Corporate indigestion

Following last year’s exercise in shooting themselves in the foot, this year CAMRA were more on target with their Good Beer Guide press launch, which concentrated on the threat to consumer choice from takeovers of independent breweries by multinationals. However, even this was a little wide of the mark, as the breweries being taken over have in recent years tended to be those in the “craft” field rather than producers of real ale.

It also contains an element of railing against fate. It’s simply a fact of business life that the most likely fate of a successful start-up is to be taken over by a larger competitor. Yes, of course in a sense it’s regrettable, but that’s just what happens. Very few go on to spread their wings and fly independently in the way that BrewDog has done. And, of course, in many cases the business owners will in effect have been made an offer they couldn’t refuse.

The current wave of takeovers are 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 current 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. I also can’t help thinking that the takeover of a business that has been established for several generations and become part of its local community is much more of a loss than that of a start-up only a few years old.

There is a somewhat patronising aspect to Roger Protz’s comments. I don’t see that there is a conscious intention to deceive drinkers that they are buying products from a small, independent company, and consumers nowadays are sophisticated enough to understand that large companies operate niche or specialist offshoots that are differentiated from their mainstream products. Those to whom it really matters will know anyway.

There’s also evidence from the US of a consumer blowback against the brands taken over by multinational brewers. As the two beer markets are very different, it’s doubtful exactly how much this will read across to the UK, but it certainly suggests that some of the inflated premiums paid for craft beer brands will become a thing of the past.

Brewing remains an industry where the barriers to entry are very low, and thus we are likely in the future to see the cycle of cool new start-up turning into corporate acquisition over and over again.