THE GIST
London’s Brixton Brewery has partnered with Heineken UK in a move that will see it increase capacity almost tenfold. Heineken will acquire an undisclosed minority stake in the business for an undisclosed sum. Following the investment, Brixton will move from its existing 3,500-hl (3,000-BBL) site on Brixton Station Road to a new 15,000-square-foot space on Milkwood Road, less than a half mile away.
Local couples Jez and Libby Galaun and Mike Ross and Xochitl Benjamin founded the brewery in Brixton, South London, in 2013. The new site, which is expected to be operational by April 2018, is expected to produce approximately 30,000 hl (21,300 BBLs) of beer annually.
WHY IT MATTERS
As reported recently by GBH, London’s brewing industry is continuing to experience a strong growth curve. This has made it an increasingly tempting market for the industry's biggest players. Recently we’ve witnessed SABMiller and, subsequently, Asahi acquire Meantime Brewing. ZX Ventures, the venture capital arm of AB-InBev, purchased Camden Town Brewery in December 2015. And earlier this year, Carlsberg, in partnership with Brooklyn Brewery, acquired London Fields Brewery in a deal reportedly worth £4 million ($5.3M).
Heineken’s move is far more cautious, however, having only bought a minority stake in the four-year-old Brixton. Its expansion is also far less significant than Camden Town’s move to its brand new 200,000 hl (170,000 BBLs) production brewery earlier this year. In fact, the move will still see Brixton remain smaller than some of London’s larger independent craft breweries, including both Beavertown and Fourpure.
“We’ve had one eye on other locations ever since we started the brewery,” co-founder Jez Galaun tells GBH. “We always felt that we wanted to grow and that it needed to be here in Brixton—that was something we weren’t prepared to compromise on.”
Galaun says the brewery had looked at several financing options for its expansion, including crowdfunding, private investment, and private equity. But it was Heineken, who originally contacted the brewery a year ago, that proved to be the right fit. Galaun says it’s the “most ideal partnership for us.”
“We could see how well they were working with Lagunitas in the U.S.,” Galaun adds. “They loved our beers, were excited about our brand, and asked if there was a way we could work together. We didn’t really know where that would lead to, but as talks went on we got to know them and we trusted them.”
Galaun didn’t disclose the percentage of the business sold nor the amount that Heineken invested, but he does cite Brooklyn Brewery, which is 25% owned by Japan’s Kirin Brewery and has distribution and production ties to Denmark’s Carlsberg, as a major influence.
Lagunitas, which initially sold a 50% stake of its business to Heineken for a reported $500 million in 2015, eventually sold the remaining portion of the business. The family-owned Dutch brewing giant went on to acquire the California based brewery outright in early 2017.
Big breweries taking a minority stake in their craft counterparts is becoming increasingly common as the industry looks for new ways to sustain growth. Brooklyn’s aforementioned deal with Kirin being one example, Founders selling a 30% stake to San Miguel Mahou in 2014 is another. With both brewery and private equity money moving around in ever-greater amounts, the question of what being “independent” means has seldom been asked more frequently.
But does the difference between private equity and brewery investment mean anything to consumers? BrewDog—which sold a 22% stake to private equity firm TSG Consumer Partners earlier this year—is another interesting example. In our recent podcast episode with BrewDog co-founder James Watt, he described minority investments by breweries as an “eventual path to control.” It remains to be seen if, as with Lagunitas before them, this will be the eventual fate of Brixton.
“We set ourselves certain criteria with regards to our expansion,” Galaun continues. “Firstly, that we need to expand in Brixton—this is our home. Secondly, that the four founders would continue to lead the business and maintain the majority stake, which is what we’ve done.”
The expansion means that after more than a year of being unable to meet growing demand for its beers, Brixton will finally be able to make amends with existing customers as well as make its beer available to new accounts. It also means that the brewery will be creating a minimum of 30 new jobs within Brixton over the next five years.
“It was vital to us to keep a production business in Brixton,” co-founder Xochitl Benjamin tells GBH. “We’re excited about finally being able to achieve what we set out to do when we initially opened the brewery in 2013.”
—Matthew Curtis