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Wednesday, 10 May 2017

Craft breweries - take cover

I see in the Morning Advertiser that Carlsberg has announced that it intends to acquire a craft brewery in the UK. This is hardly surprising news, and quite a few beer writers and bloggers have suggested that craft breweries would become targets for takeover as the popularity of their beers grew. The fate of Meantime, taken over by SABMiller, and then sold on a short while later (as I wrote here), should make any small brewery think twice before agreeing to being bought out. They should also remember Sharp's, taken over by Molson Coors who subsequently moved all the production of bottled Doom Bar hundreds of miles north, while still putting 'Rock, Cornwall' on the labels. As I wrote in December 2015, "Selling out to a big beer corporation must be a temptation for the owners of a highly successful small brewery, but the problem is that you are instantly converted from a company to a brand, and brands are no more than commodities to bought and sold like any other."

I suppose if you've had enough and don't care what happens to your brewery after you've been paid the asking price, then fair enough, although your customers may not be so sanguine, otherwise you have to be very careful and yet could still come unstuck.

Those of us who remember the domination of the beer market in the UK by the Big Six (Whitbread, Scottish and Newcastle, Bass Charrington, Allied Breweries, Courage Imperial and Watneys) will be only too aware of the promises that followed brewery takeovers to keep the beer local, brewed to local tastes, etc, etc. In nearly all cases, these pledges were broken within a few years - months, sometimes - and a sizeable proportion of British beer ended being brewed in huge beer factories. Whitbread, who had the cheek to run an advertising campaign to try to persuade us that Trophy Bitter was brewed differently around the country to suit local tastes, were the worst culprits. The swathe they cut through the British brewing scene was mocked as the  'Whitbread Tour of Destruction', depicted on rock tour-style T-shirts and posters that listed all the breweries they'd taken over and closed.

The situation today isn't an exact parallel: in the Big Six days, takeovers were usually to acquire the target brewery's pub estate, which isn't a consideration now. I suspect that Carlsberg, despite their advertising campaigns, must know that their products lack any credibility: what better way to gain instant cred than buying an established, successful and well-regarded craft brewery?

It's becoming increasingly the case that well-regarded small breweries can provide an instant, off-the-peg solution for any mega-corporations who want to enter markets that their existing products could never reach. I don't see this just as a craft problem; the takeover of Sharp's shows that real ale breweries can go the same way. I'm not sure that ordinary drinkers can do much about it; let's just hope we don't sleepwalk into a repeat of the relentless cycle of takeovers that we saw in the 1960s and 1970s.

4 comments:

  1. To be honest, many craft brewers' eyes will have lit up at this news. If you're offered a once-in-a-lifetime payday, then why not?

    And I don't think a takeover of a business that has only developed in the past ten years can really be compared with that of an established independent brewery with a tied estate that has become part of the local scenery.

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  2. Of course the situations are not identical, as I indicated. However, the eyes of many long established independent brewers also lit up when they were made offers that they decided they couldn't refuse, a fact that some CAMRA types still ignore, depicting the Big Six as villains and small breweries as plucky little heroes. In reality, many of the little boys were quite happy to collude with their own demise, just as some small craft brewers would be now, as you suggest. The brewery situation is different now, but human nature hasn't changed since the 1970s.

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  3. Not every businessman wants to build an empire to hand down to their son. Hence a sell out is a lucrative out after many years of hard work.

    As for Carlsberg. We may differ in regard to our views on the merits of their products but I the fact is, their products are low margin being discounted brand on and off trade.

    They are currently playing up their Danish origins years after all things Scandi became fashionable after The Killing did well on BBC4. The marketing is quite stylish and may even improve their sales.

    But even so, it's logical to add some new high margin brands to the portfolio, whether developed in house or acquired.

    The problem for Carlsberg and others is whether a vocal minority of beer commentators actually do represent the views of a larger customer base. If so, then part of the value of craft is not in the product but the values it represents where small is good and big is bad. Hence a danger that acquisition of high margin brands devalues those brands regardless of any other product change.

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  4. If I had built up a small business on an initial outlay of, say, tens of thousands of pounds and could sell it on for £millions, I may well be tempted, and I wouldn't criticise anyone who does take the money: it's theirs to sell, after all. Having said that, if a brewery I liked were taken over, I'd be concerned that their beers may be dumbed down or discontinued altogether.

    You pose the question of "whether a vocal minority of beer commentators actually do represent the views of a larger customer base"? Generally, I'd say not. Nevertheless, the danger of brand devaluation that you refer to does exist, but I expect companies like Carlsberg would be able to compensate for that by being able to distribute the product to many more outlets than a small independent brewery would ever have access to.

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