Valuable real estate

The craft beer industry is in a state of rapid expansion and consolidation. As the bubble continues to inflate and cover larger slices of the market, Big Money sees an opportunity to invest or take over. The acquisition of craft brands by multinationals has become common. While these deals help make brewery owners wealthy, they almost never result in further innovation or higher quality. A rumored buyout of local brewer Saint Archer by MillerCoors threatened to infect San Diego with this noxious trend.

I reached out to San Diego Brewers Guild president Kevin Hopkins to find out if there is pressure on other local breweries to sell.

“I don't feel there's any pressure whatsoever to do it,” Hopkins says.

In July, Firestone Walker announced a partnership with Belgian brewer Duvel. The Paso Robles craft pioneers characterized the deal as necessary to grow their brand. Their beer can now be brewed at any of Duvel's facilities and distributed to more far-flung markets.

San Diego brewers have not had to look as far to fund their growth. Stone, Green Flash, and Modern Times are just a few of the locals currently growing.

“The breweries in San Diego that would like to expand are doing so, and doing so at a rapid clip,” Hopkins says. “[But] what we are seeing is large non-craft brands acquiring craft-centric brands as a foray into the industry.”

Craft-bashing Super Bowl ads aside, macro-brewers crashing the party is nothing new. They've launched their own faux-craft labels like InBev/Anheiser-Busch's Shock Top and MillerCoors' Blue Moon.

But the acquisition of established craft breweries is something that can cause consumers to reach for their pitchforks. Shortly after InBev/AB's acquisition of Seattle stalwarts Elysian Brewing Company, its head brewer and co-founder resigned. Recently, the label made its local debut, and at a noticeably lower price point than comparable San Diego brands.

“As you've noticed, we start to see what was once craft brands showing up on shelves in more locations, taking advantage of the distribution channels of those larger macro companies, and being placed side by side [with actual craft beer],” Hopkins says. “Your average consumer may or may not recognize who owns any particular entity, so they're going to choose based on their perception, and that does cause a little confusion.”

As these once-regional brands expand into more markets, they demand more space on shelves, and retailers may be tempted to carry more of these labels at the expense of smaller, local operations.

Given today's environment with everyone from multinational brewing conglomerates to Wall Street scratching to get into the market, it is probably only a matter of time before one or more locals end up either selling outright, like Elysian, or taking on a partner, like Firestone Walker. Valuations are high, and a quick windfall could be too tempting to resist. It will be interesting to watch the fireworks when this inevitably happens in a community as passionate about craft beer as San Diego. Get your popcorn ready.

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