The New Belgium Sale – What it Means
Stop Press – Back in the day when news was printed (only last year for us), you might want to stop the presses for breaking news. But now in the increasingly rapid world of digital reportage even breaking news is old the next day. So as we were going to press, I mean post, with our commentary on the recent New Belgium purchase, another shocker was pounced on by multiple news sources. Constellation Brands is selling Ballast Point, the brands they paid $1 billion for just four years ago.
Not only are they unloading the brands but they are being purchased (I’m sure for a fraction of $1billion) by a small outfit in North Chicago that brewed only 1,000 barrels last year. To me the news smacked of an April Fool but we’re in the opposite season. Apparently it’s legit and contrary to most recent acquisitions, when Kings and Convicts takes control, Ballast Point will return to the ranks of the Independents. Apparently Ballast Point’s successful brands like Sculpin fell prey to the haze craze and Constellation has bigger fish to fry. Or should that be Buds – they’re already $4 billion into Canopy Growth cannabis products. But all is not lost on the liquid side – look for Corona Hard Seltzer in 2020! I’m not kidding – stay tuned…
...And now, back to New Belgium
by Tony Forder firstname.lastname@example.org
By now the shockwaves have subsided. Subject to approval by their owners, New Belgium Brewing Co. will no longer be an independent brewery. (As an ESOP, New Belgium is an employee-owned company)
In November the Colorado-based brewery announced its intention to sell 100% to Lion Little World Beverages for an undisclosed amount in an all-cash transaction. It is likely the employees will go along with the deal since 300 of them will receive payouts of $100,000 or more. (New Belgium has a total of 690 employees).
The surprise is not that Australasian-based Lion made a move (likely the first of many in the U.S.), but that they nabbed such a big fish, one that flew the flag of independence for a very long time. New Belgium Co-Founder Kim Jordan was the first Chairman/woman of the Colorado-based Brewers Association after the Institute of Brewing Studies merged with the Brewers Association of America to create a comprehensive voice for independent brewers.
New Belgium’s willingness to partner up with a global entity illustrates the changing world of craft beer in which once-prized independence is no longer the prime concern as other business-related factors take over.
Said Jordan in a Brewbound article, “The world evolves. The relationship that we’ve developed with Little World Beverages and the [congruence] of vision that the two organizations have sort of superseded that.”
Brewers Association President Bob Pease noted that as mass market lager and light lager have been volume challenged in developed markets, global brewers have been looking to tap into the craft segment.
“Every brewer will make their own independent decision about how to respond to this competitive market, and we’ve seen a number of independent brewers choose acquisition by a strategic partner as their route,” Pease said.
This year alone, three other top 20 craft breweries announced hundred million dollar deals. Touting combined “independence” Boston Beer announced a merger with 300,000-bbl Dogfish Head in May.
In August the Spanish company Mahou San Miguel upped its 30% stake in Michigan’s Founders Brewing to 90%. (Mahou and Founders also invested 40% in Colorado’s Avery Brewing in 2019 on top of Mahou’s previous 30% investment in 2017).
And, more recently in November, A-B InBev agreed to buy the remainder of Craft Brew Alliance (which comprises Redhook, Widmer, Kona and others).
New Belgium is listed as the fourth largest craft brewery in the U.S. by the Brewers Association with a production of 853,000 barrels in 2018. (Note: the BA’s definition of craft excludes breweries that are more than 25% owned by or controlled by a beverage alcohol industry member that is not itself a craft brewer.) New Belgium’s flagship brewery in Fort Collins, CO now has an annual capacity of nearly 1 million barrels while their Asheville, NC, brewery, completed in 2016 has a capacity of 400,000 barrels. The company also opened a pilot brewery in The Source hotel in Denver last year.
Under utilized capacity and expansion debt are two factors, which can play into a brewery’s decision to partner up.
“Over the last several years, we found that options to raise capital while being an independent brewer weren’t realistic for us,” Jordan said. “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. Having the support and resources of Lion Little World, allows us to attend to those competing priorities and utilize our brewery capacity to its fullest.”
Lion, a subsidiary of Japanese conglomerate Kirin, announced its intention earlier this year to establish itself in the U.S. craft beer market and they hired industry veteran Simon Thorpe to lead that effort within its Little World division. Thorpe worked with Interbrew and then InBev as their global chief of acquisitions. He came to craft beer through Belgian Duvel-Moortgat, owners of Brewery Ommegang, and successfully brokered merger deals with Boulevard Brewing and Firestone-Walker. He worked briefly for Pabst before joining Lion.
Also involved in the New Belgium deal will be Jordan’s boyfriend Dick Cantwell as part of SF Bay-area Magnolia Brewing, in which New Belgium acquired a share. Little World will buy out Cantwell’s interest as well as that of Belgian investor Oud Beersel, but Cantwell will stay involved in operations. (Cantwell left Seattle’s Elysian Brewery after it was purchased by A-B InBev in 2015).
Lion Little World already owns a small brewery in San Francisco – Little Creatures, which originated in Australia. Little World has also made inroads into craft brewing in the UK with purchases of highly regarded Magic Rock and FourPure breweries.
New Belgium’s headquarters will stay in Fort Collins, and CEO Steve Fechheimer will remain in charge. Jordan will also remain involved in an advisory role and will collaborate with other founders within Lion’s portfolio. Kirin purchased a 24.5% share of Brooklyn Brewery in 2017, which effectively puts Jordan in the same stable as her good friend and Brewers Association colleague Brooklyn Brewery President Steve Hindy. One has to wonder if and when Brooklyn will see fit to sell their remaining 75.5%.
As for New Belgium employees, no changes to their perks are expected: the well known custom cruiser bicycle after a year; the fabled all-expenses trip to Belgium after five years; not to mention the paid sabbaticals, on-site Wellness Clinic and family care leave.