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Duvel Moortgat shopping for US breweries

Discussion in 'Beer News' started by jesskidden, Aug 9, 2013.

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  1. dennis3951

    dennis3951 Mar 6, 2008 New Jersey
    Subscriber Beer Trader

    Wouldn't Duvel Moortgat itself be considered a "craft brewery"?
     
  2. LambicPentameter

    LambicPentameter Aug 29, 2012 Michigan
    Beer Trader

    I can't see Allagash being the brewery, personally. They already own a brewer that focuses on Belgian beer styles that is located in the Northeast region of the U.S. They don't really benefit from any expansion of distribution channels or moving into new markets by doing that. Part of the point of buying up other breweries is to take advantage of expertise and infrastructure that the other brewery may have established that your own company is trying to break into.

    Too many people are thinking about this too simplistically--Belgian brewer must want to expand to a U.S. brewer that makes Belgian-style beers. I know it's important for a company buying another company to stay within its wheelhouse, but they also don't want to cannibalize themselves by purchasing a brewer that sits firmly in a market segment where they already have a solid presence.

    My best guess (which is tragically uninformed, but hey that's what the internet is for, right?) is that they are looking to expand in a different region at the very least (maybe West Coast or Midwest), and I would hazard a guess that they are going to step at least a *little bit* outside their core competency. Maybe a brewer that shows some propensity for Belgian styles, but also has a portfolio that includes other great American styles. Obviously any final decision is also dependent upon the details of the deal, which we won't be privy to.
     
    VictorWisc likes this.
  3. VictorWisc

    VictorWisc Jan 2, 2013 Massachusetts

    Don't know how much you follow M&A in general, but the reasons you give as negatives are actually very good reason for a merger and in no way would an acquisition of a large brewery jeopardize further acquisitions (more to leverage!). Employee profit sharing is otherwise called "Make me an offer!" AB was "a very large brewery" and yet it somehow managed to get sucked into InBev. Plenty of companies previously promoting themselves as "employee-owned" (e.g. Avis) are now owned by someone else. Those shares employees had in the original company are simply exchanged for smaller (but initially more valuable) shares in combined company.
     
  4. Premo88

    Premo88 Jun 6, 2010 Texas

    having just had my first Ommegang brew, I'm all for it ... I love dubbels, and Ommegang's Abbey Ale is spot on as far as I'm concerned. good stuff!
     
    VictorWisc likes this.
  5. emannths

    emannths Sep 21, 2007 Massachusetts

    DM has made no secret that premium pricing and branding are a major aspect of the Ommegang brand. Ommegang pricing is not simply higher because it costs more to make in 2013 than in 2003. It's higher by design, both as a money maker and also as a signal to consumers that this is a "luxury" product and on par with Belgian imports.

    If they buy someone like Allagash, etc, that already focuses on the top pricing tier, I don't think they'll blindly raise prices more--they're not dumb. But if they buy someone that's a little more focused on reasonably-priced 6pks, I wouldn't be surprised to see more emphasis on shifting the brand to a more premium category.

    As for targets...I dunno, maybe something like Green Flash and Jolly Pumpkin? Both have ties to Belgian styles, but the focus is not on the dubbel/tripel/etc archetypes. Both would add geographic diversity, and both have a good foothold in the realm of beers priced higher than $10/6. I'm not sure if JP's process lends itself to growth though, to say nothing of their desires.
     
    LambicPentameter likes this.
  6. Stugotzo

    Stugotzo Jun 13, 2012 Florida

    As a CPA I'm fascinated by this "higher by design" and "a signal to consumers that this is a luxury product" concept.

    In fact, I'm going to double my prices for tax returns next tax season to see if I can't make more profit and possibly attract a higher income level of client. And just for the hell of it, if any potential client approaches me looking for an estimate, if their name starts with a D, M, or O (Duvel Moortgat Ommegang), the estimate will be triple what I normally charge.
     
    VictorWisc likes this.
  7. emannths

    emannths Sep 21, 2007 Massachusetts

    Try it! It's a real, well-documented thing: http://en.wikipedia.org/wiki/Veblen_good
     
    vonnegut21, JackHorzempa and Ranbot like this.
  8. VictorWisc

    VictorWisc Jan 2, 2013 Massachusetts

    "Signalling" consumers that something is a premium brand is a sure way to run it into the ground. BA would be a natural target for this kind of branding, but take a close look at the discussions here--whenever there's a discussion of Belgian styles here, Ommegang is almost an afterthought. It's weird, because there are no serious technical flaws in their product, but it makes no sense to price it in the same category as Chimay. Even Allagash, which has a much more expensive overall line, is usually mentioned earlier. Hennepin was a great beer at $4-8, but it seems pedestrian at over $10. Same for the flagship Abbey Ale. I used to get Three Philosophers all the time when it was $8 at Trader Joe's, but haven't touched it in the last four years as the price went up 50%. Duvel may think they have to educate US consumers, but someone needs to educate them that EU marketing is simply not the same as US marketing. The Rolling Rock trick simply won't work when you start out as a niche brand to begin with. They should be looking for ways to lower the price, not raising it.
     
    keithmurray likes this.
  9. emannths

    emannths Sep 21, 2007 Massachusetts

    I think they're focus is less with BA-type beer drinkers. I think it's more on people that might buy-up from something like Allagash White (and who found that beer via Blue Moon) and on the businesses that will be selling the beer. They've made a big push with chefs and the restaurant industry, and put a lot of work into tying their beer into other spendy events. All this info comes straight from the horse's mouth from a presentation by DM this spring.

    Hennepin, which I think is the star of the portfolio, is something like $9 or $12/4pk these days in Boston. No thanks. I'll stick with Helios or Jack D'Or if I want a big bottle, or the 4pks of Rayon Vert, which I strongly prefer. I still think it's crazy that $10/6pks of saison are basically nonexistent (save Collette and Notch), despite the fact that it's a well-liked style, has low raw ingredient demands, and ferments quickly (at least if you stay away from the Dupont yeast).
     
  10. VictorWisc

    VictorWisc Jan 2, 2013 Massachusetts

    Yeah, I've heard things like this from Ommegang people too (I suppose, they work for Duvel), although they don't bring up the price issue specifically. They were promoting their Chefs Dinner at one of the fests this spring, but tried to hide the costs--$65. I've seen less for exclusive wine dinners (seen more too). There seems to be an identity crisis here--they want to be readily available and, at the same time, be priced like high-end exclusives. A classic case of wanting to have the cake and eat it too. They either got bad advice or simply ignored all advice.
     
  11. drtth

    drtth Nov 25, 2007 Pennsylvania

    Agreed, but the differentiation you are proposing is somewhat different that the blanket statement their business strategy would be simply to raise prices. As for Ommegang I'd also heard that there was significant modernization of Ommegang facilities involved (but I have no link or data on that...). However with Leifman's beers (e.g. Goudenand) and the Maredous line the prices are consistent with what was being paid before.

    From what I'm reading in the article above and a few other sources I don't think Allagash is a target. I'm not yet convinced that doing Belgian style beers is a critical variable. The west cost connection may have higher priority than Belgian style, so if the WC brewery distributes to a few states... On the other hand I could see them having Russian River in their small group.
     
  12. hopfenunmaltz

    hopfenunmaltz Jun 8, 2005 Michigan

    JP is now part of Northern United Brewing Co. That is part of 2Mission which has more brewpubs, bars, and restaurants.

    JP has moved to a much bigger building in Dexter with a large amount so space for barrels and a larger brewing system. Don't think they are for sale.
     
    drtth likes this.
  13. Ranbot

    Ranbot Nov 27, 2006 Pennsylvania

    Yeah so I guess Dom Perignon champaigne, Rolex, Gucci, and Bentley Motors, are all being run into the ground. Not all products compete by having the lowest price, particularly luxury goods, which beer is.
     
  14. VictorWisc

    VictorWisc Jan 2, 2013 Massachusetts

    Sure, now take a look at their availability. They got to that price point through exclusivity--not becoming exclusive due to price. They had a start through better craftsmanship which is also what limited their production. All Ommegang has achieved by jacking the prices is turning into shelf turds. And their product is not bad at all--just not at the level that would makes sense to reach exclusivity. Stone is reaching that point in MA as well--stores are charging way too much for it. In states where prices are lower, Stone is moving just fine.

    Rolling Rock was successful in increasing sales by jumping from bottom-shelf to mid-level premium price category. Had they raise prices much higher when they did, the marketing strategy would have failed because its quality and availability don't sustain those prices. If you are willing to sacrifice quality but still want the image, you can get a readily available knock off of Gucci, Rolex, Coach, Louis Vuitton, etc. (counterfeiting a Bentley makes no sense). And they are considerably cheaper. Image alone can't sustain high prices if you can't deliver on the promise. And Duvel is not delivering...
     
  15. Ranbot

    Ranbot Nov 27, 2006 Pennsylvania

    On the contrary image alone sustains a great number of luxury goods. Bling H2O is bottled water that sells for $50 per bottle ( http://money.howstuffworks.com/bling-water.htm ) ...what do you think they are really selling in that bottle? I know people that state they know little about about wine, so they just buy moderately priced wines because they feel that give them some sort of guarantee of quality and value. It's a [irrational] decision completely based on price, but that's what consumers do. So, I don't think your perception of Duvel's brands matches the general public, otherwise Duvel probably wouldn't be in the market to purchase new breweries. You are probably a much more savy beer shopper than the general public.
     
  16. VictorWisc

    VictorWisc Jan 2, 2013 Massachusetts

    General public doesn't buy Duvel and Ommegang products. Perhaps that's their first mistake.
     
  17. djs467

    djs467 Mar 1, 2011 Colorado

    I think all that Ommegang has done over the last few years is bring their prices up to what is typical for the market. And I think most of those costs were to cover upgrading their brewery, which is pretty state of the art. Their core lineup (excluding Three Philosophers) are all in the 8-9 $ range for a CC 750ml. In some states I've been in (i.e. Florida and Virginia) the prices are a dollar or so less for the core lineup. I can't think of many breweries these days out there that have 750's under 9 bucks.

    Here's a list of beers that are comparable to beers in Ommegang core lineup and their typical prices (at least as far as I've seen here in CO)
    The Bruery Saison Rue $10.99 750ml
    The Lost Abbey Red Barn Ale $9.99 750ml
    Russian River Damnation $5.99 375ml
    Ommegang Hennepin $8.99 750ml
    So I don't think Ommegang is out of line with their pricing for their core beers

    As for their one-off's, I do think their prices are high, but not out of the domain of the market for comparable beers.

    Here's a list of beers that are comparable to Ommegangs special release beers (again this is here in CO).
    The Bruery White Oak $15.99 750ml
    The Lost Abbey Red Poppy $13.99 375ml
    Russian River Sanctification $10.99 375ml
    Ommegang Gnomegang $13.99 750ml
    I know some people might crucify me for comparing these beers, but they all have pretty close rating her on BA (4.0-4.3)

    Are there better deals out there than Ommegang? Sure, but not many, and are they consistently as good as Ommegang beers?

    I don't know how this thread got hijacked and turned into bashing on Ommegang.
     
    bld81 and drtth like this.
  18. VictorWisc

    VictorWisc Jan 2, 2013 Massachusetts

    If that was meant as a dig at me, it's off the mark--I'm much more likely to suggest Ommegang beers here as it has been one of my favorite breweries. But go back and check any discussion of Belgian-style beers and recommendations for Ommegang are not at the forefront (in fact, in a number of threads, my mention is usually the first).
     
  19. djs467

    djs467 Mar 1, 2011 Colorado

    I'm not referring to you at all.

    I think the point I am trying to make is that people notice when prices go up (i.e Ommegang), but not when prices stay the same (i.e. the other breweries I mentioned). Consumers see that increase as price gouging, but it's not at all. If a company sells a product for less than it's worth, what does that say about it's product? If the market value for a 750ml of a well crafted Saison is around $10, then any company who makes a well crafted Saison and sells it for $4 is stupid.

    I miss $5 bottles of Rare Vos more than anyone (i am a huge Ommegang homer), but it was always worth more than that, so I understand that it's nore now than it used to be.
     
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  20. Stugotzo

    Stugotzo Jun 13, 2012 Florida

    Interesting that Ommegang is trying to place itself as a luxury good / premium beer, but their parent company's main beer, Duvel, is now on sale here for $8.99 / 4-pack. May have to pick up a couple cases.
     
  21. drtth

    drtth Nov 25, 2007 Pennsylvania

    Be sure and check the age on those 4 packs...
     
  22. Stugotzo

    Stugotzo Jun 13, 2012 Florida

    10/2015 and some 02/2016
     
  23. Chaz

    Chaz Feb 3, 2002 Minnesota
    Beer Trader

    Prices on Duvel have usually pretty stable over the years, but it's always a good thing to check dates! :)
     
  24. Stugotzo

    Stugotzo Jun 13, 2012 Florida

    They went down $3 a 4-pack a couple of months ago... now they're $2 off on a special sale right now... total $5 off per 4-pack.

    Is it even remotely possible, they're making this now in Cooperstown and can charge less due to no shipping over the pond?
     
  25. drtth

    drtth Nov 25, 2007 Pennsylvania

    Since the store you where you buy it sets the price they might know why its such a good price.

    However, while I've heard that for a while some Ommegang beers were done in Belgium I don't think any of the Duvel is getting done in NY.
     
  26. RobM77

    RobM77 Feb 14, 2013 Illinois

    Many of Green Flash brews are of the Belgian variety, and they either are opening or recently have opened their second brewing facility (Virginia) giving them a West and East Coast jumping off point. Two appealing things to a company in acquisition mode.
     
  27. VictorWisc

    VictorWisc Jan 2, 2013 Massachusetts

    Not a chance AFAIK. It would be a major policy reversal for them. As for the price, it's $16.99 here--just checked again today. Even more for Triple Hopped, for no particular reason. Even at that price point, it's been having a pretty good movement here. You probably should pick up a couple of cases. It's not like it's about to go bad...
     
  28. Stugotzo

    Stugotzo Jun 13, 2012 Florida

    Just for the fact that my brother, who is not into the beer scene but absolutely loves Duvel, visits Florida about 2-3 times a year, I may just have to do that. ;)
     
    VictorWisc likes this.
  29. drtth

    drtth Nov 25, 2007 Pennsylvania

    Pricing in this area suggests you've a very good price there. I'd stock up if it were me, given the price and freshness dates you've got available.
     
  30. LambicPentameter

    LambicPentameter Aug 29, 2012 Michigan
    Beer Trader

    I tend to like variety in my day-to-day beer drinking, so I don't typically buy cases, but shit, at $9 for a 4-pack, I would have to change my M.O. That's a fantastic price for a fantastic beer.

    Also, I wanted to add that using pricing as an indicator to consumers that your product is "premium" is actually a very common practice, HOWEVER...

    ...changing the price of an in-market product to indicate a "premium" level of quality is extremely hard to pull off, because while a lot of consumers are idiots, even the stupidest among them are usually pretty sensitive to increases in price. So in order to justify a price increase, you have to be able to explain why your product is now more "premium" than it was before, and some kind of explanation about it being underpriced before usually doesn't cut it.

    Typically, when a brand wants to set its price point at a premium level to announce that it is a high-end product, they need to *enter* the market at that price point. But the notion that the only way a brand can charge premium pricing is if the demand is high and supply is low (which is an idea that I saw being discussed earlier on this thread) on their product is simply not true. Brands set prices all the time, and the projected demand for a given product is usually a major consideration, but I promise that the reason brands like Rolex or Gucci are expensive isn't primarily due to exclusivity. The price is what *makes* those brands exclusive, because fewer people can afford to buy them. But that's exactly how those brands want it, because it then imparts an image to people that makes them willing to buy the product at that higher price point.
     
  31. VictorWisc

    VictorWisc Jan 2, 2013 Massachusetts

    Not disputing any of this but add one more differentiation between a Rolex and a beer. People who buy expensive trinkets flaunt them as a status symbol (just as people flaunt diamonds). Drinking Ommegang? Not so much. Top-shelf scotch, cognac, armagnac, absinthe--those are status symbols, not just because of current prices but historically (compare to high-priced tequila that is in the same price range but lacks the cachet of these). Premium port and champagne are status symbols--again, not just through price, but historically. They didn't just bump their price up 50% and said, "Look, we're premium!"
     
  32. StJamesGate

    StJamesGate Oct 8, 2007 New York
    Beer Trader

    Exactly - big gap between #4 and #5 on that list.

    Liefmans, Vedett, and de Koninck would be the other main labels.
     
  33. LambicPentameter

    LambicPentameter Aug 29, 2012 Michigan
    Beer Trader

    Absolutely. Price is just one of many indicators of a product's quality, and again, the key here is when the decision to set the price at a premium is made. At entry to market is good because then you avoid having to address the thought process behind the pricing choice. And in my experience, any time you have to get in the weeds by making a marketing rationale behind a given decision public (not the rationale itself, per se, but the knowledge that there was a rationale), you are already in trouble. Marketing is most effective when consumers don't feel like they're being marketed to.

    Example: when Rolex first entered the market, they likely (just making it clear that I don't know the specifics of Rolex's entry) made the choice to be a high-end luxury timepiece, and aligned their entire approach to fit this positioning. Pricing was set higher than your run of the mill watches/timepieces, vendors (like jewelers instead of department stores) who sold high-end goods were targeted by the salesforce, and ads were run in publications that were likely to be read by the "upper crust" of society and people with money to burn on luxurious items. Contrast that to if Rolex had started out as just a middle-of-the-road watchmaker with a moderate price point and sold their goods through general stores, it would have been extremely hard for them to suddenly bump up the price and start selling their goods to higher-end vendors. Everyone--vendors, consumers, etc--would have been like "What's different? Why is this now 3x the price it was before? Is it made differently? With higher-priced parts? What gives?"

    This is why entry to market is such a key time for any product. Because you can't retract a first impression, and that impression is the launching point for everything you do after that. Now, in Ommegang's case, I imagine that the company line to explain the price increase would go something like "being bought by one of the premier Belgian brewers of the last century has increased our knowledge base, quality and expertise, as well as allowed us to upgrade our facilities to produce a better, more consistent product". The idea being that the merger essentially bumped Ommegang up from "standard" to "premium" brand. Whether or not you (or consumers) buy that, literally and figuratively, is the ultimate question.

    I do like your point about the difference between a consumable luxury good (craft beer) and a non-consumable luxury good (Rolex). Beer can be purchased as a status symbol as well, but it's not the same as a watch. For example, you host a tasting or go to a bottle share and whip out a Dark Lord or some other such highly sought-after beer, there will be an element of status there. But with Ommegang, we again come back to the central problem of their having changed horses mid-stream. They weren't viewed as a luxury brand before, so without some significant change in the minds of the consumer, it's not going to be an easy conversion that they suddenly are now, just because they were purchased by Duvel Moortgat. Interestingly enough, since some in the craft beer community have an aversion to large-scale production, the fact that a larger brewer purchased Ommegang might actually have hurt the attempt to up-brand Ommegang to be considered "luxury".
     
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  34. rgordon

    rgordon Apr 26, 2012 North Carolina

    If they bought Jolly Pumpkin or The Bruery maybe scale would allow prices to actually go down.
     
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  35. Ranbot

    Ranbot Nov 27, 2006 Pennsylvania

    I doubt there would be much, if any, economy of scale savings on the brewing/production side because they are separate brewing locations, but there might be some savings on the distribution and administration side.

    I considered The Bruery, but crossed it off my mental list because it's a fairly new business that's doing very well, and I don't feel like they would be ready to cash out yet....but I could be wrong.
     
  36. rgordon

    rgordon Apr 26, 2012 North Carolina

    Just stylistically fits and I tossed it out there. The Belgians have deep pockets. Weyerbacher is another brewery that could appeal to Euro-Mega-Biz- lots of potential. They could add a Halloween limited edition: Hairy Monks. Maybe not.
     
  37. VictorWisc

    VictorWisc Jan 2, 2013 Massachusetts

    Are they going to sell a boxed set with a 750cc of Hairy Monks Pumpkin Stout and 2x 375cc of Twink Blonde Ale?
     
  38. rgordon

    rgordon Apr 26, 2012 North Carolina

    God help us. Anything can become true. How about Incarcerated Idiot 187s cross merchandized with 10 Hour Energy- with a shot glass?
     
    VictorWisc likes this.
  39. errantnight

    errantnight Jul 7, 2005 Iowa
    Subscriber Beer Trader

    Just like The Bruery is driving into the ground, right? *rolls eyes*
     
  40. VictorWisc

    VictorWisc Jan 2, 2013 Massachusetts

    Roll your eyes all you want, but it won't help you read better. The Bruery started at a different price point and their most expensive beers are unique. Ommegang is very different and what Duvel is doing with it loses customers.
     
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