The Fluidity Of Good Beer’s Paradigm Shift

Two bits of related US big craft beer industry news this week. First, Japan’s Kirin has acquired about 24.9999% of Brooklyn Brewery for an undisclosed sum on largely undisclosed terms. Second, Stone Brewery is laying off 5-6% of their workforce. How about we look at the latter first. Part of the news release states in part:

…the onset of greater pressures from Big Beer as a result of their acquisition strategies, and the further proliferation of small, hyper-local breweries has slowed growth. With business and the market now less predictable, we must restructure to preserve a healthy future for our company…

This is interesting. For some time I have been going on about the schism in craft beer. So long I bored myself with the obviousness of it. This statement confirms it. There are three sorts of craft: macro craft, big craft and micro craft. The one in the middle has the shortest shelf life. Boosters will deny it, but the sales slump for big craft has been a thing for a while. So steps have had to be taken and this is what it looks like after things change at the heart of a business. They are not alone. Remember, just last April, Stone tried to suggest that the outside investment funds they took on were “craft” investments. Silly PR committee. No one believed it. The immediate response today from Jason Alstrom reflected what might be going on: “Typical corporate response … Does not sound like Stone at all. They are having a tough time wearing those bigboy pants.” The CEO is blamed but the Board and ownership set out the tasks for the CEO to complete. Likely for very good reasons given the tired brand and founders.

In the other notable story, Brooklyn has taken Kirin’s cash. The transaction’s obvious and awkward effort to avoid hitting the 25% share level led me to review the Brewers Association’s definition of craft. An American craft brewer must be independent and to be independent…

Less than 25 percent of the craft brewery is owned or controlled (or equivalent economic interest) by an alcohol industry member that is not itself a craft brewer.

Notice that careful placement of “or” in that definition. Clearly, it is possible to control more of a craft brewery than owning the same relative measure in shares. How does that occur? By the transaction for the sale of shares including a shareholders’ agreement that effectively bars the corporation from doing many things without consent of the otherwise minority shareholder. As a result, the BA’s 25% ownership rule is meaningless in the world of creative financing and investment. Strings shall be both pulled and used to tie things down. Jason Notte commented on Twitter on the distinction between ownership and control as a factor in establishing the independence of a brewery:

I often wonder how deeply @BrewersAssoc dives into the details. They have a lot on the plate without auditing every deal.

The Devil is in the details, they say. If the Brewers Association is not able to keep up with the implications of the realities of business like investment terms why bother having the definition at all. Maybe that is the plan for 2017. These are, after all, the days and months of change. The big names of big craft are mostly moving out as the money moves in. It seems that only the man of yogurt is sticking around to bask in the twilight of these dusky days for big craft even after cashing out in his own way. He must be holding out for something more Рbut what?

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