Sunday, May 1, 2011

When is a brewery big enough?

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On March 28th, the Fulton Street Brewery LLC (often referred to as Goose Island) agreed to be purchased by AB-InBEV for the reported sum of $22.5m. By agreeing to the purchase, AB-InBEV was able to purchase the 'majority equity stake' (58%) in the Fulton Street Brewery LLC. According to John Hall, 'the agreement to consolidate ownership of Goose Island under Anheuser-Busch will provide us with the best resources available to continue along our path of growth and innovation'.

The purchase itself surprised many people, and brought about comments that were (presumably) fueled by anger, confusion, etc.. I must admit that after I heard about the deal, I was angered by it because one of the largest brewing conglomerates had purchased one of the oldest, still active, brewerys in Chicago. Goose Island has long been associated with Chicago, and Chicago beer. With this one move, what was once a Chicago brewery was now a brewery in Chicago that is owned by a company based in Belgium (save the brewpubs which were not part of the deal).

I do not own a business that has the demands that Goose Island has. I also understand that it is extremely easy to be a critic (especially a critic that is as far outside of the specifics & reasons behind the deal as a person can be). But as a beer fan, it was hard to not be somewhat miffed by the whole thing. The quote from John Hall I mentioned above got me thinking. When is a brewery big enough?

I understand that a business that is accountable to share holders needs to find a way to increase their bottom line. For a brewery, that can be accomplished by increasing the number of establishments that offer your product. In order to keep up with the obligations associated with new accounts the brewery's capacity has to increase or they may need to consider contract brewing (that choice has an entire list of things to consider). To do that, more equipment & space is needed and in order to acquire such things requires cash. In the case of Goose Island, AB-InBEV provided that cash.

In the past 6 months a few major breweries have pulled out of a few beer markets. Specifically, Dogfish Head, Avery, and Great Divide. They, like Goose Island, had a decision to make: do they seek outside investment to help them keep up with the demands from their large & expanding distribution network, or do they shrink their distribution network so that they can grow organically (via a means & pace that they can afford on their own)?

Dogfish, Avery & Great Divide opted to retract their distribution network. It is not known how long the aforementioned breweries will remain in their contracted state. Beer fans in the states they left are hoping it won't be long, but only time will tell.

Personally, I am a big fan of local breweries serving their city of origin. Doing so has many benefits. A few are listed below.
  • Keeping business local results in more money being pumped into your local community via taxes, tourism dollars, etc.
  • It helps encourage & maintain a vibrant small business community
  • A small business has a greater personal interest in helping a community grow and remain safe compared to a large business in a small town. Example: McDonalds in any town America.
I hope that more breweries continue to open across the country (& around the world). More breweries means more choice and more breweries in a state means a greater, local brewing community. Which is something I think we can all appreciate.

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