Lagunitas Brewing Company creates a joint venture with Heineken

Discussion in 'Beer News & Releases' started by DogTown, Sep 8, 2015.

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  1. DogTown

    DogTown Initiate (0) May 17, 2006 California

    Greetings BA’rs…. For a change, I wanted to be the one to create the thread title and begin a thread about a juicy bit of beer news. This is that. The press release reads something like this…

    The Lagunitas Brewing Company of Petaluma, CA and the Heineken Brewing Company of Amsterdam, Holland today announced that they have entered into a powerful new partnership, which will allow Lagunitas to export the exciting vibe of American Craft Beer globally.

    HEINEKEN and Lagunitas will form a JOINT VENTURE and Lagunitas will continue to operate independently in the US and abroad, maintaining the integrity of its brews and culture. Tony Magee, founder of Lagunitas, will remain at the helm, with the same leadership and staff, same brewers, same recipes and same suppliers and distributors helping to drive the brand forward.

    Both companies will benefit from the partnership. HEINEKEN provides Lagunitas with a global opportunity to present its beers to new communities and Lagunitas provides HEINEKEN with the opportunity to build a strong foothold in the dynamic Craft Brewing category on a global scale, a category that is growing in popularity almost everywhere now.

    Lagunitas founder Tony Magee said, “This venture will create a way for Lagunitas to help HEINEKEN’s global distribution network participate in the growing craft beer category in places from Tierra Del Fuego and Mongolia to the far-flung Isles of Langerhans. Lagunitas will share in the best quality processes in the world and enjoy an open door to planetary opportunities that took lifetimes to build.

    He continued, “This alliance with the world’s most international premium brewer, itself a family-owned company, represents a profound victory for American craft. It will open doors that had previously been shut and bring the U.S. Craft Beer vibe to communities all over the world.”

    Jean-François van Boxmeer, a lifelong beer aficionado and now CEO of HEINEKEN added: “We are very excited to partner with Lagunitas. We recognize and respect the tremendous success of Tony and his people in building one of the great American Craft Beer brands. We look forward to that same team partnering with us to expand Lagunitas globally, so it can reach parts that other craft beer brands have not.”

    There’s a bit more blah, blah, blah, but you get the idea…

    Last month there was something in the papers about us that was so fundamentally inaccurate, and worse it displayed so little imagination, that I wanted to call them up to set things straight, but I didn’t. The reporter retreated to ideas of conventional thinking that read IPO, private equity, minority stake, selling out, cashing in, whatever. It was very far, far from the exciting truth.

    Here’s my thinking on things, if it matters. I’ve watched for the last few years as some good brewers have made their own decisions about their own futures and the futures of their people and brands. I’ve watched and thought strongly that it was a problematic thing. I’ve watched and tried to learn what it was that was happening. Craft Brewing, the thing itself and the environment it lives in, is freakin complicated enough. The entrance of giant piles of money is disturbing. Not because any of you here will be corrupted by it all, but because the distribution and retail tiers can be corrupted. Beer is an old biz in the US and it used to be very orderly. Craft disrupted that and the old order wants to find a way back to the past. It won’t work, but it’s going to try.

    Amid all of this uncertainty, and being 55 years old going on 80, I had to think long and hard about how to steer our ship into these new waters. There are options that range from indifference all the way to going over the transom and selling the business to someone else to steer the ship instead. Selling one’s business entirely is one thing. This is not that. Selling a stake to a PE fund that will need to re-sell it in a few years is another thing. This is not that. ESOPs are cool but they do not pave a road to bigger opportunities for the people and the brand. This is not that either. What we have created in this relationship is a staircase to the sky for all of our people and for our brand as well as for the home-grown vibe of American Craft brewing.

    Some might say I’ve changed my mind. Well, I have. But the world around us has also changed and if learning leads to new insight, then that’s the best kind of change imaginable. The hard part is discovering the uniquely positive change opportunities within the range of possible avenues forward.

    I promised myself, and tacitly promised my people, that any move we would make had to provide way more in opportunity for us than we would share. In this case we established a true 50/50 relationship. This is a true JV. I’ve said a million times that it’s good to have friends and this is the perfect expression of that.

    It took a lot of talking but the thing we have found is not an end point in any way except for the idea that it is the end of our start-up period. Time will tell for certain but I’m totally willing to step out and say that in many ways this is historic. There are many great international brewers but there is only one Heineken. They are charted as #3 in the world, but in reality they are #1. The other global ‘brewers’ are essentially holding companies, bankers by any measure. Heineken is still a brewer first.

    Most don’t know this but Heineken uses no adjuncts. That’s a choice only a brewer would make. Most don’t know this but the founder’s great-granddaughter controls the company, still. Most don’t know this either but they own 165 breweries around the world, the largest of which is over 13 million barrels and the smallest is a couple pints over 20,000 barrels. Only a real brewer would keep those smallest ones open. The CEO/Chairman is a crazy Belgian fella who started with the company working in brewing operations. Here’s an image; Our first meeting at Lagunitas/Chicago and we are walking the catwalk tour route and talking. A young family with a wobbly toddler is walking towards us. The 6’ 4” CEO, Jean-Francois van Boxmeer, instantly peels away from our conversation and begins dancing with the toddler laughing as much as the little kid all the while. Only when the toddler got distracted and wandered off did JF return to our conversation. I couldn’t stop laughing myself. We are all the same.

    This relationship is a meeting of equals, not in terms of scale, for sure, but in terms of mission and meaning and mutual respect. What this represents for us is the construction of a stairway to the sky. In the U.S.A. and elsewhere we will continue to be as completely independent as we are now because even they are inspired by what we American Craft Brewers are doing with beer. Internationally we will have our own Lagunitas people working alongside Heineken’s distribution channels because they believe that the vibe of U.S. Craft can change things everywhere. All of our peeps and all of our suppliers and all of our distributors will, in the future, be just as they are now for all the right reasons.

    First up will be Mexico and an expanded footprint in the EU. Inside of 5 years our people and our brews will be doing things that were undreamt-of previously. Ten years from now…? Well, who wouldn’t want to do pint promotions in Belarus….?

    Just so’s you know: I didn’t discuss the possibility of this sort of relationship with either ABI or M/C. Those would have been dead on arrival anyway because they don’t get it. For them, the news of the future hasn’t yet arrived. We reached out to Heineken ourselves and at that point they did not see themselves becoming involved with any U.S. Craft Brewer. However, after our first conversation and with every subsequent one they began to see what a very exciting thing it would be to bring the news of U.S. Craft brewing to communities around the world. Heineken recognizes U.S. Craft Brewing as the nucleation point for the future of beer world-wide, Lagunitas will provide the connectivity to it and they will connect us to the rest of the planet.

    Over the last 20 years I’ve noticed that a lot of beer-lovers discover Craft Beer and then want to see it as a set-piece, not an evolving scene as every brewer knows it to be. It is now, and it has always been, a point on a curve. A thing constantly becoming. Craft of 1993 would be unrecognizable to Craft of 2001 let alone Craft of 2015, and Craft of 2025 will be equally different. I have always strived to set Lagunitas in the place Craft is heading to five years out. So far so good. Today I see The World as the next thing. We will always work hardest to be more meaningful here in the U.S. than elsewhere but it’s a small planet and I want to get to it….

    I posted this here early today so that I could express this to you all first-person and I’ll hang around the thread too. If you wanna know more about how my thinking landed here, you could read a Tumblr blog I started a while ago, ‘Fermenting Ideas of Order’. I fingered my way through a lot of the mental gymnastics of it all there.

    My mantra has become: The future will not be like the past. And so it shan’t. Furthur.

    Thanks for the eyeball-time and as always, Chairs to you, BA’rs….
  2. zid

    zid Poo-Bah (1,730) Feb 15, 2010 New York
    Society Trader

    Glad you beat me to it by seconds. :slight_smile:
    MrDave and StarofSahara like this.
  3. AnalogErik

    AnalogErik Initiate (0) Jul 23, 2013 Minnesota

    Cheers! With the scale economics that blending with Heineken provides, will we see any competitive pricing changes, or increased production of products like Sucks?
    ryanhooks81 and yemenmocha like this.
  4. mudbug

    mudbug Defender (622) Mar 27, 2009 Oregon

    Good Luck! Sounds exciting! So when is the release of Sumpin Sumpin Skunky? Just kidding, Lagunitas is one of my favorite breweries and I never pass through Petaluma without stopping in.
    M_C_Hampton, Raptor66, turfy and 12 others like this.
  5. Jason

    Jason Founder (8,354) Aug 23, 1996 Massachusetts

  6. emannths

    emannths Initiate (0) Sep 21, 2007 Massachusetts

    So...cans? :wink:

    Curious how you'll handle keeping hoppy beer in code in the EU when it can be a challenge even in the US (I am assume you'll start by exporting beer rather than brewing it there).
  7. cookiequiz

    cookiequiz Aspirant (249) Apr 15, 2013 California

    There seems to be some mix-up over details or confusing double-speak. Lagunitas says they will 'form a JOINT VENTURE' that is 'a meeting of equals'---but Heineken says they've made 'acquisition of a 50% shareholding in the Lagunitas Brewing Company'. The former sounds like the creation of a new business venture with shared ownership; the latter sounds like a half-acquisition.
  8. MisSigsFan

    MisSigsFan Initiate (0) Mar 2, 2013 California

    Sucks is already being brewed too much now. Those 32oz bottles are shelf turds.
    Kemosabe, Bshaw22, josmickam and 8 others like this.
  9. jesskidden

    jesskidden Poo-Bah (2,429) Aug 10, 2005 New Jersey
    Society Trader

    Have always wondered if Heineken International, which most sources put at #3 worldwide, would ever enter the US as a brewer. They're in Mexico (they own the old FEMSA [Dos Equis, Tecate, Sol] brewing operations) and once brewed in Canada under the Amstel name (best remembered for "Grizzly Beer" by Americans) and, since they own a large part of India's UB Group, they have business connections to Mendocino/Saratoga brewing group in the US.

    Pretty surprising deal on a number of different levels.
    #9 jesskidden, Sep 8, 2015
    Last edited: Sep 8, 2015
  10. dennis3951

    dennis3951 Initiate (0) Mar 6, 2008 New Jersey

    Is Heineken going to be brewing Lagunitas beer in Europe for sale there?
  11. SedateSix

    SedateSix Initiate (0) Apr 27, 2013 North Carolina

  12. LambicPentameter

    LambicPentameter Initiate (0) Aug 29, 2012 Nebraska

    Honestly, I don't care either way--I'm all for craft brewers finding partners that will help ensure the growth and evolution of their brands after the original visionaries (like Tony Magee with Lagunitas or John McDonald with Boulevard) get to a point in life where they need to start thinking about the long-term future. Partners who will be stewards and continue to steer the brand in question with the passion and integrity upon which it was originally founded rather than as a data point in a diversification portfolio.

    But I think you're right here. There is a bit of double-speak going on. Obviously, without being privy to the details of the transaction, it's hard to say for sure, but this doesn't seem like a joint venture, at least not in the way the term is often used. I've never heard of a joint venture between Company A and Company B where the primary thrust of the transaction was Company A owning/purchasing a 50% share of Company B. Traditionally, the joint venture is a third, separate entity from the two involved companies.

    Perhaps it's not a particularly important distinction, and again, I actually appreciate the idea rooted within the transaction--whatever it's being called--but the choice of description strikes me as odd.
  13. SerialTicker

    SerialTicker Initiate (0) Jun 18, 2012 Michigan

    Lagunitas Sucks is still my favorite beer, so whatever.

    I will say the 32oz Sucks bottles was the dumbest idea.
  14. RCL

    RCL Initiate (0) Jul 23, 2008 Massachusetts

    This is just an excuse to travel to Amsterdam more frequently, isn't it?
  15. Jugs_McGhee

    Jugs_McGhee Poo-Bah (10,407) Aug 15, 2010 Texas
    Society Trader

    Can the term "beer aficionado" be unpacked for me? That's astoundingly vague - especially as a descriptor for a CEO of a multinational brewing company.
  16. lordofthemark

    lordofthemark Initiate (0) Jan 28, 2015 Virginia

    Esops do not pave a road to bigger opportunities? But New Belgium appears to be continuing to expand distro, even before completion of their new brewery in NC.

    Perhaps this means not growing at the pace Lagunitas envisions, with their discussion of a large new brewery in Southern California. Heineken had better hope the " craft beer bubble " does not pop.
  17. hoppytobehere

    hoppytobehere Champion (845) Aug 10, 2012 District of Columbia

    If I can't find fresh Lagunitas in our nation's capital, I'm not sure you're ready to take on the world just yet.
  18. lordofthemark

    lordofthemark Initiate (0) Jan 28, 2015 Virginia

    Presumably a joint venture will be formed, half owned by Lagunitas and half owned by Heineken, which will own all of Lagunitas breweries, brands, etc. And nome of Heineken's. But with US importing rights for Heineken.
  19. Vizualize

    Vizualize Initiate (0) Jun 13, 2014 New York

    I just had a Lagunitas IPA i couldnt even finish the other day it was so weak. Cutting corners has already begun! Make the beer worse and make more of it. It's the corporate way I guess.
  20. AnalogErik

    AnalogErik Initiate (0) Jul 23, 2013 Minnesota

    I want 12 oz.
  21. MNAle

    MNAle Poo-Bah (2,348) Sep 6, 2011 Minnesota

    From Heineken's official announcement on their web site:
    Heineken N.V. ('HEINEKEN') (EURONEXT: HEIA; OTCQX: HEINY) today has announced the acquisition of a 50% shareholding in the Lagunitas Brewing Company, the fifth largest craft brewer in the United States by volume.

    From the Brewers Association's definition of Craft Brewer:
    Less than 25 percent of the craft brewery is owned or controlled (or equivalent economic interest) by an alcoholic beverage industry member that is not itself a craft brewer.

    What to do, what to do...
  22. mwa423

    mwa423 Initiate (0) Nov 7, 2007 Ohio

    Perhaps this is getting off topic, but I used to agree that the craft genie was completely out of the bottle and all large breweries (both the domestic BMC but the international imports like Heineken, Corona (crown imports, blah blah blah), etc.) could hope for was to simply maintain the status quo as long as possible with their flagship brands.

    But, now we have Not Your Father's Root Beer, a FMB made by Pabst, which is outselling every other craft package in the country by leaps and bounds (IRI-MULO, L4W) and getting most of it's share from other craft brands (retailer loyalty card data). So, the data appears to completely disagree that there isn't an opportunity to gut a significant amount of the craft market with "crafty" or just well marketed brands. So...right now there's proof that big beer can gut craft sales with a single product. Also, NYFRB doesn't seem to be driven by expensive marketing campaigns or cash changing hands for shelf facings, just a product that customers (for reasons that escape me) seem to want. I agree that we are unlikely to ever return to a 95+ share of the market among BMC beers, but given the fickle nature of the craft customer in the U.S. I'm not sure that some really well marketed products

    A secondary point, it doesn't seem like Lagunitas went into this for the money, you're going in for the global reach. Is that a tacit admission that we're either at or nearing the point of complete saturation and the only way to grow is globally?
    ONovoMexicano likes this.
  23. lordofthemark

    lordofthemark Initiate (0) Jan 28, 2015 Virginia

    Actually on reflection, I don't think the JV will get importing rights to Heineken brands.

    As for the BA, they will have to either lift the ownership cap to 50% plus one (bringing CBA and a few others back) or they will have to accept Lagunitas will drop from the market share data.
    JohnnyMc, emalc, Strat58cat and 2 others like this.
  24. whosecraft

    whosecraft Initiate (0) Apr 25, 2014 California

    Although a bit wordy, I'm very appreciative that you shared this feature -- particularly when you discussed some of Heineken's background. For most of us beer nerds, we automatically assume if it's not craft, it's some sort of evil. Like you, my views have changed too.

    It's also my belief that one of the main reasons why many beer nerds are so against craft brewery expansions and sell outs is due to the overused, "drink local" campaign. Although, it's important to support local businesses with consistently great quality, there is also something truly incredible about where the craft beer industry is going.
    LuskusDelph and JLaw55 like this.
  25. drtth

    drtth Initiate (0) Nov 25, 2007 Pennsylvania

    There are lots of reasons the wording could differ between different sources at this stage of spreading/announcing the information/relationship. But the net result, regardless of what one calls it, is that Lagunitas will continue to operate as it has in the past but now has a global partnership with a company that is committed to and has a strong, significant investment in seeing the growth of the international market place for Lagunitas product.
  26. lordofthemark

    lordofthemark Initiate (0) Jan 28, 2015 Virginia

    Heineken is the third largest brewer on the planet, with brands and facilities on five continents. They were fined for price fixing (well I guess that's a kind of kumbayah ) in the EU.

    I don't think ABI Inbev has been fined fr price fixing, have they?
  27. MisSigsFan

    MisSigsFan Initiate (0) Mar 2, 2013 California

    They have them out pretty regularly now. Those can also be shelf turds.
  28. chinabeergeek

    chinabeergeek Meyvn (1,326) Aug 10, 2007 Massachusetts

    is that how they decided to stick with green bottles for export? sadly, maybe so, considering how many european small/craft brewers perpetuate this travesty.
    jcb7472 and SammyJaxxxx like this.
  29. MNAle

    MNAle Poo-Bah (2,348) Sep 6, 2011 Minnesota

    The net result is whatever is in writing in the signed contracts. A true 50/50 voting split in business expansion and other strategic decisions may not end well at all. Chrysler was also sold a "merger of equals" song by Daimler-Benz. Things didn't exactly turn out that way.
    cjgiant, hopfenunmaltz and jasonmason like this.
  30. basics

    basics Initiate (0) Oct 27, 2011 North Carolina

    Kind of sad that the only reason these deals are being made is because of distributions and infrastructure capacity that the large brewers have because they got a 100 year head start. They're basically distribution companies instead of breweries. If craft brewers could have held out for ~10 years I'm not sure they would need to help of the largers guys. Oh well.
  31. TheodorHerzl

    TheodorHerzl Initiate (0) Mar 30, 2007 Indiana

    People are outraged by this, but still totally cool with Cargill in the supply chain for malt.
  32. drtth

    drtth Initiate (0) Nov 25, 2007 Pennsylvania

    Complicated by the fact that Heineken's flagship beer is all malt which qualifies it for Craft membership if one allows foreing owned entities into the BA. :-)
    LuskusDelph and hopfenunmaltz like this.
  33. JackHorzempa

    JackHorzempa Poo-Bah (5,438) Dec 15, 2005 Pennsylvania

    “Amsterdam, 8 September 2015 - Heineken N.V. ('HEINEKEN') (EURONEXT: HEIA; OTCQX: HEINY) today has announced the acquisition of a 50% shareholding in the Lagunitas Brewing Company, the fifth largest craft brewer in the United States by volume.”

    This sure sounds more like an acquisition to me.

    I suppose I should sit tight to learn more about this business move but for the moment this does not sound too different from AB purchasing craft breweries except for the detail of the percentage amount of the acquisition.

  34. drtth

    drtth Initiate (0) Nov 25, 2007 Pennsylvania

    Quite true, but you assume that @DogTown didn't take that into consideration in cutting the deal and stating that they will continue to operate independently. Jim Koch continues to run BBC as he and his management team see fit despite there being lots of publicaly owned shares of stock out there on the market simply because he controls the shares of voting stock.
    Strat58cat likes this.
  35. lateralusbeer

    lateralusbeer Zealot (543) Feb 7, 2010 North Carolina
    Society Trader

    Bet Tony is racing to delete a lot of social media content right about now...
    qchic, tronester, ZaxGhost and 14 others like this.
  36. AlcahueteJ

    AlcahueteJ Poo-Bah (1,882) Dec 4, 2004 Massachusetts

    I imagine this will be akin to what we experience with imports here in the US. We hold the IPA to a higher standard than they're likely to hold the American IPA to in Europe. We obsess over freshness because we know what Hill Farmstead...etc. taste like fresh from the brewery.

    Germans know what fresh Helles from a local Munich brewery can taste like, and would perhaps turn their nose up at a 5 month old Helles from a larger brewery imported to the US.

    Would you buy a 5 month old Lagunitas Sucks? Probably not. But to a beer aficionado in Europe, who's never tasted a fresh Heady Topper, 5 month hold Lagunitas Sucks...well, probably wouldn't suck.
    hopsputin, jcb7472, pro100 and 6 others like this.
  37. LambicPentameter

    LambicPentameter Initiate (0) Aug 29, 2012 Nebraska

    An entirely fair point, and really the question of how Lagunitas will continue to conduct themselves moving forward is of the utmost importance here. Far more important than the semantics of how the deal is described at any rate.

    I think the reason it was of interest to me is because it struck me as a little disingenuous. Perhaps the description as a joint venture is an attempt to blunt some of the inevitable knee-jerk* criticism that will come from some craft beer fans by virtue of the sale existing at all, with no respect for the motivation behind it [*EDIT: not meaning to imply that the criticism is always unfounded--only that it exists in some form whether it is founded or not]. On the one hand, it's disappointing to me that craft brewing leaders like Tony Magee (and John McDonald) have to justify decisions made in the interest in preserving their brands.

    On the other hand, working with Heineken isn't quite the same as working with Duvel--fair or not, Heineken's portfolio looks far more similar to ABInBev's than it does to Duvel's. Maybe the language choice is partially intended to head off any association--fair or unfair--of this transaction with transactions like the ABInBev's partial ownership of the CBA.

    Honest question: is there any appreciable difference between Heineken and Lagunitas creating a joint venture that will be 50/50 ownership containing 100% of Lagunitas operations and Heinenken simply purchasing 50% of the ownership in the existing Lagunitas brand? Seems like those two outcomes would be fairly similar, but he latter spends a lot of effort enabling Lagunitas to avoid saying that they sold 50% of the company to Heineken.
    JLaw55 and cjgiant like this.
  38. berto714

    berto714 Initiate (0) Oct 16, 2014 New York

    Yea, I see old Sucks all over the place in NYC. Not sure I get the love for this beer anyway, but I'm not really a Lagunitas fan in general so I'm probably not the target audience.
  39. flurker

    flurker Initiate (17) Nov 10, 2007 Illinois

    This article says it's three seats on the board for Heineken, three for Lagunitas and Tony Magee remaining as chair, so 4-3 voting retained by Lagunitas.
    Auror, creepinjeeper and drtth like this.
  40. degbert

    degbert Initiate (0) Dec 1, 2009 Texas

    I think the biggest thing we're missing is that we don't know yet what's going on here. We have some press releases, which are written to put spin on things, and some conjecture. We have insufficient data. And while we can sit here and conjecture in turn, the fact remains this is uncharted water, gang. Time to wait and see.
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