration. These are what large brewers want when purchasing a business. The bottom line is share holders want profit, not a feel good story.
2. New Belgium
Though based on the owners of some of these breweries it is unlikely it will happen in the short term. But at the end of the day everyone has a price, and we all want to live on the hill overlooking the water eating Kobe Steaks. Some of these could have strong business backers which mean they are not targets at this point. And I hope they dont’ but we know its called Ecomonics in business, demand/supply.