16 Dec Recent Sales of Breweries Show That “Craft” and “Independent” May Be Moot Terms
by Mark E. Lasbury for Indiana On Tap
Here’s the way the world is supposed to work – at first things seem ill-defined, hard to comprehend and don’t make much sense. Then you gain experience as things happen; you start to see relationships, details become clear, and your understanding is greater. Think about how many things are simple for you now but started off as black boxes; reading, you’re last job, how to answer that question from your wife about she looks in that dress.
Most issues become less ambiguous and easier to define with more data points and time; they come into focus. Unfortunately, not everything works that way. In some instances, more data and experience means that you see nuances or hidden details that create problems in understanding the totality of a subject. More information and occurrences can actually make some issues more difficult to categorize, characterize, or communicate to others.
For example, many scientific studies end up adding to the knowledge base, but also open new avenues and questions rather than simply answer previous questions. Things seem to get murkier and expansive instead of honed to a sharp point. It seemed that way in physics for thousands of years, the fundamental forces were better defined, but how they fit together became less and less clear. Wait… you mean light is both a wave and a particle? Even today, we’re just starting to come upon a theory for the unification of forces, a combining of Newtonian and quantum mechanics.
BA is moving away from “craft” and starting to emphasize the word “small.” Is that a more accurate description of the breweries we love? image credit: Brewers Association
Naturalist/biologist E.O. Wilson wrote a book about this very thing, entitled Consilience. This is the phenomenon of seemingly disparate lines of inquiry coming together to show relationships that would otherwise have remained hidden, those that can enlighten and join various disciplines. His major thrust was an effort to join the sciences and the humanities, but the concept works for many things. The idea is that knowledge pathways and possibilities diverge until a fulcrum reached, and then additional information starts to draw several lanes together and subjects make more sense.
Independent craft beer. Early in the craft beer era things were simple – you were mega-beer or you were craft. The players were easy to name and define. Then some craft beer producers got big, and some joined together. But still, into the late 90s and early 2000s people would open a brewery, make beer, and that was their identity.
Then corporations saw that money could be made, and they bought craft breweries. Then the BMC (Bud, Miller, Coors) companies starting losing market share to craft beer, and they started buying craft breweries, hop farms, and distributors so they could control the industry. Each phase added to the experience and knowledge of craft beer, but they also made craft beer harder to define and understand.
Recently, the idea that independent was a better term for the kind of beer you and I most like was better than craft, simply because the added experiences in craft had left that term ambiguous. More data, more history, and more knowledge, but less clarity. Now there are examples that call into question the term independent as well. Craft beer certainly has not reached a point where we can start to see consilience. The problems in defining and understanding have been pointed out by a few recent high profile sales of breweries, as well as some local changes on a much smaller scale.
image credit: Ballast Point Brewing
Let’s take a look at some examples, and try to see if they make the terms craft and independent more or less applicable – do we need to move on to a new paradigm of definition and understanding? Is it ever going to become possible to define who is out for the good of beer, and who is out for their own good?
Ballast Point Sold to Kings & Convicts. Ballast Point Brewing of San Diego was an up and coming brewery (established in 1996) with wildly popular products and a steady increase in distribution when the original owner/founder Jack White sold to Constellation Brands in November of 2015. The purchase price was a whopping $1 billion, the largest sale of a craft brewery ever.
Constellation Brands is a corporation that has over 100 brands of beer, spirits, wine, and medical marijuana. It started in 1945 by buying wine in bulk to sell to bottlers, and as such, it doesn’t make wine or brew beer. Therefore, under the Brewers Association definition of craft (less than 6 million barrels/yr, less than 25% owned by a company that doesn’t make beer) Ballast Point went from craft to non-craft. It also went from being independent to being dependent on its corporate owner.
By the middle of 2016, the three original individuals that managed, owned, or brewed for Ballast Point were off “pursuing other interests,” and the corporate philosophy of Constellation Brands had permeated the business. They immediately expanded to national distribution, and increased production by making their beer in several locations. Then sales began to slide – like off the edge of a cliff. The same thing happened to Green Flash, also from California, about the same time and Boulder Beer this year. Green Flash reduced its distribution footprint tremendously, and Boulder is only doing local distro. and a brewpub now.
image credit: Kings & Convicts Brewing
As to why Ballast Point had problems, there was brand fatigue, a lack of innovation (ie. they didn’t start making hazy IPAs), the market growth slowed, there were several reasons for their decline, both self-inflicted and out of their control. They abandoned plans for a brewpub in So Cal, and reduced production from 430,000 bbl in 2016 to 200,000 bbl in 2018. Constellation Brands lost interest in Ballast Point (admitting that they misjudged the market) and in a press release said they were looking to focus on the Corona Hard Seltzer coming out this spring….good luck with that.
As a result, Ballast Point was sold a couple of weeks ago to a small brewery out of Highwood, IL (suburb north Chicago) called Kings & Convicts. The sale price wasn’t announced, but word has it that it was $100 million or less, a mere one tenth of the sale price of just over four years ago. Kings & Convicts was started in 2017 and does almost no distribution whatsoever.
In truth, Ballast Point was purchased by the investors who are behind Kings & Convicts, a couple of guys who made mints in hotels and wine. Brenden Watters is the face of the purchase, he worked in the corporate world of hoteliers and sold his boutique hotel line a couple of years ago for several million. He started King & Convicts with Chris Bradley, who brewed all 550 barrels of their beer in 2018. But the real money came from Richard Mahoney, a n acquaintance of Watters and the CEO of the Wine Group, which own many brands, including Robert Mondavi and Franzia. This isn’t really a beer deal, it’s a money deal – they’re in this to turn a buck.
Their plan is to get back to basics, reduce the distribution, hire a new sales force, and focus on what it means to be independent. Will it work? Who knows. The bigger question for me is does it mean anything that they were craft – weren’t craft – and now are craft again? Because one of the investors happens to own a small brewery, does the ownership group qualifying as brewers of beer and really make Ballast Point craft beer again? Are they really independent again? Are they making decisions based on the good of beer (and money), or solely on the idea of making the investment pay off?
image credit: Anderson Valley Brewing
It’s a move away from the corporate giant to something smaller, but does this sale do anything to help us gain a better grasp on what it means to be craft or independent?
Anderson Valley Brewing sale to the McGee family. Opened in 1987 by Ken Allen, Anderson Valley Brewing has been sold twice now, once in 2010 to Trey White, a Hoosier (and couple of silent partners) in 2010, and now to McGee family in December of 2019. Ken Allen brewed and sold beer at Anderson valley for 23 years before retiring to Belize, while the new principal owner, Kevin McGee, made money in wine and beer sales.
McGee is a lawyer by trade, sold a lot of beer and wine, and now is the principal force behind Terroir Capital. Interestingly, he loves craft beer and opened a small brewery in his garage a few years ago, Healdsburg Beer Co. He even won a medal or two at the US Open Beer Championship in Cincinnati. His brewery has expanded beyond his garage now, but he is still a local brewery with ties to the same northern California area s Anderson Valley in Boonville.
McGee says he doesn’t wish to change what Anderson Valley does, including their best sellers, the Boont Amber Ale or their fruited gose series. So in this case, an independent brewery is sold to a venture capital group that also has a small brewery. Is it still craft? Technically, they are still craft by BA definition. Does it matter that the man behind the venture capital is also the man behind the small brewing company – does that make them more craft?
image credit: Healdsburg Beer Co.
Likewise, does it matter that in both cases we have discussed here, it’s a brewery owned by another brewery and a corporate arm – does that lessen the idea of their independence? The two sales have similar aspects for sure, but for some reason I have a much easier time accepting Anderson Valley as still craft and independent than I do Ballast Point. Has too much water flowed under the bridge for Ballast Point? But to the larger point, do these sales further erode the idea of craft or independent really carrying any meaning?
Conclusion. Is it time for new words, new definitions, or a simple shift to new categories? Craft beer, as weird as it may sound, isn’t as easy as quantum physics. In physics, facts and observations are observable and repeatable. The interpretation of the facts can be vary, but with eventually one idea becomes supportable and others fall by the way side. But people are involved with beer, and people are inscrutable. Sales trends, fads, personal motivations, changes in pricing for agricultural products, the whims of government oversight – do you think these things are making craft beer easier to understand or harder? They can always become harder, but will they ever get easier? The question are many:
Do the examples of Ballast Point and Anderson Valley indicate a movement back to independence or craft?
Click to see a big, up to date version of who owns who. image credit: The Mad Fermentationist
How about New Belgium selling to Kirin – they make beer, but in no way will New Belgium fit into a BA definition of craft or independent now. Does that change the beer (not immediately, but probably eventually)? Does it change your opinion of them? Is it worse that they went from employee owned to corporate?
How do you choose who to drink and who is trying to nudge out or even suppress craft beer?
Cannon Ball Brewing in Indianapolis recently sold to Scarlet Lane. Scarlet Lane is going to make a couple of Cannon Ball beers (tentatively) at their McCordsville location, so is the Cannon Ball location (now called Cannon Ball Gastropub) still a brewery? A brand? The same could be said for Straight to Ale’s recent purchase of Druid City Brewing in Alabama, and several other mergers.
As you can see, we still have more questions than answers, so we are still muddying the waters and not moving toward consilience. It may be time to scrap the entire description and take things on a case by case basis, but that means that drinkers and people who care about the longevity and health of the industry have to pay much more attention to what’s happening. That’s more work than most are willing or able to put in. For me, I choose to decide on what happens to the profits, where they go and if they are used to support or suppress craft beer.
I leave you with the words of Buckminster Fuller – “When working on a problem, I don’t consider beauty, but when I have a solution, if it is not inherently beautiful, I know I am wrong.” So far, the understanding we have of craft beer as an industry is anything but beautiful.
banner image credit: VinePair
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