THE GIST
Bell’s Brewery, the nation’s 16th largest brewing company, today announced its sale to Lion Little World Beverages, a global craft beer division of Japan’s Kirin Holdings. It’s the second purchase this fall for Kirin, which just days ago got approval for a reported $368 million deal (U.S.) to purchase Australia’s Fermentum, owner of three breweries: Fixation, Stone & Wood Brewing, and Two Birds. At the start of 2021, Kirin also bought a minority investment in India’s Bira 91 for a reported $30 million.
Americans may recognize Kirin for its acquisition of New Belgium in 2019, and the latest move is the largest craft beer company sale since. Bell’s produced nearly 462,000 barrels of beer in 2020, sold in 43 states and Puerto Rico. Bell’s Facebook page indicates all of its locations will be closed Nov. 10 and 11 to allow staff to “reflect on the past year and talk about what’s ahead.”
Founded in Kalamazoo, Michigan, in 1985, Bell’s is the top-selling craft brewery in its home state, selling $48.5 million in Michigan chain retail Jan. 1 to Oct. 31, as tracked by market research firm IRI. That’s a little under half of its national tally of $105.7 million. In the Mitten State, Bell’s sold almost $20 million more than the second best-selling brewery, Founders Brewing Co. (owned by Spain’s Mahou San Miguel). Bell’s nationwide sales are on pace with Firestone Walker Brewing Co. and Anheuser-Busch InBev (ABI)-owned Elysian Brewing Co.
With this acquisition, Kirin now owns two top-20 U.S. breweries in terms of production. Thanks to spiking sales for its Voodoo Ranger line of IPAs, New Belgium added almost 100,000 barrels of production during its first year of ownership by Kirin in 2020, and has surpassed 1 million barrels of production this year.
WHY IT MATTERS
The sale to Kirin/Lion offers benefits on two fronts:
For Kirin: Bell’s adds another large American brewery to the company’s portfolio in a region (Midwest) in which it doesn’t currently own one, aiding Lion’s global expansion and creating a more thorough collective of U.S. breweries stretching from coast to coast. In addition to Colorado’s New Belgium, Lion’s U.S. holdings currently include a minority stake in New York’s Brooklyn Brewing (which itself owns unknown minority stakes in California’s 21st Amendment Brewery and Colorado’s Funkwerks) and California’s Magnolia Brewery (which New Belgium bought in 2017 and which was included in its sale to Lion).
Bell’s has made significant improvements at its production facilities in the past decade, too, spending $7 million to upgrade equipment in 2017 and 2018, on top of a $52 million expansion announced in 2010. Upgrades included a tunnel pasteurizer, a piece of equipment that allows for greater quality control in products that require post-fermentation juice additions, like flavored malt beverages and ready-to-drink (RTD) cocktails. If Kirin and Bell’s see fit, this state-of-the-art equipment could offer a path for FMBs and RTDs, both growing "beyond beer" segments that hedge against an overall decline in beer sales over the past decades.
For Bell’s: The sale solves a succession question for the Bell family, which for years indicated it intended the brewery to stay in family hands. Larry Bell’s daughter, Laura Bell, briefly served as CEO of the company from February 2017 to May 2018 after a decade in other roles within Bell’s. But after she left that leadership role three years ago to “explore [her] other passions and interests,” it wasn’t clear that anyone within the Bell family would helm the brewery in the coming years.
“There’s really only a couple of us left who were the founder and president and are still the founder and president today of an independent brewery that doesn’t have an investor partner or hasn’t been sold,” Bell told Encore Kalamazoo this year. “In the top ranks, there’s not many of us left.”
The sale marks the end of 36 years of family leadership for Bell’s, a not-unusual progression for a brewery of its size and age. Other pioneering craft breweries founded in the 1980s and 1990s—Goose Island Beer Company, Lagunitas Brewing, Cisco Brewers, Widmer Brothers Brewery, Founders Brewing Co.—have since sold all or a portion of their shares, with great interest from international companies from Belgium, Spain, and Japan.
While ABI has slowed its pace of brewery purchases in recent years, the creation of small brewery collectives has emerged as a model for smaller breweries looking to combine ownership and resources. For example, Mahou San Miguel and Founders bought into Colorado’s Avery Brewing Co., which now produces some Founders beers. Globally, mergers and acquisitions are occurring at a record pace, aided by low interest rates, and represent $4.3 trillion year-to-date in 2021.
“The M&A momentum points to a fundamentally strong market looking ahead. This pace of dealmaking could continue for the next 18-24 months, with new financing solutions and sectors driving activity," Andrea Guerzoni, global vice chair at Ernst & Young, tells Reuters.
In 2012, Larry Bell floated a potential sale of the brewery if he couldn’t convince the company’s minority shareholders to sell their shares to him and his family. At the time, Bell told MLive this was a move designed to ensure ownership of the brewery would transfer to his children upon his death. A year later, after the negotiations forced a pause to a $52 million expansion project, the Bell family took full control of the brewery.
According to Encore Kalamazoo, Bell’s had just two shareholders, Larry and Laura Bell, before the sale. The duo turns over ownership of the company while the brewery is still in a place of strength: The brewery grew production volumes 9.5% between 2016 and 2020, and though its sales in chain retail stores dipped -2.4% in the 52-week period ending Oct. 31, its sales outperformed the overall craft beer category, which was down -3.3% in those stores during the same period.
For Lion, Bell’s is an attractive asset. It has a near-national sales footprint, a stronghold in its home market of Michigan, and popular products in two of craft beer’s most important categories: IPA (Two Hearted IPA) and seasonal beer (Oberon Ale).
Two Hearted is the #6 IPA in chain retail, and represents just over half of Bell’s total year-to-date sales in those stores. It grew +92% between 2017 and 2020.
This year, Two Hearted is expected to exceed 2019’s national sales in chain retail stores by about $7.1 million.
In the 52-week period ending Oct. 9, Bell’s Two Hearted was the #15 craft beer brand in grocery, drug stores, liquor stores, and convenience stores tracked by market research company Nielsen. It sold $61 million during that time, just $3 million less than Blue Moon Light Sky, which was Nielsen’s top-selling new craft beer brand in 2020 (per the “craft” definition used by retailers and market research companies, and not the Brewers Association).
Oberon, Bell’s second biggest brand, is the vast majority of its seasonal beer SKU, which has sold $22.5 million in chain retail stores tracked by IRI, about as much as Miller 64 sold in the same stores this year. Oberon is such a successful seasonal brand that its annual spring return, Oberon Day, is considered a harbinger of spring as significant as any solstice date.
Those flagship products give Bell’s strength with its distributors and the potential to ramp up e-commerce sales. This is critical as retail placements in stores traditionally represent 80% of total alcohol sales, a percentage that’s increased since the COVID-19 pandemic. E-commerce represents roughly 4% of U.S. alcohol sales and is growing fast—it was 1% before the pandemic. With in-demand, recognizable products and wide distribution, Bell’s can win on both fronts.
The company is known for long-standing relationships with its distributors, earning Bell’s the title of National Beer Wholesalers Association’s 2017 Partner of the Year. Those relationships haven’t always been smooth sailing, however: Bell’s famously suspended sales in—then re-entered—Illinois and Virginia over disputes regarding franchise law, which governs the contracts between breweries and distributors. Those scuffles, though, “racked up wins” for Bell’s in terms of its power in distribution contracts, as lawyer Ashley Brandt put it in a post for Libation Law Blog.
Ultimately, the Lion-Bell’s transaction mutually benefits both parties: Larry Bell finds future leadership for Bell’s, and Kirin Holdings picks up another top-10 U.S. craft brewery, this time with deep roots in the Midwest. Larry Bell hands over the brewery from a position of strength; it’s up to the buyer to continue that legacy.
Words by Kate Bernot