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Tuesday, December 13, 2016

Asahi Snags Urquell

In the wee hours US time, Asahi announced it had picked up one of the jewels of the brewing world:
HONG KONG — Asahi Group, the Japanese beer giant, said on Tuesday that it would pay $7.8 billion to buy a group of Central and Eastern European beer brands from Anheuser-Busch InBev, in the latest brand shuffle for the rapidly consolidating brewing business.... The latest agreement, which is expected to close in the first half of next year, would give Asahi control of operations that were previously owned by SABMiller in five countries, including Pilsner Urquell, Kozel, Tyskie and other brands.
Asahi is an interesting company. It was the first brewery to introduce "dry beer" back in 1987, and Asahi Super Dry became an influential hit in Japan. That allowed the company to grow, and it began doing all those things we expect from big breweries: entering in agreements with other bigs (Miller, 1995), expanding into other markets (five breweries in China opened by 1999), adding liquor to its portfolio (early '00s), and finally adding food products a couple years later. In the last decade, they began picking up stakes in foreign breweries and then this year really made a move by purchasing some very high-profile European brands outright; in addition to Urquell, they acquired Peroni and Grolsch earlier this year (and were the subject of rumors involving acquisitions of other breweries in Europe and North America).

Asahi has managed to move into Europe thanks to the massive ABI-SABMiller deal, which was approved contingent on those companies dumping some of their assets to preserve competition. It reminds me a bit of a blockbuster sports trade, when other teams are brought in to help move superstars between two principal teams in the deal; in order to make the deals work, they need to move role-players around, too, often to teams not involved in the central deal.

If you're a fan of Urquell (or Grolsh or Peroni), this is probably good news. In making the announcement, Asahi said in a statement that the newly-acquired breweries were “highly compatible with our existing business in Western Europe and will strengthen our business platform, allowing Asahi to grow sustainably across Europe.”

SABMiller has owned Pilsner Urquell since 1999, and their approach hasn't always been clear. To their credit, they've maintained the grounds Urquell owns, which are honestly an international treasure, and have kept the brewing onsite in the more inefficient plant with all its oddities (decoction brewing, onsite maltings). But they've also periodically tried to Heineken-ize the brand, making it a more industrial and generic product in order to turn it into an international brand. Those two impulses were in conflict, and the brand suffered. SABMiller seemed to abandon the generic-and-big strategy in the last couple years, though, and had gone back to accentuating its heritage and unique and unusual flavor palate.

I'll be honest; if I were a billionaire, I'd have tried to buy Urquell myself. It is without question the most influential brewery in world history. The brewery itself is a treasure with its miles of cellars, those maltings, and gracious (and spacious) campus. Going there is like visiting a beery Vatican City. The value of the beer and brand seem enormously under-utilized right now, and I can imagine that in the hands of the right company it might well rejoin the ranks of the world's most-respected breweries. SABMiller has let it languish.

It is not the kind of workhorse that will deliver 30 million barrels of sales (if memory serves, they actually brew around a couple million). But, in the post-craft world, where brewing quirks, heritage, and localness are valuable assets, few breweries have as much upside as Pilsner Urquell. Asahi may not be assembling a portfolio of the biggest players, but they have found some excellent smaller breweries. It's an unusual approach that uses a different logic than ABI, and I'll be watching closely to see how it continues and how it pans out.


  1. Got to tour it a few years ago. Absolutely amazing.

  2. The other bidder was a Czech investment group. On the one hand, it would've been nice to see PU back in Czech hands, on the other, investment groups aren't the kind of people that hang out to a company for too long.