THE GIST
With an agreement in place to buy 100% of New Belgium Brewing Company, Kirin Holdings, through its Lion Little World Beverages global craft beer division, has tentatively collected the first jewel in a future crown of U.S. breweries.
Barring a “no” vote by New Belgium’s employee owners, who still must approve the acquisition, the deal is expected to be finalized for an undisclosed sum within the next six weeks. Forbes reports the value between $350-$400 million.
The move sets up what will be another “collective” of breweries, an increasingly common theme this year as the beer market tightens and growth becomes harder to come by. Kirin already owns 24.5% of Brooklyn Brewery, with Brooklyn owning unknown minority stakes in 21st Amendment Brewery and Funkwerks. New Belgium also owns San Francisco’s Magnolia Brewing Company, which is set to be sold as a package deal with the Colorado brewery.
[Disclosure: New Belgium Brewing Company underwrites GBH’s Into the Wild series.]
Aside from Magnolia, it’s not clear what ramifications these connections may ultimately have for the Kirin-owned superteam, but in an open letter posted on the company’s website, New Belgium co-founder Kim Jordan said that the brewery—the fourth-largest, Brewers Association-defined “craft” brewery in the country—would “anchor a US Craft Beer platform.”
“We’re thankful for Lion and Kirin’s support of our values,” she wrote, “and I’m excited to help to build a collective of breweries along with the management of New Belgium, who share the same commitment to delighting beer drinkers: with great beer, great businesses and great collaboration amongst us.”
Whatever happens with this “collective of breweries,” the new assortment won’t be alone. Fireman Capital’s CANarchy brands have embraced the power of marketing under one name, while Legacy Breweries, anchored by Ninkasi Brewing Company, wants to build a roster of 15 companies in the next year. Boston Beer, maker of Samuel Adams, found a partner in Dogfish Head Brewery that both businesses needed, while last week’s sale of Craft Brew Alliance and its roster of eight beer and cider producers further emboldened Anheuser-Busch InBev’s Brewers Collective craft division.
Should the deal close, New Belgium would lose its “craft” designation from the Brewers Association. That’s the same scenario some of the other largest brewers in the country have faced: in recent years, Goose Island Brewery, Lagunitas Brewing Company, Ballast Point Brewing, Founders Brewing Company, and more have lost that designation. The Brewers Association has updated its definition multiple times to help keep some of the largest members in the fold—most specifically Boston Beer.
WHY IT MATTERS
After thriving for years and helping to embolden a U.S. drinking culture around the idea of “craft,” which paved the way for 8,000 breweries across the country, these large, tenured companies can no longer live as easily as they did in the past. The future is now, and they need help from each other to survive in an increasingly competitive industry.
“If you feel a squeeze coming, then what can you do?” asked Simon Thorpe, then-president of Duvel Moortgat USA, in December 2015. “If you can see this and you've got the presence of mind to say, ‘I'm in the wrong place’ then you owe it to yourself to reinvent yourself and you can [transform].”
Speaking at Brewbound Session San Diego almost four years ago, Thorpe could have been talking about today’s climate for many of the U.S. craft breweries he highlighted during his talk, including Boston Beer, Deschutes Brewery, and New Belgium Brewing Company. Now, almost four years later to the day, it was Thorpe who helped broker the New Belgium deal in his new role as U.S. managing director for Lion, a subsidiary of Kirin.
(In a strange coincidence, it was just two weeks after Thorpe praised New Belgium in his talk that rumors began swirling that the Colorado brewery was seeking to sell.)
In an interview with Brewbound yesterday, Lion Little World Beverages managing director Matt Tapper echoed the theme of Jordan’s statements, noting that Thorpe would play a key role in building the “foundation” Lion has in New Belgium. Thorpe had previously helped bring Boulevard Brewing Company and Firestone Walker Brewing Company under the Duvel Moortgat USA banner, including the latter on a bit of a buzzer beater in 2015, when Thorpe positioned Duvel against a rival offer from AB InBev. Firestone Walker was set to be AB InBev’s anchor in California, but the company then turned its attention to Golden Road Brewing, which it bought in fall 2015.
As the bedrock of whatever collective is formed, New Belgium will benefit from the new financial backing. Costs for its $140-million Asheville, North Carolina facility, which opened three years ago, rose during a series of lengthy delays. Early last year, New Belgium laid off 25 employees in Colorado and three in North Carolina, citing a "decline in our business." After expanding staff in 2013 to support the Asheville facility, the company had to adjust payroll because "we haven’t yet achieved our goals in the face of changing dynamics in craft brewing," New Belgium said in a press release.
It's unclear how a year's delay in opening that facility and adding 70,000 additional barrels of capacity in Fort Collins at the same time left a lasting impact on the business, and whether it would have put New Belgium in a position for any future layoffs. Attempts to reach CEO Steve Fechheimer were unsuccessful.
Jordan also noted in her letter that an influx of money will help balance the cash demands of the company’s Employee Stock Ownership Plan (ESOP) as New Belgium works to grow its brands.
Since hitting a peak of 945,367 barrels in 2014, New Belgium’s volume has since dropped 10.2%, to last year’s reported 848,609 BBLs. Meanwhile, the brewery was putting more emphasis on its packaged beer sales, increasing the volume of beer sold in stores tracked by IRI, a market research company, from 53.6% in 2016 to 58.3% last year. Sales of flagship Fat Tire Amber Ale have declined steeply: it fell 26% in grocery, convenience, and other chain stores, plus liquor stores from 2016-2018, and is on track for another down year in 2019. Meanwhile, most growth has come from the Voodoo Ranger lineup of IPAs, which comprises three core beers and a rotating collation of three others, as well as well as The Hemperor HPA, although Hemperor will soon be discontinued.
In her letter to employees, Jordan mentioned Lion Little World Beverages’ appreciation for New Belgium’s specialty lineup of sour beers. A majority of those are sold through the company’s taprooms and are on track to grow by about 2% in dollar sales this year.
Jordan noted that the new backing “and [Kirin’s] resources in R&D and innovation can only help to grow our own capabilities,” which could point toward further innovation strategies for brands, or finding ways to lean in hard on Colorado’s new beer sales laws. For the first time this year, the state allowed all grocery and convenience stores to sell full-strength beer, prompting a rush of breweries and brands to capitalize on the newly available shelf space and revenue. New Belgium found particular success with its Voodoo Ranger IPA and Dayblazer Easygoing Ale thanks to the new law; both are among the best-selling brands in Centennial State grocery and convenience stores.
Ultimately, the brain trust behind New Belgium may prove to be the most important piece to this deal. As the business starts its next phase as part of Kirin, Jordan will stay on as an advisor, and CEO Steve Fechheimer will keep his position. Along with Thorpe, who will help direct future acquisitions, the trifecta’s major experience will help shepherd what happens next, and will benefit any new owners who come aboard.
This kind of setup has been pivotal for other burgeoning brewing collectives around the country. Ninkasi co-founders Nikos Ridge and Jamie Floyd are guiding Legacy Breweries’ plans, while Craft Brew Alliance has CEO Andy Thomas and Christine Perich—chief financial and strategy officer, and former New Belgium CEO, COO, and CFO—on board for its move into AB InBev’s orbit. CANarchy also has one of the country’s most renowned brewers, Cigar City Brewing’s Wayne Wambles, guiding production for multiple brands across facilities.
Should New Belgium employees approve the sale to Kirin’s Lion Little World Beverages, that will result in a powerful organization. The team-up won’t just help New Belgium individually compete better on a national scale, but will create opportunities to rival other brewery superteams, both present and future. There’s certainly an incentive to move forward for those employee-owners: “more than” 300 employees are set to get “over” $100,000 in retirement money should the deal finalize, “with some receiving significantly greater amounts,” according to Jordan’s letter. Multiple sources who were present for a presentation by Jordan to employee-owners tell GBH that some employees will receive between $500,000 and $1 million.
It’s a game-changing payout for many who’ve been a part of helping New Belgium build, grow, then evolve with the U.S. beer industry. As things have gotten harder in recent years, company leadership sees this as the time to move onto the next stage and build something bigger—and hopefully better.
Words by Bryan Roth