Colorado’s New Belgium Brewing recently announced that it has been purchased by Lion Little World Beverages, which is the U.S. branch of the Japanese alcohol giant Kirin. Kirin owns over a hundred beer brands worldwide, primarily in Asia and Australia. They also own a 25% stake in Brooklyn Brewery. They are decidedly Corporate. The 100% stake Kirin is acquiring means that New Belgium loses its Craft status. Indeed, it will be required to removed the Independent Craft Brewers seal from its labels.
For fans of independent craft beer, this might be the most painful Crafty buyout yet. Feels real bad. This sale went public just before Thanksgiving, but it has taken me awhile to get my head around the implications.
Shining Brewery on a Hill
Throughout the era of Crafty beer buyouts, there has been one Shining Brewery on a Hill, a brewery that Found Another Way. “You don’t have to sell out to Budweiser,” I would insist again and again, as buyout after buyout happened. “There’s a better way. See, look at New Belgium. That’s how you do it!”
New Belgium started an Employee Stock Ownership Plan (ESOP) in 2000, and by 2013 had become completely employee-owned. This seemed to be their answer to the pressures that all breweries face as they grow, pressures that have caused lesser breweries to resort to selling out to Big Beer. Other craft beer brands took notice:
Well-known brands such as Harpoon, Modern Times, Great Lakes, Left Hand, and many others have learned from and built on the New Belgium experience. Craft brewing, in fact, has among the highest densities of ESOPs of any industry. 1
Brewing Under Pressure
This website admittedly takes a very smug view of Corporate Beer Buyouts, assuming that all buyouts are bad, and that all owners who take them are selfish and greedy. This is a very childish view of complex circumstances about which I know almost nothing. The clear truth is that as a brewery becomes successful and grows, ownership is no doubt under tremendous pressure to secure stable funding, and it is this pressure that sometimes drives breweries to sell to Corporate. Some of these sources of pressure are invisible to casual drinkers:
- Ownership has been making beer for a long time and is ready to retire. See Anchor Brewery.
- Investors were promised a payday that contractually needs to be delivered. The pressure is even greater when (as is often the case) those investors are family and friends who had put their own dreams and plans on hold in order to help support yours.
- Distribution is difficult and expensive. In some states, Corporate Beer essentially has a lock on channels of distribution. If you want to ship your beer to those states, some sort of agreement with a Corporate beer company is needed. The terms of those agreements are at best expensive and at worst downright prohibitive.
- Expansion is really complicated and expensive. Any fool can put together a 1/6 barrel brewhouse together in their garage (although some of us fools have managed to mess even that up). To build a brewery of the scale that the New Belgiums of the world use, and to make sure that brewery is efficient, effective, and safe, and then to actually build the thing, is a project of a scale that very few of us can imagine. Projects of that magnitude cry out for the stable funding and access to capital that large corporations are designed to deliver.
- Existing as a large Craft brewery is nearly impossible. This is the most troubling source of financial pressure, as it involves a broader industry trend that we’ve discussed before. Malt contracts, hop contracts, distribution, keg sourcing; these things get more and more difficult as a brewery grows, and at a certain point they become unmanageable without the institutional heft that an AB InBev provides. The list of breweries that have managed to stay independent at this scale is very, very short.
The folks at the National Center for Employee Ownership summed this all up nicely:
ESOP companies face the same kinds of pressures and opportunities all companies do. The craft brewing industry has been undergoing rapid consolidation for several years, with multiple major acquisitions announced every year. Large brewers can add marketing, capital, and distribution advantages that even major players like New Belgium find hard to match. 2
More Than Beer
The main theme of this website is that the craft beer industry is about more than beer, that how a beer tastes is only part of the story. “It matters who is making your beer,” I’ve declared. “It matters that they are an integral part of their local community. It matters that they have environmentally sustainable brewing and distribution practices. It matters that they treat their employees well. It matters that they understand that the rising craft-beer tide raises all craft-beer boats, and they act accordingly.”
When I hear stories of small upstart breweries loaning kegs and hops to neighboring breweries that are at once their colleagues and their competition, I think, “This is an industry I want to support. They make great beer, but they also make the world around them better.”
And that has been the amazing thing about New Belgium: even at giant scale, they have been all of those wonderful things, and more. They have set an example for how a company is supposed to treat its customers, its employees, its competitors, its community, and the environment. They have famously chosen sustainability over expansion. Jeremy Owens at Marketwatch summarized:
New Belgium established itself as a B Corp., a status that requires a company to meet certain social, environmental, transparency and accountability standards, and make a commitment to consider the interests of all stake holders, not just its shareholders. That last part wasn’t a problem for New Belgium, though, as it instituted an employee stock-ownership plan, or ESOP, that made most of its stakeholders also shareholders. 3
On top of all of that, it must be said: they have consistently made very good beer.
The sale, explained
Founder Kim Jordan laid out her rationale for the sale in an open letter to fans, and it must be said that it is not the usual Crafty brewery buyout boilerplate. It is a nuanced and thoughtful explanation of a very complicated and painful decision. She talks specifically about trying to find the best way to maintain the brewery’s unique identity while undergoing near-explosive growth:
We’ve needed to balance the cash demands of our ESOP and selling shareholders, with the operational need for more capacity… and the need to grow our brand by reaching more beer drinkers with our brand message. These are a lot of competing priorities and it has been difficult to do all of them as well as we’d like. As we surveyed the landscape over the last several years, we found that options to raise capital while being an independent brewer weren’t realistic for us. Some of the most widely used options by craft brewers were going to compromise a lot about what makes New Belgium great; environmental sustainability, and a rich internal culture. Some of these were going to lead to cost-cutting or a lack of focus on sustainability. 4
Jordan will stay on at New Belgium as an advisor, “ensuring the core tenets of craft beverages are aligned with the strategic vision for Lion Little World Beverages in the U.S. and around the world.” She laid out her vision for what a combined New Belgium + Kirin will look:
Imagine a world where publicly traded companies are dedicated to business as a force for good, taking into account an array of stakeholders- their workers, their shareholders, and the environment. This is a model for a big, compelling future and is in line with the needs of our rapidly changing world.
Impact
The sale of New Belgium means a good payday for employee-owners. Jordan remarked:
More than 300 employees are receiving over $100,000 of retirement money with some receiving significantly greater amounts. Over the life of our ESOP, including this transaction, the total amount paid to current and former employees will be nearly $190 million.
This is almost the thematic opposite of a number of Crafty beer buyouts:
Employee are often the losers when the ownership of their employers changes hands. They almost never benefit from a transaction . . . The existence of an ESOP means that the sale price is divided among many people, rather than a single person taking the entire profit from the sale. 5
At least at the outset, Kirin seems interested in changing as little as possible. This part starts to sound a little bit boilerplate-y, but the devil is in the details. New Belgium will keep its B Corp status, and will continue to work toward being carbon-neutral (Kirin has committed to be carbon-neutral in their Australian breweries as well). So they are at least paying lip service to maintaining New Belgium’s unique identity.
Mad / Sad / Meh
New Belgium was a pioneer in the craft brewing world, and grew to become one of its giants, never losing itself along the way. This has been rare and wonderful, and their departure from Craft beer should be mourned. That said, there are reasons to not be too sad about how this has turned out:
- The employees won. The employees of New Belgium are actually be rewarded for helping make the brewery a success. The same cannot be said for most Crafty Buyouts, which reward the owners immensely, sometimes at the expense of employees’ jobs. So that’s nice.
- Kirin is not AB InBev. You don’t see Kirin ads during Monday Night Football (at least not yet). Yes, they are Corporate Beer, but there is international corporate ownership and then there is ownership by companies that run silly primetime ads mocking craft beer drinkers. Kirin seems to be the former. So it could be worse.
- The reasons for the sale are unique to New Belgium (and Kirin). Jordan lays out a compelling explanation for how this sale is the best way to preserve the overall culture of New Belgium. She’s clearly passionate about keeping New Belgium socially conscious, environmentally sustainable, and employee-friendly, and she believes Kirin is a good match for those values. This is not the rhetoric that has been typically been used to justify a Crafty brewery buyout.
Conclusion
So I’ve arrived at “sad but understanding” when it comes to how I think about this sale. At this point, it seems that Kirin is going to try to maintain the culture and values of New Belgium, and that nothing much will change.
We’ve heard this tune before, however, and it has sometimes ended very badly. A year from now, Kirin could shut down New Belgium’s operations, fire all its employees, and brew all of its beers offshore in direct-fire kettles powered by dirty coal and kitten tears. And then this sale would, in hindsight, be shown to have been a huge mistake.
On the other hand, Kirin could very well respect the culture of New Belgium, and work to maintain and follow its values. In that case, I won’t give a second thought to enjoying a Voodoo Ranger Hazy Juicy Hazy or La Folie every now and then. I really hope that can happen.