Double (IPA) Standard for Craft Breweries?

May 5, 2017
Aaron K. Zeamer

It was announced on Wednesday that one of the more popular craft breweries in the country, Wicked Weed Brewing out of Ashville, North Carolina, was acquired by Anheuser-Busch, the world’s largest producer of beer.  Interestingly (but not surprising if you follow the craft beer industry) the announcement was met with significant backlash from the craft beer community.  The acquisition garnered significant criticism on Twitter, with many accusing Wicked Weed of “selling out.” The deal even generated a statement from the North Carolina’s Craft Brewers Guild, saying that they were “disheartened” by the announcement.  In another example, when Elysian Brewing Company out of Seattle announced its sale to Anheuser-Busch in 2015, the owner reported that customers were buying beers and dumping them onto the floor in protest of the sale!

Why are craft brewers treated so differently in the business world than other startups?  Why are they accused of “selling out” when in other industries, startup companies are celebrated and their founders turned into celebrities when they successfully sell off their company for millions (or hundreds of millions) of dollars?

The answer is not so simple and there seems to be reasonable arguments that can be made on both sides of the issue (beyond just pouring out a perfectly good beer).  Customers and craft beer enthusiasts often express concern that the takeover by a large, international corporate giant is going to impact the quality of the beer.  In some cases, this seems to be a justifiable concern.  The article from Thrillist cites a number of examples including Goose Island and Ballast Point where, after the acquisition, the original ownership left, recipes were changed, and in one case, a coveted batch of beer had to be recalled because of a non-toxic bacteria that infected the beer required its recall.  These issues were all blamed on the takeover and many people swore off drinking these beers as a result.

But what about the brewers and the people who have poured their souls into starting up and running a small brewery.  In many cases they invest their life savings into the business to get it started and build a following.  Don’t they deserve the significant return on their investment and the opportunity to grow their company into a nationwide or even worldwide brand?  What many outside the craft beer industry lose sight of is the opportunity that these kinds of acquisitions can afford to the small, regional brewery.  Yes, there are examples of ownership, head brewers and other key personnel exiting after an acquisition by a large company, but there are also significant advantages that these “big brewers” can offer that go unnoticed.

Let’s talk distribution.  Distribution varies from state to state and can be incredibly complex.  This forces many small breweries to either self-distribute, meaning they have to hire staff and have the resources to sell directly to small distributors, bars and restaurants so their beer can be sold outside of their own brewery.  This often means a local brewery doesn’t make its product available very far from its location.  The alternative to self-distribution in many states is to sign up with a wholesale distributor, who is then in charge of every aspect of a brewery’s distribution and in many states, exclusively so.  Those contracts are often heavily in favor of the distributor and leaves the fight for shelf space in a store up to the distributor.  It can also mean a product sits in a warehouse for who knows how long before it gets put on a shelf, potentially impacting the quality of the beer once it reaches the consumer.  By contrast, companies like Anheuser-Busch and Miller-Coors have distribution networks in place nationwide and move such an enormous quantity of beer through them, that they exercise significant control over what actually gets put on a shelf.  To have their backing and resources likely means that a craft brewery’s product can sit on the shelves of nearly any store in the country.

So before you swear off Wicked Weed, Ballast Point, or any other beers that will someday come under the umbrella of one of the “big brewers”, take a moment and think about the opportunity that has been afforded to the brewer and the brewery before you accuse them of selling out.  That’s not to say that every acquisition is going to be perfect and leave the quality of the product unchanged, but we should at least give them a chance before pouring what may be great beer down the drain.

Aaron Zeamer is an attorney at Russell, Krafft & Gruber, LLP, in Lancaster, Pennsylvania. He practices in a variety of areas including Business Law and Liquor License matters. Aaron works frequently with commercial real estate agents, brokers, restaurant and bar owners, breweries, distilleries, and wineries to facilitate the sale and transfer of PA liquor licenses.