Thoughts and Notes on Anheuser-Busch’s Purchase of Goose Island

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.

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Samurai Artist
Samurai Artist

Founder of The New School and most frequent contributor Ezra Johnson-Greenough has worked in the craft beer industry for almost 10 years, doing everything from illustrating beer labels to bartending at renowned beer bars and breweries like Belmont Station, Apex, Laurelwood and Upright Brewing. He has also had a hand in creating events like the Portland Fruit Beer Festival, Portland Beer Week, and the Brewing up Cocktails series. He is available for freelance consultation in marketing, events, graphic design and branding. Contact: SamuraiArtist@NewSchoolBeer.com

Discussion

  • Anonymous
    Anonymous
    Tue Mar 29, 2011 1:53 PM

    The beer writer is Andy Crouch and the owner of Goose Island is John Hall.

    • lowendfrequency
      lowendfrequency
      Tue Mar 29, 2011 2:58 PM

      So, if AB doesn’t intend to change the beer, brew the beer, move the brewing or otherwise participate in the process then what are their goals? The same as they’ve always been, to make money. Beer is an honest drink and while all breweries needs to make a profit, I’m put-off by those who brew for profit alone.

      I for one WILL be boycotting Goose Island. I never thought their beers were that great to begin with (save a few exceptions) but with AB at the helm, I’ve given them my last dime. It’s not from a concern over the product quality, it’s concern for the politics. As a consumer, the best way for my voice to be heard is to vote with my dollar. I vote NO to big beer. These guys don’t give a damn about craft beer. Remember, this is the same company that spends millions lobbying against craft brewers, against laws that make craft beer more accesible, against equal distribution of craft beers and against fair placement of craft beer on store shelves.

      I’m not fooled.

      • Samurai Artist
        Samurai Artist
        Tue Mar 29, 2011 4:52 PM

        Anonymous yeah well aware of that…not sure what your trying to say?

        • Shawn
          Shawn
          Tue Mar 29, 2011 4:59 PM

          Ah, boycotting a brewery; slacktivism at it’s best. Why not do something to help someone out. Donate some money to Japan relief. Help feed the hungry. Do something that matters. ‘Boycotting’ AB-InBev isn’t going to do anything. It’s an empty statement for the lazy and uninspired.

          • Anonymous
            Anonymous
            Tue Mar 29, 2011 5:11 PM

            The original post, that you have since corrected, had Andy’s and John’s names incorrect. Just trying to help out.

            • Samurai Artist
              Samurai Artist
              Tue Mar 29, 2011 6:28 PM

              Anonymous, I did not correct anything but thanks for reading.

              • Little Brother
                Little Brother
                Tue Mar 29, 2011 6:45 PM

                Enough about what this means for “craft beer.” What does this mean for the workers? You yourself, Ezra, have seen what happens to workers when big companies buy the little ones. Green Dragon being bought by Rogue meant layoffs and now Bridgeport has laid off workers from it’s Hawthorne restaurant. Don’t ague that this isn’t a Big Business model for making profit. While I understand that Bridgeport may be struggling, why is it they have money to remodel this location, but they can’t maintain jobs for the workers?
                Back to GI, I don’t know what A-B will do to those workers, but I bet it will be profit driven.

                • ElGordo
                  ElGordo
                  Tue Mar 29, 2011 8:05 PM

                  I got ya covered, Ezra. Anonymous was right.

                  • ElGordo
                    ElGordo
                    Tue Mar 29, 2011 8:12 PM

                    @Little Brother – Green Dragon and the renovated Bridgeport pub will both still employ workers, just maybe not the same set of workers that were there under previous circumstances. I don’t think either one of those deals had any lasting impact on the overall payrolls. Unless Bridgeport is planning on utilizing robot servers, which would be FREAKIN’ AWESOME.
                    The brewing process, on the other hand, is scalable and able to be automated, and brewery workers are therefore vulnerable to being made somewhat obsolete as production gets consolidated. GI will be maintaining (and expanding) its own brewery for the time being. I think the potential for layoffs lies more in the marketing department, since A-B already has a sizable army of brand managers who have a lot more experience than most of the crew at GI.

                    • Shawn
                      Shawn
                      Tue Mar 29, 2011 10:03 PM

                      As for Bridgeport, what would be better than robot servers (though I will admit that that would be AWESOME), is beer that is worth drinking and food worth eating.

                      • Angelo
                        Angelo
                        Tue Mar 29, 2011 10:56 PM

                        I think the reason why Anheuser-Busch InBev made this move was to in some small way test a parlay of what they are doing. According to the Brewers Association,growth of the craft brewing industry in 2010 was up considerably (11% by volume and 12% by dollars compared to growth in 2009 of 7.2% by volume and 10.3% by dollars) while the overall beer industry saw losses, especially in imported beer. Seems that it is inevitable that in these economic times there will be more marketshare and perhaps even more localization of buying habits. Chicago being one of the largest cities in hemisphere doesn’t have a “craft” brand as prolific other smaller cities. Boston is a considerably smaller market and has the largest craft brand and the largest American owned brand. Back to the idea of regionality in branding, it seems like a long contemplated move for A-B InBev to lead the charge amongst the glut of multinational breweries before the rug has been fully pulled from beneath them. I agree that most consumers (of course in the Northwest and PDX we’re a bit more insular and thinking that way about things) with the sentiments that if the product is good folks will still buy it, drink it. I guess only time will tell, but I think this move is revolutionary here in the US and this, in part shows a bit of desperation on behalf of both buyer and seller.

                        • Apple Seed
                          Apple Seed
                          Tue Mar 29, 2011 11:34 PM

                          The folks who partially used to own part of Goose Island also own Widmer so the possibility that Widmer could be bought out someday might not be out of the question. Crafter Brewers Alliance also owns Red Hook and Kona Brewing….

                          • Jeff Alworth
                            Jeff Alworth
                            Tue Mar 29, 2011 11:41 PM

                            I love that you posted this at 2:35 am.

                            • Walker
                              Walker
                              Wed Mar 30, 2011 3:41 PM

                              This transaction is part of a larger trend that is coming to head: craft breweries simply not being able to keep up with demand. With Dogfish Head and Great Divide both dropping distribution from large markets, and GI selling itself off in the name of expansion I think it’s hard to argue that the trend is bad for craft brewers. Each brewery will have to decide for itself how to deal with overwhelming demand in the way that suits themselves.

                              It’s promising to note that breweries by and large are making decisions that will protect in integrity of their beer. In the short term though it is the craft beer drinkers who are getting short changed, an unfortunate side effect of popular breweries making tough choices with the bigger picture in mind.

                              • Harry
                                Harry
                                Wed Mar 30, 2011 7:35 PM

                                I find it interesting how overlooked the replacement of Greg Hall is in this whole thing. We are losing a great asset to the NW brewing community in Brett Porter. He went from Portland Brewing to Deschutes in 2005 where he has been head brewer the past half decade. He was also involved in the District Northwest of the MBAA and will be missed.

                                • Samurai Artist
                                  Samurai Artist
                                  Wed Mar 30, 2011 7:41 PM

                                  Harry,

                                  I dont think its overlooked. I was going to write more about him leaving but then he indicated it was all good. Also sure its sad to lose Brett Porter but he actually left and had been working for Goose Island for about a year already so unless they were planning this that far in advance its unrelated.

                                  • Little Brother
                                    Little Brother
                                    Thu Mar 31, 2011 1:15 AM

                                    @ElGordo-Green Dragon and Bridgeport do (or WILL in BP’s case) still employ people, but the act of laying workers off cannot be left unnoticed. What if you were laid off because of a buyout, just to be replaced by someone who is probably going to be paid less, have less benefits and/or have a shittier work environment? We all lose when these transactions happen. Not that buyout have to mean layoffs but as ownership gets consolidated, workers are always the ones to pay the price. That’s what’s happening in Wisconsin, Ohio, etc and it is of course happening in the private sector. Business owners use “economic climate” to bring down labor cost, even when CEO’s are still reaping huge profits. I know this this first hand, even from my “progressive” employer.

                                    Back to GI, things are different there for sure. They are expanding, but often the case then is increased workloads without the extra hands. Ask your friends at Widmer. They’ve been expanding production yearly in this “economic downturn” and not increasing labor, because of the climate.

                                    I support craft beer, but my guess is that we will soon start seeing some more organizing in the craft industry as the micros get swallowed up by the big boys.

                                    • PDXBeerguy
                                      PDXBeerguy
                                      Fri Apr 1, 2011 1:03 AM

                                      Yes if Google approached Taplister with a large amount of money we would consider selling out to them. Retirement sounds nice. In all seriousness Goose Island is not selling out. They are a business and the purpose of a business is to make money. I was surprised by the purchase, but hope that the quality continues to be the same. Ken from Goose Island on Twitter said “Our brew pubs are not a part of this deal and the pub brewers will continue as usual.” This is good news.

                                      • Levi
                                        Levi
                                        Fri Apr 1, 2011 5:29 PM

                                        This is very sad. It will be difficult to enjoy Goose Island beer knowing we are helping the crooked Busch family pocket even more unneeded change which will continue to help them purchase some of the world’s best lawyers to cover up their dirty laundry. It’s easy to boycott Bud Light, Michelob, and Bass, but when it comes to boycotting quality beer, we’re definitely put between a rock and a hard place! People around the globe are depressed because of what the Busch family is doing and therefore should supply every one who has chronic depression due to their actions (including me) with some kind of antidepressant. And once that is taken care of, they to do something good with their money… like purchase Lybia or something and get the hell of out of the states.

                                        I’ll finish with this… Anheuser-Busch lies about their beer, actions AND goals. They are reckless and will go completely out of their way to seek any reason at all to cost the little guy money. Did I mention their beer taste worse than my own piss? (based on assumption here) It’s actually probably equal to cat piss, I’m sure. THIS CAT PISS BEER MONOPOLY MUST STOP! I apologize for being a dick, but this has to be an exception because AB is “MR. DICK”. I could take it step further and describe what AB does with that title, but I will leave that up to your imagination. Again, Stop “MR. DICK’S” cat piss beer monopoly because no one likes cat piss or dicks. Sorry for the rant.