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Wednesday, March 30, 2011

The Goose Island Deal

Post Updated!

On Monday we learned of a tiny bit more consolidation in the beer world: Chicago's Goose Island was leaving Craft Brewers Alliance for the InBev borg:
Chicago's premier craft brewery, Goose Island, is selling itself to distribution partner and minority owner Anheuser-Busch InBev N.V. for $38.8 million and replacing its brewmaster.

Anheuser will purchase a 58% stake for $22.5 million and the remaining 42% stake from Portland, Ore.-based Craft Brewers Alliance for $16.3 million. Anheuser already controls a third of CBA.

Almost every blogger worth his salt has weighed in on the deal, and remarkably, the chorus is mostly in tune. Far from gnashing of teeth and beating of breasts, we get this kind of analysis:
  • Since everybody else has an opinion about what the Goose Island sale means I’ll be honest and type, I don’t know. (Stan Hieronymus)
  • What happens if AB-InBev keeps Goose Island beers at the same quality but lowers the price? Would they be any less craft if that were to happen? (Alan McLeod)
  • Does the casual beer drinker care that Goose Island is now owned by Anheuser-Busch? I doubt it. (Brady Walen)
By coincidence, I happened to re-post an item on Sunday about the difference between craft beer and craft breweries. For thirty years, Americans acknowledged no distinction between the two: first you described a craft brewery (small and independent) and then you could point to craft beer (the product of a craft brewery). It's a facile definition, but a durable one. What I find most interesting about the sale of Goose Island is a tacit acknowledgement that the two are indeed separate. To the extent people are bothered about it, it's because they worry Goose Island's beer will change. It's a watershed in the way we think about beer. Americans are becoming more sophisticated in their understanding of good beer, and as a consequence, they have a more subtle understanding of the business behind it.

Other Thoughts
A couple other things to note. First is the announcement of the new brewmaster at Goose Island: Brett Porter. Incumbent brewmaster Greg Hall (founder John's son) will step aside, apparently by his own wishes. Brett's a long-time Oregon guy, brewing first at MacTarnahan's (back when it was Portland Brewing) and then at Deschutes in Bend. Unlike some of the outsized personalities in brewing, Brett's low-key and flies under a lot of people's radar. He's a helluva brewer, though--he designed some of MacTarnahan's best (if fleeting) beers ever--and Goose Island is fortunate to have him. Brett, an urbane guy who likes the artistic offerings in larger cities, is lucky to have landed in Second City.

Finally, it's worth mentioning that this is good for our hometown brewery, too. A little note in the Motley Fool last month had me worried. It reported that Craft Brewers was cash-poor and $19 million in debt and recommended against investing. (The Motley Fool is an investment advice site.) According to the reports on this deal, Craft Brewers stands to get a windfall of over $16 million. I sent a note to the brewery after seeing the Motley Fool piece, and they assured me things were cool there. Their assurances and my business ignorance were enough to reassure me, but this has to make things even cooler.

Update: Maureen Ogle, who literally wrote the book on American beer history, has one of the best pieces on this deal I've seen. I regret I didn't put it in the main body of my comments.

1 comment:

  1. Re: 'Americans are becoming more sophisticated in their understanding of good beer, and as a consequence, they have a more subtle understanding of the business behind it.'

    But, craft beer sale only accounts for 5% of US beer sales; so, more correctly: "A few Americans are becoming . . . '

    The share price of Craft Brewers Alliance [Hook] stock has increased ~18% in the past 5 trading days and is up 28% YTD.

    For me, the 3rd paragraph of "Ken's" comment to Andy Crouch's post on the buyout is most insightful. I direct your attention to: