Brooklyn Brewery Looks Ahead After Busy Month and a Bit of Trolling

Austin Ray

Brooklyn Brewery is having a moment.
 
Yes, the company is nearly 30 years old in the age of new, and yes, the company rides on the back of a Vienna-style Lager in the age of the IPA. But consider: the nation’s 11th largest craft brewery by volume has had an incredibly active summer, establishing a slew of new joint ventures with Carlsberg in Hong Kong (announced June 27), London (July 3), and Lithuania (July 11). Then, to follow that up just two weeks later on July 26, Brooklyn announced a pair of minority investments in San Francisco’s 21st Amendment and Fort Collins’ Funkwerks in service of building a shared national sales platform.
 
The company’s moment, however, is about more than all this successive activity.

Given Japanese beer giant Kirin’s own minority investment in Brooklyn, announced this past October, paired with all its recent dealings, the company has been thrust into the ongoing conversation about independence in the craft beer industry. Most notably, fellow New York brewery Sixpoint has taken umbrage with the “optics” of Brooklyn’s new behavior (even as Sixpoint continues to struggle with its own optics for being a contract brewer), and specifically suggests the investments in 21A and Funkwerks “allows the brewing conglomerates to achieve a controlling stake in American craft breweries through a series of interrelated LLCs while maintaining good optics in press releases.” Brooklyn responded on its own blog by saying the “assertion that Kirin has a ‘path to control’ of 21st Amendment, Funkwerks, and Brooklyn Brewery for that matter, is 100% incorrect.”

In a text exchange with GBH, Sixpoint founder, Shane Welch admitted he had no “hard proof” despite referring to some sort of “strategic deck” on Reddit, and now simply refers to how he thinks these deals are typically structured—a far different tone than the one he used in full view of beer fans. It turns out he has no inside line on the operating or acquisition agreements between Kirin, Brooklyn, or any subsidiaries. While his theory may be rooted in historical evidence for such deals, such as Heineken having a path to buy the rest of Lagunitas despite Tony Magee’s insistence on independence, Brooklyn denies anything of the sort exists with Kirin and its 24.5% stake.

Given the flurry of activity as well as its newfound role as temporary main character in the saga of independence, it’s clear that this OG craft brewery has been busy of late. So, we pulled Brooklyn Brewery’s president, Robin Ottaway, away from it all for a few minutes to talk through it all.

The following has been edited lightly for clarity.

It being a “fundamental” change in your business, was that something you had resolved to do from the outset or did you land there in talks?
We’ve had conversations over the years with all sorts of people, and I think so has everyone, with that basic question of “how can we do things more intelligently?” To properly service wholesalers and distributors, it requires manpower and those kinds of things lend themselves to scale. And if you look at all the established suppliers, the bigger ones, the most successful ones are multi-brand suppliers. That’s not surprising. You offer a portfolio of brands to your wholesalers and retailers and you become more relevant to them. So yes, that is part of the strategy to say, “Hey, we want to make sure we really secure our route to market,” and, “How can we do this in a more intelligent way?” What we announced is our response to that.

It seems each piece in this larger puzzle of your last few months is a little bit different from one another. In London, it was the acquisition of London Fields. In Hong Kong, you’re establishing a whole new brand. In the U.S., it was a pair of minor investments in service of establishing a national sales platform. How did the company sort of navigate these different options in different places and identify the best opportunities?
Like anything else, these things have evolved over time. Our business is almost 50% export now, so we’ve always been paying a lot of attention to overseas markets, and particularly our bigger overseas markets, we spend a lot of time there. I think the moves we’re making there are kind of a natural progression. In some ways they’re fundamentally not very different, the investments we’re making in all these different breweries. Each country has a different setup in terms of how you go to market. Obviously, in the U.S., the independent tiers are very different than anywhere else. So how these things actually function and come to life varies from country to country based on market conditions and where our partners are in that market.

Fundamentally to us, we’ve always been collaborators. How we run our company, how do people get our voice—we’ve always been very comfortable with different voices. You’ve got Eric and I, you’ve got Steve, you’ve got Garrett. Those are just kind of the more public facing voices. For us to work in collaborations is very easy. We’ve always done it, so it’s just kind of a natural extension of how we operate. And then I think the strategic decision to essentially diversify our portfolio and get involved and make these investments in different brands, that’s a strategic decision based on what we see happening in the marketplace.

In light of the Kirin deal about nine months ago, you wrote on the blog, “This investment is part of a broader strategy to form partnerships and collaborate around the world to build our brand and help grow craft beer wherever we go.” These recent months seem to fit nicely under that umbrella. What’s the next step in that broader strategy?
To execute it. A lot of these things, it’s that simple. It worked out kind of all these things coming at once because I think it kind of reveals our strategy, and so at this point, I’ve been saying, this is all talk. I don’t want to say the talk is easy. Talk is easy, but obviously putting the deals together isn’t always easy. Although it’s been kind of remarkably smooth because everyone was in alignment with the vision and what we all wanted to accomplish. But the real work begins January 1st. We’re doing tons of work preparing for that so the real work has already started. But my point is, what we’re gonna do now is just focus on executing all these things. We’ve got our work cut out for us and we don’t take that lightly as I’ve said.

So if execution is the next step, does that mean you guys are taking a step away from forging new partnerships?
There are no immediate plans to add to it. Would I say “no, never?” No, absolutely not. But on the other hand, absolutely not anytime soon because we’ve got to figure out what we’re doing here first.

You guys felt the need, in your words, to “set the record straight” this week in response to comments made by Sixpoint. Why did Brooklyn feel the need to respond directly?
We said what we’ve said, and we have nothing further to comment on. We’re totally transparent about the ownership and consumers can make their decision.

What are the differences between 24.5% (what Brooklyn sold to Kirin) and 25% (the corporate investment line at which the BA declares a brewery no longer independent)? How does the company view that distinction?
Ultimately, we have a trade group that made a decision, a determination, and we fit within that determination. If someone wants to say that definition in their mind isn’t accurate, I can’t prevent anyone from thinking that way. The way I look at this whole thing is, I know that my brother and I have control of Brooklyn Brewery. We run Brooklyn Brewery. There’s no path to control. So as far as I’m concerned, I’m independent. The same thing with the guys we’ve just invested in. The founders retain control. For the purpose of the BA definition, because we’re a BA brewer, it doesn’t really matter what percentage we own. But to me, it wouldn’t really matter anyway.

What’s next for the Brooklyn brand itself, setting aside the slew of new partnerships?
We’re much more focused on the supply side and managing the supply side. It doesn’t sound particularly sexy, but everything from sourcing ingredients to ordering beer on time to making sure your beer is fresh out there. We’ve spent a ton on really making sure we’re providing the necessary support for our wholesalers and distributors. I think what’s next is to kind of keep doing what we’re doing to get better at it.

We want to position ourselves in the best way possible to perform in this new environment that we’re in. We’ve made our big strategic moves here, from taking the investment from Kirin to then all these things we just talked about. Now it’s about executing. You try and run your business proactively, but of course you’ve also got to be reactive to what may happen in the marketplace. I think all of us who observe this craft world closely know we’re in a period of big change. As I joke, I’ll tell you what I think today, but I reserve the right to change my opinion tomorrow. I think anyone who blindly plows forward is at peril. So we keep our eyes open.

—Dave Eisenberg