On September 8th, 2015, the purchase of 50% of Lagunitas by Heineken valued Lagunitas as $1 billion. A company buying a large stake in another company to share profits and operating expenses happens all the time. It’s sound business and economics.
On September 11th, 2015, Greg Koch stepped down as CEO of Stone Brewing to be Executive Chairman. Consolidation and role focusing is standard operating procedure for most companies as they grow, especially in tech startups as the founders who had the idea show their cracks when companies expand their scope. Stone is expanding geographically and starting dining experiences larger than brewpubs, which isn’t necessarily the same experience model as brewing a great beer. Finding someone focused on expanding business operations is sound business and economics.
As far back as 2013, people speculated that the craft beer market was in a bubble phase. Chris Morris, a great writer that covers craft beer and many other topics well, wrote about this bubble as it exists this year. He expertly highlights how starting a brewery is not getting into “the beer business”. And how people who want to start brewing a craft beer are finding it easier to get funding because of this bubble. Again, this is similar to the tech startup world where people want to invest in an idea only hoping it will turn them a profit and not really caring as much about the product itself.
Craft beer and its bubble is something created by the waves of the larger beer business crashing against something, or each other. AB Inbev and its likely takeover and merger with SABMiller is the beer business and not the brewing business. They want to control as much of the global market of how beer gets into people’s hands. And for those places that can only hold a certain number of beers, or brands, they want to make sure it’s one of theirs. If someone in rural China that usually drinks a Snow Beer can’t find it, maybe they’ll grab a Harbin instead. What AB Inbev and SABMiller want to ensure, is that whatever they grab, it’s one of theirs.
Beer certainly is a commodity business where people have to continue to buy your beer to truly succeed. The way the business grows is through availability. And that’s where this new combined power in the beer business will be causing the waves that craft brewers will have to ride.
Taps are always rotating. And getting new beers flowing through those taps will always be a part of the beer business. But people usually have to go somewhere at certain times to buy it. Craft brewers and other artisans who started their business to make a good beer can exist and thrive in this part of the market. Once they bottle it so that someone can buy it and enjoy it wherever and whenever they want, that’s when a craft brewer has thrown their bottle into the waves. And AB Inbev and SABMiller are looking to find that message in a bottle.