Sunday, 31 March 2019

Here for the long term

Takeovers of up-and-coming craft breweries by international brewers have now become so commonplace that they no longer produce the gasps of amazement that they once did. The latest is Magic Rock of Huddersfield, where ironically we were only three weeks ago. They have been bought by antipodean firm Lion Global Markets, who up to now had no foothold in the UK.

Co-founder and managing director Richard Burhouse insists that he intends to remain with the firm indefinitely, and says “I’m here for the long term, as far is I’m concerned, at least four years, but hopefully many years afterwards.” However, I can’t help being reminded of the words of Anthony Avis, author of The Brewing Industry 1950-1990, on this subject, in a section entitled “Some thoughts on the quest for personal advancement.”

Sadly, individual freedom and expansion do not live together, and this is abundantly clear to anybody who had created success by his own efforts and who sells out that success, reaping the financial benefit, and then stays on to manage for his purchaser. It never works out, and if there is apparent harmony it is because he has surrendered his freedom in deference to the advantage to be gained from being part of a huge organisation, and he will fade.
I once saw Richard Burhouse speak in a “Beer Debate” at the Manchester Beer & Cider Festival, and nobody seems to have a bad word to say about him. I’m certainly not one to be crying “betrayal” over this news, and my reaction is more one of congratulating him on having grown his company to the point where he can enjoy a lucrative payday from a multinational company. But surely the time will come when he decides that he would prefer to exercise his freedom in pastures new, or when he has had to endure one corporate instruction too many. And, after he has gone, who will be there to replace him with the same spirit of adventure and innovation?

In the 1950s and 60s, the period Avis was describing, unsuccessful or stagnant breweries were taken over for their tied estates. In the 2010s, in complete contrast, successful breweries are taken over for their brands. But, at the end of the day, are the international brewers essentially acquiring a wasting asset? Breweries like Magic Rock have no tied pubs, no widely-recognised brands, simply a reputation for being cool and cutting-edge. And that is something unlikely to thrive for long in a corporate culture.

9 comments:

  1. Good argument, but depending how the mergers work. If the keynote brand sits pretty in the original shop or transferred to a factory, likely it will languish in time - without more. Even craft breweries risk that as we see with early-established brands whose sales have fallen.

    But AB InBev's expansion of Goose Island brewpubs, say, will tend to keep a cool name before the public and retain its interest. Ultimately there should be one in every town and numerous in large centres. I suppose it's a variation of the old tied estate notion.

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    1. Goose Island is a well-established brand, though. I don't think any British craft brewers beyond BrewDog have much recognition outside enthusiast circles.

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  2. I do feel the internationals are savvy enough( usually) to know & factor in any losses over time in individuality & cutting edge impetus they have just paid for,and because of their different general strategy it doesn't desperately matter to them so much,in a way on first inspection it might look to the casual observer that it should.

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    1. Big companies are not immune from bandwagon-jumping, though. I do get the impression there is a feeling of "we must acquire a craft brewery, otherwise we'll lose out."

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    2. Definitely! In many industries we have seen over the years boardrooms going daft and all chasing the same thing in rival companies for fear of losing out.I'm not prone to stray into arguments about sexism & fair representation ,but I have often suspected this to be more prevalent when the rival companies boards don't have enough females on the board for balance. I've often suspected the men of getting too competitively carried away in such circumstances & buying frenzies,but put this in as an aside & won't return to the subject in case it causes outrage in some as yet unknown quarter out there!

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    3. Actually Lion did already have a foothold in the UK. They bought Four Pure last year. And they have pretty much said that they are looking for more opportunities. I think it's also worth noting that Lion are not even independent themselves. They are owned by Kirin...

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  3. "Breweries like Magic Rock have no tied pubs, no widely-recognised brands, simply a reputation for being cool and cutting-edge. And that is something unlikely to thrive for long in a corporate culture"

    What they do have though is an embryonic corporate Brand that's been incubated in the wild, ripe for development (exploitation) by the corporate culture, but eventually leaving little trace of the original ideals.

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  4. Professor Pie-Tin2 April 2019 at 18:18

    Good luck to Richard Burhouse.
    In an industry populated by blowhards,bullshitters and barstool experts he's created a valuable brand and earned himself a decent wodge.
    Anyone who has actually set up a business and/or employs people knows it can be a constant struggle with lots of sleepless nights.
    You don't like how the beers turn out after the buy-out ? Go and brew some yourself.

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  5. Beer is nothing more than the processing of commodity grains into a processed product of higher value. Craft has managed to command higher prices, wider margins and higher perceived value among an increasing niche of customers. The trouble some brewers have is that in a sea of thousands, their beer commands commodity prices. Some craft brewers manage to build value into their brand.

    Any opinion needs to consider where this enhanced value sits. Is it an intrinsic feature of the product or an intangible concept wrapped up in nebulous concepts like “values”, anti-corporatism and presuming a virtue to small scale?

    The value possibly sits in both. Maybe a group of people just want colder, fizzier, hoppier, stronger beer and are willing to pay more for it. Maybe a group of slightly sanctimonious self-righteous right on people just want a product that suits their own self-image. They want a burger but hate large American corporations, so they swerve MacDonald’s and go to an independent café. Same with beer. Same with anything they are minded to buy. As they have money, and are willing to pay more, they are valuable punters.

    If the value is intrinsic, these takeovers can maintain the brand value that supports the enhanced value. So long as they don’t Schlitz the product. If the value is intangible, then merely taking the craft brewer over destroys it. Guess we’ll find out.

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