Who’s next for takeover?

By BeertownNZ Wed, 22 Feb 2017 National

Panhead’s price tag of $25.1 million put craft brewery takeovers back in the news last week.

The official confirmation came just a couple of weeks after Tuatara’s sale to DB, and the news items inevitably started speculation on ‘Who’s next?’

Takeovers have been hot news overseas, and New Zealand beer fans are keen to get in on the act and extrapolate the trends here. Check out Neil McInnes’ take last year (before Tuatara sold), and beer writer Jules van Costello’s response. But the fact is there are only a handful of potential buyers, and potential targets are pretty limited too.

Let’s look at the potential buyers – there’s just three, and they’re not all shopping.

Lion/Kirin’s purchase of Emerson’s and Panhead gives them an excellent range of craft beer options – the highly regarded, long established Emerson’s, and the live-fast-brew-young Panhead. Lion has access to other craft beers including Little Creatures. It offers its venues Lion Red, Emerson’s JP, and plenty in between – and that strengthens the ties on taps. Beertown punt – Lion is investing in making more Emerson’s and Panhead, and is not looking for any more labels right now.

DB/Heineken’s Tuatara purchase shows a late change in strategy. It has been more flexible than Lion with its tied venues, and offers Black Dog as a semi-faux-craft label. It’s a toss-up whether DB will continue this conservative strategy, or join Lion in an arms race. Beertown punt – DB doesn’t feel a desperate need to buy another craft brewer so will only buy on its own terms. If it does buy another label, it will stop producing Black Dog outside the Wellington brewpub.

Independent/Asahi is behind the other two major brewers, both in its slice of the pie and its craft beer cred. It bought Founders in 2012 and wrecked a respected craft beer brand. Its attempts to expand Boundary Road into craft beer have fallen flat. Independent appears to run strong controls over tied venues – matched by very attractive financial support. Bar owners signed up knowing craft beer wasn’t part of the package. So I expect Independent is not under great pressure to invest tens of millions in a craft brewery, even though there’s no doubt it could. Beertown punt – Independent is unattractive to craft brewers, and it doesn’t really care.

A real outsider punt could go on Big Craft buying into Little Craft. There’s been some speculation that Moa and Harrington’s could be interested in buying into smaller craft brewers. Moa is now distributing for ParrotDog, and would certainly be interested if/when PDog expands again in 3-5 years (as suggested in PDog’s crowdfunding launch document). Beertown punt – I don’t see anything happening any time soon, at least not in public.

Now let’s look at the potential sellers – what craft breweries would make tempting takeover targets?

There’s a lot to consider: do they own plant that will need to be replaced?; do they have good distribution and forward orders?; is their range distinctive enough?; is their brand distinctive enough?; will the brewer stay involved?; do they want to sell?

Given my prediction that there’s little interest in buying New Zealand craft breweries, it’s a bit academic, but let’s have some fun. Here’s some* Beertown punts on different craft brewers’ attractiveness to the majors.

Garage Project – demand exceeds supply; excellent brand and loyalty; “We’re always interested in what ideas people might have”; would prefer any takeover to be secret.

Liberty – fast-growing brand with strong social media presence and loyalty; range and quality would appeal to bars and drinkers; young owners would probably consider right offer.

Epic – pugnacious owner Luke Nicholas is a gifted brewer; no equipment to write off; but gifted brewer Luke Nicholas is a pugnacious owner.

Behemoth – distinct brand in New Zealand; expanding into Australia; no equipment to write off; young owner would probably consider right offer.

Bach Brewing – strong branding with Kiwi summer associations; no equipment to write off; decades of industry experience.

Sprig & Fern – biggest strength and weakness would be the tied pub chain – this may appeal to Independent, but legal arrangements with venue owners could make a deal complicated.

OK, this isn’t a Top Six, it isn’t ranked, and it certainly isn’t a definitive list of who would/wouldn’t take a cheque. And given my punt that the three majors are not actively on a shopping spree, it’s just a bit of fun.

Takeaway Beertown punt – craft brewers will continue to enter the game much faster than they will be bought out, and we are not yet at Peak Brewery Numbers.

Cheers!

Martin Craig

*Disclaimers a-go-go: This is not intended to be a complete list of who might or might not be for sale. Inclusion or lack of inclusion on this list does not imply any commentary on the business or its products. I have not interviewed any of the breweries named (including majors) regarding takeover plans and wouldn’t expect them to tell me. Other opinions are available. Martin Craig and Beertown.NZ Ltd to not own any shares or hold any other financial interest in any brewery.

By BeertownNZ Wed, 22 Feb 2017 National