John Moragne is a transactional business lawyer in Nixon Peabody’s Business and Finance group and is a member of the Food, Beverage & Agriculture Team. John routinely works with businesses of all sizes on mergers, acquisitions, and strategic investments to grow and develop their businesses.
As any member of the New York State Brewers Association will know, Americans may be drinking less beer, but when they do, craft beer is increasingly their choice. The national Brewers Association’s data for 2013 (available here) show that while the overall beer market contracted by 1.9%, craft beer increased its market share to 7.8% with 17.2% growth in total barrels sold and 20.0% growth in the dollar value of sales. Craft beer comprised a $14.3 billion market in 2013 and every sign and research report shows that number going much higher in 2014 and beyond.
As beer consumption trends have changed over time, big brewers and the private equity world have, as expected, taken notice. Anheuser-Busch InBev has acquired three craft brewers in recent years—Goose Island Beer Co. in 2011 and both Oregon’s 10 Barrel Brewing Co. and Long Island’s Blue Point Brewing Co. in 2014. MillerCoors has a separate craft division – Tenth & Blake Beer Co. – which was specifically created to develop and acquire craft beers and currently owns a minority stake in Georgia’s Terrapin Beer Co. and also houses MillerCoors’ “craft”-branded beer offerings, such as Blue Moon and Leinenkugel’s. In addition, as craft beer represents a fast-growing market where consumers are willing to pay a premium price over the competition, the resulting business brew has captured the attention of private equity firms and investment in the market increases each year.
The big brewers and the private equity world will likely continue to take stakes in craft beer, either through outright acquisitions or minority interests. One of the hallmarks of craft beer is its independent and grass roots quality and culture, which may provide some barrier to entry and success for the big brewers and private equity in the craft market.
But if an eventual sale of your brewery is a potential goal, planning early is key. The strength of your brand and intellectual property, your ownership structure, contractual relationships with key vendors, and, as my colleague Vince O’Brien discussed in his “Growing Pains” blog (available here), distribution rights and their impact on an eventual sale of your business will all be vitally important. Big beer and private equity are paying attention, so if you want to be a part of potential future craft acquisitions and consolidation, now is the time to start planning. Structuring your business the right way from the start will maximize its value and improve your position as a potential acquisition or investment opportunity.
