If you didn’t catch the news
that quickly shot around the internets yesterday, Anheuser-Busch
purchased Chicago-based Goose Island Beer Company
, once part of the Craft Brewers Alliance (along with Widmer, Red Hook, and Kona). Goose Island Brewmaster Greg Hall is also stepping down.
Obviously this is pretty huge news in and of itself, but I think the most interesting question is why Anheuser-Busch purchased the company in the first place. Sure, Goose Island is successful and large for a craft brewery, but it is still beyond minuscule in comparison to the macros. This move may signal a new strategy for the big guys…
From the press release, this is how the deal is going down:
Goose Island’s legal name is Fulton Street Brewery LLC (FSB). Anheuser-Busch reached an agreement to purchase the majority (58 percent) equity stake in FSB from its founders and investors, held in Goose Holdings Inc. (GHI), for $22.5 million. Craft Brewers Alliance Inc. (CBA), an independent, publicly traded brewer based in Portland, Ore., that operates Widmer Brothers, Redhook and Kona breweries, owns the remaining 42 percent of FSB and reached an agreement in principle to sell its stake in FSB to Anheuser-Busch for $16.3 million in cash. AnheuserBusch holds a minority stake (32.25 percent) in CBA.
Goose Island sold approximately 127,000 barrels of Honkers Ale, 312 Urban Wheat Ale, Matilda and other brands in 2010. To help meet immediate demand, an additional $1.3 million will be invested to increase Goose Island’s Chicago Fulton Street brewery’s production as early as this summer.
Goose Island made 127, 000 barrels of beer last year. That makes an operation like Hopworks look small, but compared to Widmer, which is close to 3 times that size, Goose Island is small. Compared to Samuel Adams, which produced over 2 million barrels, it is positively tiny. Then again, Samuel Adams looks like a drop in the bucket when compared to Anheuser-Busch’s production. So why is the big guy toying with something so small? Sure, A-B, like other macros, has launched its own series of faux craft beer brands. None of these labels has caught on (except for Molson-Coors’ Blue Moon), but in a statement A-B indicates it won’t be making any Goose Island beers, but instead investing $1.3 million for GI to expand its own brewing capacity.
Behind the Pint-An Interview with Goose Island Brewmaster Greg Hall from Ritch Marvin on Vimeo.
Another interesting turn of events is longtime Brewmaster Greg Hall will be stepping down to be replaced by Brett Porter. My first thought was that Mr. Hall, who I interviewed last year, was leaving because of differences over the ownership change, but an interview he did with Time Out Chicago suggests differently, and helps us understand more of the benefits to the GI family from the acquisition:
“…we just couldn’t keep up with demand for everything. But as we found people who had the money to help us, they all wanted control and we didn’t want to give up control for obvious reasons. Then our friends at Anheuser-Busch, who’ve done a great job helping build our brand, called and said “Let’s talk.” We said, “Before we talk, we want to make sure you know we want to keep brewing in Chicago, management in Chicago, decision-making in Chicago and we want to grow brands and add capacity.” And they said, “Great, that works for us.” They’ve told us they’re committed to us because of who we are. I sat across the table from Dave Peacock [president of AB USA] and said, “Why Goose and not Sam Adams or someone like that?” and he said, “We like your beers, brands and innovations, what you’re doing and want to do with beer and food and we like that you’re in Chicago.””
Mr. Hall also hints at the benefits to himself and what he may be undertaking next:
“It gives me money to start something new and a little bit of flexibility. I can’t really talk about what I’ll be doing for another month or so, but it won’t be beer. Think about it—if Goose Island was my Mt. Everest, climbing Mt. McKinley would be boring. I’ve already done the beer stuff. I’ve created a new style in bourbon stout, I’ve brought wild fermentation beers to a food community and the masses, and there’s gotta be at least a dozen Goose brewers working as head brewers around the country, and I’m terrifically proud of that. Now it’s time for something else.”
With many media and fans calling Goose Island sell outs, there are worries that the quality of the beer will go downhill, or perhaps at least change. According to Beer Pulse, Goose Island Brand Ambassador Ken Hunnemeder stated on Twitter
, “The beers will not change.” According to Beernet, A-B CEO David Peacock said that A-B will not brew Goose Island beers, but will help expand the existing brewery. Still, there is much hate being spilled on the internets, and with that writer Andy Crouch mounted a defense
“After getting beyond the initial surprise of the deal, I’m left with the thought that the A-B deal is actually good for craft beer (and certainly for Goose Island). As I noted in last month’s BeerAdvocate Magazine, it is time for the big brewers to signal their intentions towards craft beer.”
And continued with
“The Goose Island sale to AB-InBev in one sense must be seen as a victory for craft brewers. Instead of simply trying to knock-off or belittle their efforts, the world’s largest brewery clearly appreciates some of the nuances of the American marketplace. And it is certainly vindication for the hard work and efforts of the Goose Island family.”
While I share Andy Crouch’s fair and more optimistic view of Goose Island as a successful and proven brand that probably won’t go into the dumps just because of the deal, I can’t say I agree that this is a victory to craft brewers. Sure, it means that the little guys have become important enough to buy, but we have known that for a while, with macro sales numbers declining and craft beer numbers continuing to grow. Does anyone really need vindication by being bought out by a giant corporation? I don’t think it is fair to go on a boycott of Goose Island based on this. Let’s be honest, how many craft brewers would sell out if offered millions of dollars? There is no shame in it. I mean, can you imagine Google offering to buy Taplister and them saying no?
Back to my initial question of why A-B would want Goose Island to begin with. First off, breweries like Samuel Adams, Widmer, and Sierra Nevada would surely be much bigger assets, but I imagine they are not for sale. Or was it just because GI owner John Hall needed the cash to expand the brewery and A-B got a good deal on the acquisition? In other similar circumstances, the bigger company may end up taking its successful brands and making them cheaper and in higher volume at a different production facility and laying off or even shuttering the old business. All indications are that this is not the case with this deal so far. If that holds true, then perhaps A-B intends to make Goose Island essentially into its specialty lineup of beers and hopefully get rid of crap like Shock Top Wheat. In a statement to the Wall Street Journal, A-B CEO David Peacock seems to suggest this. “We really needed to radically change our position in the high end.”
Or, and this is the scarier thought, maybe this signals macro breweries giving up on trying to clone craft beer, and instead the beginning of a buying trend. If A-B thinks it is a good idea, will other macros follow suit? Yes, I guess that will be a win for many craft brewers, but is it good for the industry as a whole? I don’t think so.