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Craft brewers tap down resistance to Wall Street investors

Discussion in 'Beer News' started by azorie, Aug 19, 2015.

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  1. azorie

    azorie Pooh-Bah (2,409) Mar 18, 2006 Florida
    Pooh-Bah

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  2. mwa423

    mwa423 Initiate (0) Nov 7, 2007 Ohio

    A somewhat decent read, the question I can't get past is why an IPO would ever be a good idea for almost any craft brewery.
     
  3. drtth

    drtth Initiate (0) Nov 25, 2007 Pennsylvania
    In Memoriam

    Raise money and retain control?

    Boston Brewing has stock out there that has gone from below $17 when I first noticed it to well over $200 these days. But there are two kinds of stock, voting and non-voting. Koch continues to own 100% of the voting stock. That's part of what made him a Billionaire.

    Duvel Moortgat some years back did an IPO on part of their ownership. Raised capital to begin expansion. Did so successfully. Recently bought back the outstanding shares as part of their current wave of expansion and so the whole thing is basically family owned once again.
     
    #3 drtth, Aug 19, 2015
    Last edited: Aug 19, 2015
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  4. Brolo75

    Brolo75 Initiate (0) Aug 10, 2013 California
    Deactivated

    "Craft breweries have a soul, and I think the big money coming into the industry is kind of a challenge to that soul," he said.

    Agree with this statement, big money can change the craft brewery landscape.
     
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  5. mwa423

    mwa423 Initiate (0) Nov 7, 2007 Ohio

    Eh, but you can more easily raise money and retain control through private equity sales by selling a minority stake. Here's the problems I see with going public:

    1. You are now subject to a buttload of accounting rules and securities laws, you have to hire people to manage these things and those people are expensive. Any cash you're putting into your new five accountants is a half million or so you're not putting into the beer/pp&e/etc.

    2. Do you really retain control? Obviously it depends on how you set up the IPO, but what happens when an activist investor (or InBev) just buys every share of stock on the market? Oops, there goes control. If you try the Boston Beer route, I assume there was a discount at IPO for the the fact that the company was controlled 100% by Jim Koch.

    3. If you take private equity money, you can know that the people who have invested in you have done so understanding and (at least the day you sign the contracts) being on the same page about where the business is going. If you decide that maintaining the higher quality of your product is of the utmost importance (which I think craft brewers would want to do) then hopefully a lower margin to support the brand equity of the beer would be an easier sell to private equity who understands that quality comes first. The public market? Screw you, we need higher margins, figure it out or we'll find somebody who will.

    I suppose it's possible that private equity pockets aren't as deep or generous as the myriad of articles about private equity buying into craft make them out to be, but it just seems like it's more trouble than it's worth.
     
  6. jesskidden

    jesskidden Grand Pooh-Bah (3,071) Aug 10, 2005 New Jersey
    Pooh-Bah Society Trader

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  7. Homers_Beer_Odyssey

    Homers_Beer_Odyssey Initiate (0) Jun 17, 2014 New York

    With any successful product, IPOs, buyouts, acquisitions, etc. can destroy quality, as the pressures of mass commercialization take effect. No guarantee this will happen, it's just the danger. That's capitalism.
     
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  8. rgordon

    rgordon Pooh-Bah (2,677) Apr 26, 2012 North Carolina
    Pooh-Bah Society

    Goodness, "craft" beer is not sacrosanct. This is a commercial world and some just move through it more easily than others. If someone wants to sell their successful business, good for them!
     
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  9. jesskidden

    jesskidden Grand Pooh-Bah (3,071) Aug 10, 2005 New Jersey
    Pooh-Bah Society Trader

    Another article about investing in "craft breweries" from Entrepreneur magazine.
    Is Craft Beer as Close to a Sure Thing as an Entrepreneur Can Get?
    :rolling_eyes:

    Sounds like a cult. :grinning: (Quiet - Hear that? I think I hear people singing "Kumbaya").

    More down-to-earth "pluses and minuses" in the full article.
     
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  10. drtth

    drtth Initiate (0) Nov 25, 2007 Pennsylvania
    In Memoriam

    Does sound a bit cult like....

    Have you ever seen any other source to support the claim of failure rate close to zero? That would certainly a difference from the general statistics of approximately 50% expected failure in small business start ups within the first 5 years. :confused:

    If its true the failure rate is that low at this point I'd think it might be an indicator of continuing market expansion as a possible explanation since lower failure rates are to be expected during a growth period.
     
  11. jesskidden

    jesskidden Grand Pooh-Bah (3,071) Aug 10, 2005 New Jersey
    Pooh-Bah Society Trader

    I assume they're basing it on the annual Brewers Association Press Release, which announces the market share and number of new "Craft Brewers" and also includes the number of closures. For instance, for 2014:
    So, around 1.3% "craft breweries" closed last year (based on the final 2014 figure - it'd be a bit higher - but still under 2% - if based on the 2013 EOY total).
     
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  12. lordofthemark

    lordofthemark Initiate (0) Jan 28, 2015 Virginia

    Craft beer has had a different culture, more in common in some ways with the artisan al and local food movements, than with mainstream consumer products sectors. That may well change soon, as market conditions change, but there is much evidence it has not ended yet. That culture, more than size or quality is what sets craft apart, and is what BA is trying, with some awkwardness, to define in their data. Naturally many consumers are indifferent to that culture, and some people are hostile to it (needing to mock it with the term kumbayah) but some consumers actively support it, and it seems to be important to many brewers.
     
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  13. JackHorzempa

    JackHorzempa Grand Pooh-Bah (3,181) Dec 15, 2005 Pennsylvania
    Pooh-Bah Society

    I tend to agree with @lordofthemark in that it seems that the craft beer movement has a culture about it. In my area this culture seems to be related to the buy local aspect. If this is indeed the case, I can see folks supporting their local craft breweries as part of a community thing.

    In contrast, most other business sectors (e.g., restaurants) are simply just businesses without a community outreach part to it.

    Maybe this explains why craft breweries are statistically more successful as compared to other business sectors?

    Cheers!
     
  14. Kman_Colorado

    Kman_Colorado Crusader (403) Aug 17, 2014 Colorado

    For now the kumbaya culture may exist, but I believe that once the number of breweries becomes saturated enough that it impacts high margin sales at the tap room. Then all gloves will come off as people fight for their livelihood.

    The difference I see to the artisan food movement is that there aren't the large number making the same product. How many brewers are their in Denver vs how many for example local goat cheese producers?
     
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