Full Sail Brewing Co. of Hood River, Oregon was one of Oregon’s first craft brewers and had been employee owned for years. Like many craft brewers who have been around that length of time, Full Sail has had many ups and downs. Just recently, the 78 employee-owners voted to cash out and sell to Encore Consumer Capital.
Full Sail’s annual volume is impressive at 115,000 bbls. and the Full Sail beers are highly awarded and respected. While none of the terms and conditions have been made public, these 78 employees have all agreed to remain at the brewery.
In recent years, private equity firms have discovered the craft industry and aggressively pursued opportunities. One of the most interesting announcements came recently with the formation of Enjoy Beer by Rich Doyle and the investment firm of FFL.
As one of its founding partners, Enjoy Beer has signed 160,000 bbl. brewer, Abita and is actively looking to sign up to four additional partners. When they are ready, their plan is to take Enjoy Beer public.
As we know, ABI has been active in buying successful crafts purchasing breweries including Goose Island, and recently 10 Barrel Brewing and Elysian Fields Brewing, all of which were growing and well regarded brands with loyal consumers. Both 10 Barrel and Elysian Fields are located in the Pacific Northwest.
When Schlitz decided to sell out in the early 1980s, it was the result of producing liquid that was damaged. In spite of their efforts to again brew good beer, the damage had been done. Coors Brewing Co. had an interest in acquiring Schlitz because they wanted to begin the sales of Schlitz Malt Liquor and Old Milwaukee as they, Coors, had no brands in those segments and both brands were category leaders. Unfortunately for Schlitz, and their wholesalers, the government would have challenged this under anti-trust laws.
Stroh Brewing Co., however, which was much smaller than Coors, was able to move forward and purchase Schlitz with government approval. Stroh, while not in the same position as Schlitz, was a small regional brewer who was struggling to maintain market share. Many of us, who were Schlitz wholesalers at the time, privately believed that putting two sick companies together would not create one healthy company. Ten years later, that proved to be true.
Heileman Brewing Co., made up of a number of successful regional craft beers including; Rainer, Henrys, Old Style, Lone Star, Mickey’s, Iron City, Drewrys and others sold to an Australian named Alan Bond. Heavy debt and declining sales forced Heileman into bankruptcy and eventually they, too, sold.
Since 2008, the beer industry has seen the rapid rise of craft beers, while the overall industry continues to shrink, meaning that ABI and MC have lost millions in sales. The world financial experts continue to discuss the possibility of ABI buying SABMiller.
Some think it will eventually happen, while others seem to think that there are too many complicated and conflicted issues which will preclude this purchase from happening. From a distance, based on sales, one might initially see another Stroh/Schlitz model of brands that are struggling.
What if ABI and SABMiller come to the conclusion that the craft segment will grow to a 50% share of the US market? Imports, led by the Mexican beers could grow to a 20% share. That would leave 30% for ABI and MC.
The question then is: how much money will these two giant companies throw at large craft established breweries? With PE firms, along with ABI and MC as buyers, it is no wonder that Full Sail and others have chosen to cash out. The difference between genius and stupidity is simple: genius has it limits.