The Pub Curmudgeon - Buy in haste, repent at leisure
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Last week, it was reported that US drinks conglomerate Constellation Brands was selling craft brewer Ballast Point, which it had bought for a jaw-dropping $1 billion in 2015. The buyer was the much smaller Illinois firm Kings & Convicts Brewing, and it was rumoured that the sale price could have been as little as $75 million. That would represent a staggering loss of value in only four years.
It brought to mind this blogpost from 2017, in which I made the point that much of the brewing industry seemed to be in the grip of “craft paranoia”, where they were frightened that the rise of craft beer posed an existential threat to their business, and they were flailing about in all directions trying to counter the trend. One aspect of this was established major companies paying what even at the time seemed inflated sums for up-and-coming craft brewers.
Two and a half years later, things look very different. There’s plenty of evidence that the seemingly inexorable rise of craft has peaked, and it’s also something that has been very much driven by novelty and innovation, and isn’t amenable to the tried and tested business strategy of building strong brands. While these deals might have provided bumper paydays for the founders of the acquired businesses, many big companies have been left feeling that they have burned their fingers, and are having to write down the value of their investments.
Brewing seems to be one of the few markets where a substantial number of customers really do put a value on the independent status of producers, and it could be argued that a large chunk of value was lost on the actual day the company was sold.
Of course the British market is very different from the American one, and it would be wrong to read the lessons across too closely. But you do have to wonder whether the big companies that have acquired stakes in British craft breweries are wondering just how far they can take the brands, and worrying that the initial spark has vanished.
One response of established British brewers to the craft trend has been to establish craft sub-brands and bring out products that ape the style of well-known craft beers. However, all too often this comes across as “dad dancing”, with the beers themselves being pale imitations, and drinkers easily able to see through it. Maybe a better response would be to play to their strengths and bring out speciality beers that build on their own heritage, such as Fuller’s Past Masters series, Greene King’s Chevallier beers and Marston’s Horninglow Street range.
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