Why don't craft brewers go public?

Discussion in 'Beer Talk' started by MNAle, Feb 11, 2016.

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  1. MNAle

    MNAle Initiate (0) Sep 6, 2011 Minnesota

    Tech startups use IPOs to generate cash for growth (and for the founders to cash in).

    Why don't craft brewers do that? Is it an awareness thing? (i.e. they wouldn't do well since few people outside of their home market know who they are?)
     
  2. SonnyJay

    SonnyJay Initiate (0) Jan 18, 2015 New York

    Short answer: it's really expensive and disruptive for a small company to be public. For the amount of cash the typical craft brewer would need, it's typically a lot more efficient to look for private capital instead.
     
  3. drtth

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

    Many start ups have outside investors. Until they are paid off going public is sometimes not an option.

    The Tech start ups you refer to, (e.g., something like Fitbit) are often some years into their development trajectory before they have enough going to make a public offering worth the effort. (Look how long Facebook was around before doing an IPO... :slight_smile:)
     
  4. Persdawg

    Persdawg Initiate (0) Mar 12, 2015 Texas
    Trader

    People cry about these breweries selling out...an IPO is an immediate sell out and loss of control.
    Can't imagine the craft nerd world would be a fan of that idea.
    You would have to be established in order to draw any real monetary interest in your shares...

    It took Sam Adams 12+ years to go public.

    The moment we start seeing more craft beer companies trying to offer public shares...we will definitively know that the top is in.
     
    #4 Persdawg, Feb 11, 2016
    Last edited: Feb 11, 2016
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  5. hopfenunmaltz

    hopfenunmaltz Pooh-Bah (2,611) Jun 8, 2005 Michigan
    Pooh-Bah Society

    There are cases where a founding Brewer had partners, and to expand took on more partners or sold more shares to existing partners. The deals were not structured to maintain control via voting shares held by the Brewer. The Brewer gets outvoted, and if the vision does not match the investors demands, they are out on the street looking for a job.

    Guys who have seen this happen are cautious.
     
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  6. PatrickCT

    PatrickCT Grand Pooh-Bah (3,776) Feb 18, 2015 Connecticut

    The brewery would be beholden to stockholders. Not their customers.
     
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  7. David_Deas

    David_Deas Initiate (0) Jan 26, 2016 North Carolina

    Because when you have stockholders you have to satisfy them with a return on their investment, which (without getting into specifics) will inevitably result in a worse product that is more widely distributed.
     
  8. SonnyJay

    SonnyJay Initiate (0) Jan 18, 2015 New York

    This isn't necessarily true. IPOs can feature Primary Shares - newly created shares issued by the company to raise capital, or Secondary Shares - shares held by existing investors ("cashing them out"). IPOs from young, high-growth companies typically include mostly Primary Shares, since the whole idea of the IPO is to fund their growth.

    That said, a brewer would have to be looking at a really, really big capital need to make the costs of the IPO and headache of being a public company worth it.
     
  9. charlzm

    charlzm Initiate (0) Sep 3, 2007 California

    Why have an IPO when you can just do a Kickstarter program and never have to listen to those people again?
     
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  10. Scott17Taylor

    Scott17Taylor Initiate (0) Oct 28, 2013 Iowa
    Trader

    Money nd losing control. A lot of business owners are in it for the passion of what they're doing and the freedom to do what you want with the business. Going public causes a need to look after share holder value where if you own the company entirely yourself you can do pretty much what ever you want.
     
  11. jmdrpi

    jmdrpi Grand High Pooh-Bah (8,245) Dec 11, 2008 Pennsylvania
    Pooh-Bah Society

    Not necessarily - for example, my understanding is that Jim Koch still controls 100% of the voting shares of Boston Beer.
     
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  12. bluehende

    bluehende Initiate (0) Dec 10, 2010 Delaware

    I would think there are only a handful of the bigger boys that could take on this cost of the IPO and the ensuing costs to comply with SEC rules. The ones I can think of can probably get cash cheaper ways. It might happen if an owner for some reason or another wants to cash out, but I would assume that a takeover is still probably a more cash efficient way to go like Ballast Point.
     
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  13. Nittybeat

    Nittybeat Initiate (0) Jan 28, 2015 California

    The theme I have noticed is that breweries that are in it for the money first, usually fail. We are seeing it all over the country.

    It took Ballast Point 19 years to reach their selling point.

    Russian River still only produces less than 20,000 bbls a year and I promise you they could sell out for crazy amounts of money. There are plenty of examples all over.

    Main point being small breweries need to stay small for a long time so that quality stays high and demand stays high.
     
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  14. fredmugs

    fredmugs Initiate (0) Aug 11, 2012 Indiana
    Deactivated

    Exactly. I donated to one that should start construction soon. There are a few perks based on my contribution level but I really donated because the place will be less than a mile from my house.
     
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  15. barflybastard

    barflybastard Initiate (0) Jan 28, 2012 Pennsylvania

    Agree with your point(s), but there are obviously outliers, the most recent that comes to mind being Saint Archer.
     
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  16. Nittybeat

    Nittybeat Initiate (0) Jan 28, 2015 California

    Yup it helps when you start out with money lol

    Imagine if Ken Grossman started out with a 30,000 barrel set up instead of stuff he put together in a garage ha!
     
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  17. barflybastard

    barflybastard Initiate (0) Jan 28, 2012 Pennsylvania

    Not sure the specifics of an ESOP, but my understanding that, while this might not raise capital, it does allow those with ownership stake to cash out to some degree, without selling out the brand. Think New Belgium, Harpoon and Deschutes have done with with different percentage of stock. We recently had a smaller, local brewery execute this as well (Voodoo). The latter move inspires the opposite emotions of those when reading that a brewery decided to sell outright.
     
  18. 4truth

    4truth Pundit (806) Jan 30, 2015 Illinois
    Trader

    Pyramid and Redhook both went public in the mid-90s, neither story ended particularly well.
     
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  19. jesskidden

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

    ...and even worse for the no-longer-in-existance "Pete's Brewing Co."
     
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  20. drtth

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

    Yes, that is correct.
     
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