Friday, 22 June 2018

The great craft sell-out

This is the column that I submitted earlier this month for the next edition of my local CAMRA magazine Opening Times, which is due to be published at the beginning of July. I normally wouldn’t release these until the first of the month, but in view of its topicality I thought I would let readers have a preview.


The Great Craft Sell-Out

It’s a fact of life that most successful start-up breweries will end up being bought by bigger competitors

THE PAST few years have seen a growing trend of successful craft breweries founded in the modern era being acquired by the major international brewers. We have seen such well-known brands as Goose Island, Lagunitas and Ballast Point being taken over in the US, plus Meantime and Camden in this country. As “Opening Times” went to press, there were reports that Heineken was planning to buy a stake in craft favourites Beavertown.

This has resulted in widespread disappointment, even a sense of betrayal, amongst craft beer fans. Selling out to “the man” is, for many, hard to forgive. On the other hand, if the owners are offered well over the book value for their company, they can’t really be blamed for seizing the chance of a comfortable retirement. It also contains an element of railing against fate. It may be regrettable, but it’s simply a fact of business life that the most likely outcome for a successful start-up is to be taken over by a larger competitor. Very few go on to spread their wings and fly independently in the way that BrewDog has done.

There’s a strange reluctance to recognize any merit in beers produced by the major breweries. In the 70s and 80s, CAMRA was very critical of the market dominance of the then “Big Six”, but it always accepted that they did produce some excellent real ales. Yet many craft fans are unwilling to touch anything in which the big boys have had a hand. But surely it’s entirely possible for a big company to produce a good beer, just as a small company can make a poor one. This comes across as an exercise in cutting off your nose to spite your face.

This wave of takeovers is significantly different from those that occurred in the British brewing industry in the 60s, 70s and 80s. Then, the prime objective was to get hold of smaller competi­tors’ tied estates and distribution networks. Promises may have been made about maintaining production at original sites, and keeping brands going, but they were rarely worth the paper they were written on.

The more recent ones, however, are about acquiring beer brands, not outlets, and so there is much more of an incentive to maintain the brand equity. Inevitably, in many cases, it will end up being eroded over the years by changes in recipe and production methods, but if they’re not careful the buyers end up destroying the value of their own purchase. It’s also hard to see the takeover of a start-up only a few years old as quite as much of a loss as that of a business that has been established for several generations and become part of its local community.

Every small business start-up has a life-cycle, and there will come a time when the owner wants to move on. Most micro-breweries eventually just shut up shop because the owner has become too old, or unwell, or has lost interest, or isn’t making a worthwhile profit. If you look at the micros from the first couple of decades of CAMRA, few are still in existence in any form. Companies like the remaining family brewers, who have been in existence for a hundred years or more, are very much the exception, not the rule.

Brewing remains an industry where, compared with many others, the barriers to entry are very low, as shown by the fact that over 1,500 new breweries have been set up in this country in the present century. The loss of some favourites may be regretted, but we are likely in the future to see the cycle of cool new start-up turning into corporate acquisition repeated over and over again.


Obviously a huge amount has already been published on the subject of the Heineken investment in Beavertown. I thought this blogpost from Katie of The Snap and the Hiss offered a very balanced perspective from the point of view of someone who is a Beavertown fan.

In contrast, Boozy Procrastinator has speculated on what Logan Plant’s famous dad might think of it all (definitely NSFW).

25 comments:

  1. Serious question - how many micro brewers have kids, to whom to pass on the business?

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    1. I would have thought the proportion of microbrewers with kids is pretty similar to that of the general population. Whether the kids are interested in taking over the business is another matter, obviously. But in the past this would have been the most common method of passing on a business as a going concern.

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    2. Maybe, but read this: http://www.thelocals.ie/features/rascals

      I don't know how typical that might be.

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    3. "I would have thought the proportion of microbrewers with kids is pretty similar to that of the general population."

      Not a chance. Look at the geeks running companies like Brewdog. High-strength and highly-estrogenic modern hop beers are only half the problem.

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    4. Are you claiming that it is the physical effect of the beer itself which damages their reproductive chances, Anon?

      I thought that the original comment related to freedom from responsibilities and so the scope for risk-taking.

      Can you refer us to any studies though?

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  2. The Stafford Mudgie22 June 2018 at 13:16

    But would the stakeholders in BrewDog refuse well over the book value for their company ?

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  3. 'but if they’re not careful the buyers end up destroying the value of their own purchase'

    To our enthusiast eyes perhaps, but the idea is to obtain market penetration for their newly-acquired brands that the original brewer could only dream of, and to do that they'll market the product intensively, while turning the flavour down a bit to make the beers palatable for the lowest common denominator. What'll make things interesting is when the next cycle starts and the multinational brewers will have to consider ditching 'yesterday's investment' and buying up the latest cool thing which will all depend on how much return they get from each takeover. In Beavertown's case they've strenuously made the point that Heineken have bought a minority shareholding and the £40m injection is the cost of the brewery but as that's around 20 times the net worth of the company I'd say this is a full blown takeover in all but name.

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    1. The Stafford Mudgie22 June 2018 at 18:44

      But is there any recent evidence of "turning the flavour down a bit to make the beers palatable for the lowest common denominator"?

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    2. Have you tasted Doombar recently?!

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    3. The Stafford Mudgie23 June 2018 at 15:08

      Yes, in two pubs last Monday and I can't say it's much different from when I was unimpressed with it on holiday in Cornwall during the mid 1990s.

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    4. I was just about to say exactly the same thing Paul !

      This "changing the formula" myth is just an excuse for lower sale and/or worse cellarmanship (apart from a few beers with reduced ABV)


      retiredmartin



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  4. Ah, the famous Gloom Jar...

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  5. "Very few go on to spread their wings and fly independently in the way that BrewDog has done."

    You mean to become condemned as evil multinational chains? ;)

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    Replies
    1. While, on the other hand, if you become Black Sheep or Otter you're condemned for being dull and unimaginative.

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    2. The Stafford Mudgie23 June 2018 at 19:48

      Well, in Yorkshire I would avoid Black Sheep and drink Timothy Taylors, in Dorset I would avoid Otter and drink Butcomde, Cotleigh or Exmoor and in Cornwall I would avoid Sharps and drink Skinners or St Austell - not that that means that there's anything wrong with Black Sheep, Otter or Sharps or that they're "brewed for the lowest common denominator", just that that's my choice. ,

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    3. I don't think that many like-minded people could have put that better, TSM.

      Given the choice between "something zesty" (of which I've never heard), and even GK IPA, I may well drop for the latter.

      Doom Bar would be desperation, however,

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    4. Who exactly are "the lowest common denominator" for whom these beers are brewed?

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    5. The Stafford Mudgie26 June 2018 at 10:02

      Without a reply from "electricpics" I think we might assume that "the lowest common denominator" are ordinary pub goers who routinely drink "bland" nitrokeg smoothflows and, if offered the choice, would opt for Sharps Doom Bar rather than a 'challenging' or 'interesting' beer like Oakham Citra.

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    6. I think that E'pics just meant there was nothing unusual about these ales, and to which anyone might take particular exception, even if that meant a not-so-characterful beer, David.

      I don't think that he was necessarily making a social comment about its drinkers.

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    7. The Stafford Mudgie27 June 2018 at 03:06

      Anonymous,
      That would be my interpretation if "electricpics" had commented about brewing beers TO the lowest common denominator but, no, he posted "make the beers palatable FOR the lowest common denominator".

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    8. Yes, Staffs. He was perhaps referring to their tastes in beer, and not to their education, socio-economic group, or to other facets.

      Maybe he'll tell us?

      Anon (the same).

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    9. I dont think that there is a large cross-over between people who drink nitrokeg smothflows and people who drink "unchallenging" real ale.

      Personally I find life is quite challenging enough without seeking out further challenges in the pub.

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    10. In answer, I meant beers that are run of the mill, nothing unusual or challenging, which for many drinkers are absolutely fine. No social comment inferred or intended.

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  6. Entering the world of Micro brewing and setting up the brewery is relatively easy if you have the money and were not ripped off by one of the turnkey providers who took the money and did not deliver the brewery. Then we had to use the iron ration money to provide all the kit for ourselves, the premises and all the money associated with that plus ingredients for experimental brewing, plus the casks, fermenters, pumps, hoses, and sundry consumables. It's a great way to amass a lot of assets. But you have to make them work. It has taken us about a year and a half of hard graft making and selling a range of high quality beers to build up a reputation amongst our customers and beer festivals and those producing the real ale CAMRA publications. One mistake could blow all of this. It is not for the faint hearted nor for anyone who does not like hard work and exercise! However, there is nothing so rewarding as sitting in a pub, anonymously drinking your own beer, and hearing positive reactions and comments by local drinkers supping your ale. That is truly rewarding. I am thinking of writing a book about my experiences re both the brewery set up and about the biochemistry of mashing and the yeast physiology which are so important to getting the beer right, plus some information regarding fermenter design and control and what it can do for your beer taste and quality. Multifactorial it most certainly is.

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  7. A good post talking a lot of sense. It's similar to the Indie bands of the eighties - whenever they had a chart hit or made some cash by joining a bigger record label then people complained. There's plenty of choice out there now and soem brewers are inevitably going to bite the dust...market focrces.

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