The thread about closings finally surpassing openings, among other threads, got me thinking about this; What are the realistic paths forward for a brewery who's ownership is getting up in age and looking to retire? Obviously a business can be passed to the next generation of family members, if you've got any interested. There's the ESOP option, which sounds great on paper but seems like it has always preceded a sale. You can take it public, I don't know when the last time anyone has done that since Boston Beer is? Otherwise it's a sale to...someone? So is that the future we can expect for pretty much all our local brewers? They'll be sold off or just shut down when the owners retire? Has anyone seen successful examples of modern breweries navigating succession successfully?
Not only obvious, but certainly the route most of the successful (post-Pro - Beer Wars era) US breweries did it. Busch family still at AB at the time of sale, Uihleins (Schlitz's nephews) still at Schlitz and even tho' the company merged with Premier during Prohibition there was still a Pabst at Pabst into the 1950s (IIRC), etc. Even many of the large regionals founded in the nineteenth century that survived into the post-Repeal/postWWII era were being run by suceeding generations of Schaefers, Haffenreffers, Liebmanns (Rheingold), Ortleibs, Schmidts until sold or closed. And today, of the handful of pre-Pro breweries that survive, there are Yuenglings, Straubs, Schells (Martis) and Coorses involved in those breweries. Pete's Brewing Co. did it, around the same time as BBC. At the time (1995), they were far and away the #2 "craft" brewery (about 1/3 the size of Boston) but 2 and a half years later, they sold to Gambrinus (Corona importer, owner of Spoetzl). IIRC a lot (but still a minority) of Pete's stock was owned by Stroh and Stroh executives, Pete's then contract-brewer which would soon also go out of business. Yeah, they're something of a scam and referring to them as being "employee owned" is somewhat euphemistic since most decisions are still controlled by hired managers. Read the business press and they call them "exit strategies" for owners, complete with a lot of tax benefits. But the ESOP members at breweries that were able to vote to sell out at least wind up with more than workers at shuttered or sold breweries.
Matts at F X Matt, too. (Knew I was forgetting one ). So, of the 14 or so US breweries (not brands!) that survive from the Pre-Pro era in one form or another, even as subsidiaries of larger firms, about a third still have founders' family members in management. Anheuser-Busch, Coors, Pabst, Cold Spring, Matt, Minhas (formerly Huber), Genesee, Schell, Spoetzl, Stevens Point, Straub, The Lion, Pittsburgh, Yuengling
The Pete's stock certificate is on sale! https://scripophily.net/petes-brewing-company-california-1986/ The IPO in 1995 was at $18.00, increasing to above $25 that day. Today a certificate will set you back $89. It looks like you might get something more than your initial investment if you had held onto a 1 share certificate. Does any investor now receive real certificates these days??
Interesting but I guess I'll hold onto to the brewery stock I already own. Gotta come back eventually... right? Gotta admit, bought it back in the day before online sales, and with all that screaming in the background on the phone to my broker's office, I had a hard time hearing what the guy was saying - damn, I thought I was buying STOCK ALE.
I’m worried that this a different era and craft beers will follow the path of California wineries where they will all be bought out and consolidated. Venture funds, financial orgs will buy them and consolidated. There will be admirable exceptions, but the rule be being bought out and move on.
I think we've seen what happens to most legacy breweries as the principles leave. They get taken over by people with more business sense and money and start to wither at the vine as they lose authenticity and understanding of the product. So far no brewery has transitioned beyond that included Sam Adams it just takes slower to fall from the top. A brewery rides on its authenticity when it isn't the big 3. maybe Yeungling is different but that's family owned and chasing a different segment. When you forget who you are and what got you there so far those craft businesses have failed. If you do not forget what makes you unique, often location and certain attitude towards the product, you can survive. If you become an IP farm you already dead and its just a matter of where you are on that scale.
For authenticity I think back to Lucky Lager. They weren't chasing anything but trying to move the product. Their slogan was "It's Lucky when you live in America!"
For the local/small brewers relying on the taproom profit model, it’s probably not much different that when the owner of a restaurant hangs it up. Either a family member takes over, sold to another person who wants to do another brewery (or try to retain same brewery, but that never really ends well), or it’s all sold off and the space gets repurposed for another business or sits idle/vacant.
“Why don’t any of my kids want to take over the brewery?!!!! Ungrateful wretches just want to cash out and move to the Caymans!”
The book has already been written. http://francesstroh.com/book/beer-money/ (See also: https://www.forbes.com/sites/kerrya...-the-largest-private-beer-fortune-in-the-u-s/) Here is a Stroh family member writing about her family business from an insider's point of view (but without a detailed understanding of the peculiarities of the beer business). She describes the decline and fall of her family's Stroh brewing empire. I don't think the author gave the management enough credit for trying to survive in a tough environment. All but a sprinkling of regional breweries failed, either moving to expand as Stroh did, or just trying to survive. None of the national brands has survived with significant family management except Coors, as MolsonCoors.
It's not a very good business to be in unless you're a hobbyist as well as a business person, or extremely lucky. I'd take the Caymans (if there was any cash sitting around). Some craft brewery owners I knew were facing retirement age. They knew their brewery needed a big investment to move to better facilities. Should they have taken on a multimillion loan in their 60s when they saw the market becoming more competitive and fragmented before their eyes? They sold, and the new owners made the capital investments that did not pay off. The business was resold (certainly at a big loss) in a few years, but is still operating.
That's true to a certain extent. There'll always be some young dude or dudette that wants to make their mark. Or, someone wanting a career change. Or someone cashing out, and taking on a passion project. Or a brewer that's gone as far as they can in the industry and needs to strike out on their own. The opportunities may be different than the first couple generations of brewery owners, but there will still be opportunities for the willing.
Probably not on radars yet, but I could see this being one of the next PE roll-up strategies. Fragmented industries are ripe for roll-up.
isn't that sort of whats already happening? Tilray, Monster, ABV, whatever the Harpoon based thing is. Seems like PE is taking it's shot and is kind of realizing that it's not the best investment. High capital outlay, saturated market, byzantine regulatory environment. I think that to the extent PE comes into play, it will be one or two funds that figure out how to integrate the brew pub experience into the fast casual franchise framework and they will quickly fill their portfolio up with the regional brands that they need. Reading through this thread and talking to a couple folks locally who are in or adjacent to the industry I'm expecting that it will basically move more and more into a sort of restaurant industry model. The macros can be seen as the sort of top of market fast food type brands available everywhere at the lowest price, then there will be a tier of regional brands (owned either publicly or by large PE entities/macro brands) that will be ubiquitous within their geographical boundaries, then there will be a huge swath of places that will have a lot of churn and will be largely family/privately owned.
I think there are a couple of different discussions here. After a company becomes dominant, how does succession occur. In early days, there was consolidation, then how was ownership of the winners in this process passed. I’m more interested in the short term, the consolidation process, which is on-going. How does it play out, who wins and loses, and to what extent is the creativity we are used to get squashed out. one of the local microbrewers is much more interested in shipping beer than in creating new beer options. I think he is more likely to survive the ongoing shake-out. His brewpub is on,y mediocre, but his growth has been great.
Yeah, I agree that it will probably be a handful of funds that sort of "take over." But it's early stages still. I think it will accelerate as more breweries face financial challenges. Red Lobster brew pub coming to your area. We'll see.
