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Posted September 2017

 

The long trail East

US craft brewers | Westward, Ho! The story of the United States has always been one of westward expansion, beginning along the East Coast and continuing until it reached the Pacific. For over two centuries the American West has promised progress and new opportunities. Its laid back, relaxed, entrepreneurial attitude has been instrumental in boosting the growth of craft beer, turning the West Coast IPA into the quintessential American craft beer style. Unbeknown to many, though, Western craft brewers are moving East and establishing footholds in North Carolina and Virginia, while expanding their distribution footprint all over the US. The economic and cultural implications of the new Eastward, Ho are certainly momentous.

How wondrous that some anniversaries kind of sneak up on us without much of a warning? So it was during this year’s silly season, when most of Europe had already decamped for their holidays, that US media reminded us that “the Summer of Love” was 50 years ago. Half a century ago, long before many of you were born, “the continent decisively tipped and everything in America that wasn’t nailed down went sliding and clattering westward into the foggy bowl of San Francisco” (James Parker in The Atlantic). Resembling a veritable stampede, an estimated 100,000 to 200,000 young people descended on San Francisco’s Haight neighbourhood to “wake and bake” (aka toking up right after you wake up) in that drug-fuelled, music-drenched summer of 1967.

Call it life’s many unexpected twists and turns that, as we were busy catching up on what exactly happened all those decades ago, three San Francisco breweries were sold in the short span of only two weeks. The rush was kicked off by Brooklyn Brewery, which bought a minority stake in 21st Amendment Brewery at the end of July 2017. No financial details were disclosed. A week later, Japan’s Sapporo came along and took over the prestigious Anchor Brewery for USD 85 million. And lastly, on 10 August 2017, Colorado’s New Belgium Brewery bailed the 20-year-old Magnolia Brewing Company out of insolvency, having put USD 2.7 million for its assets on the table. Yo, Love, Peace & Happiness to all!

Few would have thought that Brooklyn, New Belgium and Sapporo’s owners are closeted hippies who had a belated coming-out, or that they were swayed by some subliminal backmasked messages in Scott McKenzie’s flower-power anthem “If you’re going to San Francisco/Be sure to wear some flowers in your hair.” Brooklyn, which bought into 21st Amendment (105,000 barrels in 2017) and Colorado’s Funkwerks (7,000 barrels) simultaneously, said the whole point of the exercise was to create a nationwide sales and distribution platform to better compete for shelf space against the Big Brewers and their craft beer brands.

Sapporo’s rationale for acquiring Anchor is fuzzier. Clouded in commercialese, the Japanese firm wants to “push forward a distinctive plan that designates North America its business base.” Whatever this means precisely, we should not rule out that Sapporo’s executives were also looking for a nice spot in the US to set up shop. There are worse places to live than San Francisco.

Affectionately called the grandfather of craft beer, Anchor presently finds itself in a fix, having slipped from 13th (2009) to 22nd (2016) in craft brewery sales rankings. Founded in 1896, Anchor was famously rescued from closure in 1965 by Fritz Maytag. In 2010, given his age then 72 and the fact the brewery hadn’t been growing as rapidly as some of its peers during the craft beer boom, Mr Maytag chose to sell it and the distillery, which he had set up in 1993, to an investment and consulting firm, the Griffin Group, led by Keith Greggor and Tony Foglio. The duo is well-known in the industry for its work in building the Skyy Vodka brand, which they sold to Italy’s Campari Group in 2007. Explaining his reasons for the brewery’s sale, Mr Greggor cited “difficult market conditions” and “declining volumes”. Fortunately, this did not deter Sapporo but depressed Anchor’s valuation.

And as to Magnolia (4,000 barrels), it was not bought for straightforward business considerations but for love by the craft beer industry’s power couple Kim Jordan, the founder of New Belgium Brewery (1 million barrels) and her partner Dick Cantwell, one of the founders of the Elysian Brewery from Seattle, which was sold to AB-InBev in 2015 for an estimated USD 60 million. The two have their pied-à-terre in San Francisco. New Belgium acquired a majority shareholding in Magnolia with Mr Cantwell, the Belgian Lambic brewery Oud Beersel and an anonymous investor from Portland, Oregon, taking on minority stakes. In effect, Mr Cantwell has not just re-invested some of the proceeds from the sale of his former brewery, he has also found a new calling. He becomes Head Brewer of Magnolia, while the founder of Magnolia, Dave McLean, becomes an employee of New Belgium.

A few years ago, this string of transactions would have created a deluge of comments on the internet – how, why, and was there another Gold Rush in the offing? This time, there was hardly any response from webizens and none that pondered the coincidence of San Francisco’s breweries hitting the news as the city was gearing up to celebrate the Summer of Love’s 50th anniversary.

Perhaps, this nonchalance was only to be expected. In terms of craft breweries, the West has become a crowded place. What is more, the real trend in craft brewing is no longer “Go West, young man” but “Eastward, Ho” as successful cashed-up western craft brewers are putting stakes in the ground in states like Virginia and North Carolina.

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