Last week, I had the pleasure of attending a local event featuring a panel of some of the most noteworthy people in San Diego’s craft beer scene. Hosted by 6 Degrees San Diego, “Beer for Breakfast” allowed attendees to hear updates on the craft beer industry straight from those on the front lines. Below are a few of their insights which I found particularly interesting in light of the recent slue of consolidation and acquisition announcements. (Disclaimer: Please excuse the shoddy photo; the lighting was no bueno and it was 7am.)
On “getting too big”: “Do we worry about it? No. We can’t worry about it because we focus on innovation. We crank up our special release programs because we have demand from our fans to try new things and make bigger, better, and more aggressive beers. We try to focus on the experience–much like everyone else here. And we try to educate so that we are bigger. We focus on quality, delivering the utmost freshest beer, and continuing to innovate so we make sure people who are craving the next new thing are getting it. – Pat Tiernan, Chief Operating Officer, Stone Brewing Company
On acquisitions and consolidations in the industry, including news about Saint Archer selling to MillerCoors’ craft beer division and Heineken’s announcement of buying a 50% stake in Lagunitas. Is this a huge win for American beer, particularly Heineken buying a domestic brewery? [After about 30 seconds of silence] “I think it depends on how you define what a ‘win for American beer’ is. Listen, Stone Distributing Co. has a great camaraderie with [Saint Archer’s] sales folks … We have a high level of respect for their brewers–they do some really good stuff. What Josh [Saint Archer President] and the team have done over the last few years–you have to have high level of respect for it. It’s not a path that Stone, or many of us on the panel, would go down, but you have to respect their decision.” – Pat Tiernan
“One of the things that gets lost is outsiders not looking at the same thing that those of us on the inside are looking at. On the one hand, you have breweries like Lagunitas that have been around for a while … and people are starting to think, ‘Okay, what’s my exit strategy?’ Or, ‘How do we create leadership for the future?’ But the other, probably more important, thing is that in the craft beer industry, the baby is insatiable: the more successful you are as a craft brewer, the more you grow. There is more capital required. Some get to a point where they may not have the capital to get to the next level. Someone like Saint Archer, which was doing extremely well, may not have had $20-30 million to go build the next brewery. And so that was the path that enabled them to keep moving forward.
You look at the Lagunitas sale of 50% of their company, and they got an extraordinary valuation. But you also have to look at the investors in Lagunitas–none of them had ever received distribution in the history of the brewery. So it was an opportunity for some of them to take some chips off the table. There are a lot of factors that go on. Whether or not it’s good for the industry? I think that the craft brewers that remain true to themselves when they follow the new capital path will be good for the industry. And those who allow the diluted effects of large company management and big beer philosophy won’t be as good for the industry.” – Chris Cramer, CEO and Co-Founder, Karl Strauss Brewing Company
“It’s a personal decision, too. A lot of breweries are started on under $100,000, for instance. When your industry starts doing well, and they tell you your multiplier is 12 or 15 times [figure out what he said], your knees will get weak. Your phone rings. People throw numbers at you that you couldn’t have ever imagined. But staying true to your passion is going to be the test. Are you in this for money? Are you in this to make great beer? Is it a combination? There’s all sorts of ways this can go down…” – Peter Zien, Owner and CEO, AleSmith Brewing Company
On San Diego being ranked as low as #5 on some “top craft beer cities” lists: “If you go around the nation or the world and ask people what the leading craft beer city is in the US, I don’t think San Diego will come up as #5. It’ll come up #1–absolutely.” – Chris Cramer