Beer writer Jules van Costello takes issue with Neil McInnes’ look at craft brewing takeovers.
In a Beertown.NZ post last week, beer writer Neil McInnes asserted we are in the ‘Takeover Years’ of New Zealand craft beer.
I agree takeovers form part of the craft beer landscape in 2016 and onward, and ultimately this is a good thing.
But I would argue that it is unfair and, dare I say callous, to describe New Zealand beer today with a such simple, click-bait-friendly broad brush.
The future is strong for craft beer in New Zealand, and is especially strong for independent craft beer.
To describe the current state of New Zealand beer as one of buyouts is akin to describing Game of Thrones as a show about incest. Yes, it's the incest and buyouts that get the headlines, but this only reflects a fraction of the action. The reality, as always, is much more nuanced. Rather than get into market trends and other such issues, I’m going to concentrate on the same subject as Neil - ownership.
I certainly agree with Neil that brewery ownership is changing. When I wrote the first edition of Brewed: A Guide to the Craft Beer of New Zealand, I found that the vast majority of brewing businesses were owned by a handful of shareholders, usually those with pre-existing family relationships or friendships. If you need me to simplify (and it is over-simplification), most breweries were owned by the brewery, their family and maybe a few friends.
This has changed dramatically in the past two years.
Craft brewing is a boom industry, as evidenced by Garage Project being the fastest growing business in the country according to the Deloitte Fast 50. ParrotDog was also in the top 50 at number 29. Both were, and remain, independently owned.
It is no surprise that the suits at Heineken Asia Pacific (which owns DB) and at Kirin (which owns Lion) want in on the action to reclaim ground lost to craft beer. In the last few years Lion has bought up two notable craft breweries (Emerson’s and Panhead); DB has created Black Dog in 2011; and Independent Brewery (owned by Asahi) entered into an odd, nebulous production and distribution agreement with Founders (the Duncan family still own the brewery). All three have also produced pseudo-craft brands.
Five breweries out of about 160 is hardly indicative of a wholesale trend, especially not one that can be used to describe the whole industry. Being a boom industry, lots of investors (and not just big, corporatised ones) want to get in on the perceived craft beer goldmine. Lots of institutional and mum & dad investors want in on craft beer action.
Renaissance, Yeastie Boys and ParrotDog have all had high profile crowdfunding campaigns, raising approximately $2,200,000 over 1323 shareholders. That's about $1663 per shareholder - not a massive amount but more than most people can afford to lose on a vanity investment.
All three sold between 12% and 15% stakes in their businesses. All three used the funds to expand, but in radically different ways. Renaissance was more of the same on a larger scale; Yeastie Boys funded international expansion to brew beer closer to the markets drinking it; Parrot Dog funded a move to a bigger site with a hospitality venue.
Look at Tuatara - in mid-2013 Rangatira Investments (which in itself is two-thirds owned by charitable shareholders) took a 35% stake. The founders – Carl Vasta, Sean Murrie, Fraser McInnes and their business partners – still own about 57% of the business.
On a smaller scale, arrangements like those at Funk Estate are becoming more and more common. In January 2016 it moved from being a contract brewing business to a fully-fledged bricks and mortar brewery and in the process relocated from Wellington to Auckland. The three founders sold just over 15% of their business to eight shareholders to help fund this expansion.
I too have only given five examples, but hopefully five different ones that show the industry in a different light. The founders of all five breweries retain control of their own businesses and benefit from investment - allowing them to grow but also bring in other skill sets to add value to the business. Even at Panhead and Lion, the original founders and staff have been retained in roles that are driving the businesses forward and not just as figureheads.
The growing interest in the growth of craft beer is one that will attract investors. Just as most New Zealand businesses are small businesses, most breweries too will continue to be small businesses owned by everyday people. Instead of more breweries with fewer owners (which is the picture Neil paints and is certainly the trend internationally), to me it looks like there will be more breweries, and they are will be owned (at least in part) by more and more people.