Anheuser-Busch InBev is returning to the region where its craft acquisitions began—and with the hopes that an Ohio brewery will play a pivotal role in shaping shelves across the Buckeye State.
The multinational announced its purchase of Cleveland's Platform Beer Company this week: AB InBev's second Midwest acquisition after Chicago's Goose Island in 2011. The buyout is AB InBev’s 11th overall, the most recent previously being 2017’s purchase of North Carolina’s Wicked Weed Brewing. Like Goose eight years ago, Platform is a brewery on the rise and in need of capital to compete on the next tier of regional breweries. It’s grown exponentially since its opening in 2014, thanks in part to an eclectic portfolio and a contract-brewing-facility-turned-production-space.
Platform has relied on just two year-round brands to push its portfolio, which hit 27,000 barrels last year: New Cleveland Palesner and Speed Merchant White IPA. These two beers represent about 50% of Platform's production, with the rest of its annual volume coming from seasonal and one-off draft and canned beers. In a press release announcing the purchase, AB InBev highlighted the brewery’s vast portfolio, which has amassed “more than 600 recipes that include a variety of unique seasonals, sours, ciders and fruit ales, barrel-aged beers, and a line of hard seltzer.”
The acquisition takes place at a pivotal moment in Ohio beer. Per capita consumption is on the decline (-6.9% from 2013–2017, the latest year of data), but Brewers Association-defined craft beer production has held steady over the last five years, increasing 4.3% 2014–2018 (the most recent data available). Ohio ranks 11th in “gallons per 21+ adult” for BA-defined "craft," and has attracted outside investment the likes of Southern Tier Brewing Company—a company that started in New York, is headquartered in North Carolina as part of its Artisanal Brewing Ventures partnership with two other breweries, and which opened a satellite taproom in Cleveland last year.
There was already plenty of interest in Ohio before ABI planted its stake, with big shifts toward craft taking hold around 2015. But the move creates an opportunity to scale up a homegrown brand that has already proven successful within its local market. Platform’s ascension has run parallel to another Ohio company, Rhinegeist Brewing, which went from 2,000 BBLs in 2013 to 100,302 in 2018, and has made one of the more successful transitions into the regional-brewery category in the country. At one point, that growth led to unfounded rumors of a sale, but the story is different this time around with Platform.
With this purchase, AB InBev is getting a host of benefits, including multiple brewery and taproom touchpoints across a growing state, as well as the ease of bringing a self-distributed brand into its network of wholesalers. Mika Michaelis, president of AB InBev's Brewers Collective group of craft breweries, noted that Ohio is increasingly a "big state" for the company with "an emerging craft scene" happening in multiple cities, led by Cleveland.
Though the five-year-old company has grown with slow deliberation thus far, Platform’s business model is now, most importantly, set to scale. With nearby legacy breweries like Great Lakes Brewing Company seeing sales declines, Platform’s constantly changing collection of beers and hard seltzer range have the ability to compete in a new way in Cleveland and beyond.
Over the most recent 52-week period tracked by IRI, a market research firm that compiles scan data from chain stores, the Platform portfolio of beers had increased sales by 8.7% in grocery, convenience, and other stores across its entire six-state distribution footprint. Those growth numbers increase to 11.2% in the state of Ohio, and 13% in grocery stores in its hometown of Cleveland.
As the sixth-largest Brewers Association-defined “craft” brewer in the state, Platform’s most direct competitor now appears to be Fat Head’s Brewery, which has two brewpubs in the Cleveland suburbs, as well as other locations in Canton and Pittsburgh. Fat Head’s sales growth in the same chain locations as Platform has been more impressive, jumping 30% across its entire distribution footprint, 26.7% in Ohio, and 19% in Cleveland grocery stores over the past year.
All of this has the potential to create significant pushback against Great Lakes—the largest brewery in the state, also located in Cleveland. The production volume and IRI sales are all down (-4.6% full footprint, -4.2% Ohio, -9.2% Cleveland grocery stores) for Great Lakes’ family of brands. With the rise of Rhinegeist, steady growth of Fat Head’s, and new backing for Platform, the 31-year-old brewery is facing stiff competition from its much younger counterparts.
In an interview with Good Beer Hunting, Platform co-founder Paul Benner cited increased access to raw materials and an influx of capital for investment in equipment and staffing as keys to why this deal made sense. These kinds of efficiencies are needed in today's industry, he notes, because it makes it easier to be successful for two-to-three decades instead of, say, two-to-three years.
"It gives us the resources we've never had the opportunity to enjoy in our five years," Benner says. "We're a very scrappy brewery and we've grown with hard work and effort, but most important, it's a chance to give back to employees who have sacrificed a lot for us."
What Benner didn't address specifically in talking about the needed advantage to sustain and grow his business was the collection of breweries around him. Ohio is home to about 300 breweries, but few of relative scale that could be considered direct competitors to Platform. Especially since the company's distribution side could quickly play a more prominent role in growth, using AB InBev's powerful distribution network is a potential gateway to added shelf space.
The majority of Platform's volume has been self-distributed until this point. Benner says that, depending on seasonality of beer-buying (summer is traditionally a high point for beer, winter a low), taproom sales account for 20–40% of volume in any given month. Distribution by his staff is now "halted as a part of this," he says, so Platform can transition into ABI's wholesaler network. Current sales staff will remain on to act as brand reps for the brewery, and Platform will have "an incredible sales force in Ohio," Benner says.
About 90% of Platform's beer is sold in its home state, though brands were only available in about half of Ohio’s major chain stores at the start of the year. Once the AB InBev deal is closed and distribution efforts are aligned, that number will rise.
Of course, like any modern brewery, that's only part of the game. There's a line of hard seltzers aptly named “Seltzer Project,” which will play in a category on track to sell $1 billion of product this year. And all these brands can be found across a network of taprooms, including locations in Cleveland and Columbus, a coffee-beer bar in Cincinnati, and a soon-to-open barrel-focused tasting room in Cleveland. There’s also a planned brewpub in Pittsburgh.
This kind of hub-and-spoke business model is something that AB InBev’s craft breweries have expanded into in recent years, with 10 Barrel Brewing Company and Golden Road Brewing both operating additional locations outside their home bases. Wicked Weed also has a sorta-bar space in Atlanta that’s inexplicably still not open. These kinds of own-premise options are key for growth, as more breweries lean into the taproom model to connect with drinkers while protecting margins for their bottom line.
Meanwhile, a key advantage for AB InBev in this move is the scale at which Platform can grow. There's currently a capacity of up to 45,000 BBLs at Platform's Cleveland production facility, which was once advertised as a contract brewing business for the industry but ended up almost exclusively supporting the brewery’s needs. After finishing 2018 at 27,000 BBLs, there’s some runway, and Benner says there’s additional infrastructure to add tanks.
“If there’s a need to cross-brew, that’s something we can explore,” he adds in regard to potentially shifting any production to AB facilities.
For all the changes that are sure to come, there’s one thing Benner is most excited about: with about 100 part- and full-time employees scattered across the state, bringing on more people and offering enhanced pay and benefits packages means his team has more recruiting power than ever before. It’s going to come in handy, too, as Platform now has the means to challenge some of its biggest and most-tenured peers in Ohio.
Words by Bryan Roth