It is spring cleaning at the Big Brewers. While Molson Coors sold San Diego’s craft brewer Saint Archer to upstart Kings & Convicts, which had previously taken Ballast Point off Constellation’s hands, AB-InBev quietly wound up its joint venture with cannabis firm Tilray.
Looks like deals related to distressed assets and new opportunities are taking prominence: See Tilray buying craft brewers Green Flash and Alpine, and Monster snapping up CANarchy.
In the past, growth brands were prized highest. Nowadays M&A is driven by geography and production flexibilities. Moving into Beyond Beer is not just a tactic for brewers. Coke’s collaborations with first Molson Coors and now Constellation show that beverage and drinks companies need to diversify, too, if they do not want to miss the boat.
Monster Beverage has been mulling a move into booze for years. In a significant shakeup to the US craft brewing industry, on 14 January 2022, Monster announced it will acquire the craft beer and hard seltzer producer CANarchy Craft Brewery Collective for about USD 330 million in cash from private equity firm Fireman Capital Partners. This should kill the rumour, spread in November 2021, that Monster was seeking a merger with third-ranked US brewer Constellation Brands (Corona, Modelo).
Monster’s move underlines that traditional boundaries between the categories are rapidly blurring, and that CANarchy might have simply been too good a deal for Monster to pass up.
For CANarchy’s roughly 500,000 barrels (585,000 hl) of output, Monster is paying USD 660 per barrel, which is far less than what Constellation paid for Ballast Point in 2015 (the outlay of USD 1 billion came to almost USD 3,500 per barrel). In 2019, AB-InBev purchased Craft Brew Alliance at a cost of about USD 424 per barrel and Boston Beer bought Dogfish Head for around USD 1,100 per barrel.
Monster, whose biggest shareholder is The Coca-Cola Company, has given the usual assurances that CANarchy will “function independently, retaining its own organizational structure and team.” It thus hopes to mitigate any backlash or boycott from craft beer aficionados.
I wonder, though, if anyone is still keeping track of who owns whom, given the many craft brewery sales in recent years.
It is pick ‘n chose for The Coca-Cola Company. Having partnered with Molson Coors for its Topo Chico hard seltzer, the beverage firm, in January 2022, said it has now chosen rival Constellation Brand to create a line of RTD cocktails under Coke’s Fresca soft drink brand.
Slated to arrive sometime this year, the drinks will be produced, marketed and distributed by Constellation. This will be Coke’s third alcoholic drink launch, but only its second alcohol cooperation. Coke went solo in Japan where its local unit has been selling a hard soda, Lemon-Do, since 2019.
It is hoped that hard sodas could pick up the slack for hard seltzers, whose US growth seems to have slowed down in 2021.
AB-InBev and cannabis firm Tilray have ended their partnership in Canada by mutual agreement. According to Tilray’s CEO Irwin Simon, on 6 January 2022, AB-InBev was unwilling to launch THC beverages in Canada. Cannabis drinks can legally contain either THC, which is psychoactive, CBD, which is non-psychoactive, or a blend of the two. They must not contain any alcohol, though.
The end of the AB-InBev-Tilray joint venture may have been triggered in part by underwhelming sales of cannabis beverages in Canada. However, Tilray’s decision to continue buying US craft breweries – and thus become a competitor – could have also played a role. In December 2021, Tilray acquired San Diego’s craft breweries Green Flash and Alpine for a total of USD 5.1 million (or USD 150 per barrel beer sold) from private equity firm WC IPA. In December, Tilray also bought the Breckenridge Distillery in Colorado for USD 103 million.
Obviously, Tilray must be thinking Beyond Beer. The San Diego breweries Green Flash and Alpine will give Tilray more options for future cannabis products in California, which is the nation’s largest market for cannabis.
Molson Coors sells San Diego’s craft brewer Saint Archer to Kings & Convicts after seven years. It has pulled the brand from store shelves and sold the brewery (capacity: 100,000 barrels) and two local taprooms to Kings & Convicts, the owner of craft brewer Ballast Point. Molson Coors will retain the rights to the Saint Archer brand – at least for the time being.
The 2015 deal marked a milestone in San Diego’s craft brewing industry, as Saint Archer was the first local brewery to sell to a Big Brewer for a rumoured USD 35 million (or USD 1,000 per barrel, which was then the going rate). Current financial terms were not disclosed.
According to estimates, Saint Archer reached peak sales in 2019, when it made 65,000 barrels beer. Output dropped to 55,000 barrels in 2020. In the end, it just became another victim of Molson Coors’ portfolio clean-up, which already saw Molson Coors discontinue Coors Seltzer and a dozen other economy beer brands in 2021.
Dubbed the “Great Resignation”, a record number of people were quitting their jobs in the US and elsewhere last year. Just like shoppers concerned with a brand’s record on sustainability, employees are holding firms to account on treatment in the workplace. When BrewDog was slammed for nurturing a “toxic” culture, many feared it might not recover from this HR and PR disaster. Upon the release of its new workplace code and other measures, it looks like BrewDog could be heading in the right direction. If BrewDog gets this right, it could offer other companies a benchmark example, not just for addressing and recovering from such crises, but for becoming a more attractive place to work.
Following the introduction of minimum unit prices (MUP) for alcohol in Ireland on 4 January 2022, some alcohol has almost doubled in price at shops and supermarkets. The government’s MUP system, which is determined by and is directly proportionate to the alcohol content, means alcohol cannot be sold for less than EUR 1 (USD 1.13) per unit. In effect, the new law has ended promotional deals and cheap drinks. MUP for alcohol is part of the Public Health Alcohol Act, aimed at preventing binge drinking and reducing harms caused by booze.
Boom of Czech minibreweries is over. Over the past decade, the Czech Republic has seen a veritable upsurge in small breweries. There are now about 500 minibreweries operating across the country, with more than 30 being established in 2020. In 2019, before the pandemic, the Czech Republic sported 617 breweries, up from only 128 in 2008, per Statista.
However, Michal Voldřich, head of the Bohemian-Moravian Association of Minibrewers, told Radio Prague on 22 December 2021 that the trend has already reached its peak. Minibreweries only account for two percent of domestic beer production, which stood at 21.6 million hl in 2019.
With soaring inflation and a rise in energy prices, Mr Voldřich expects that small brewers will be forced to increase their prices by some 20 percent this year.
AB-InBev and Keurig abandon their Drinkworks joint venture. Who needs a pricey dispensing machine for cocktails at USD 300 each that will only clutter up your kitchen counter? On top of splurging out on a machine you needed carbon dioxide (a two-pack of cannisters cost USD 15) and the pods, which set you back USD 16 for a 4-pack. So why invest in a Drinkworks kit, if you can buy pre-mixed cocktails for around USD 10 for a 4-pack?
This must have dawned upon AB-InBev and Keurig Dr Pepper, too, because they announced they would discontinue the production of Drinkworks, their pod-based home cocktail machine in the United States.
Russia’s Ministry of Industry and Trade proposes to start compulsory labelling of beer and low-alcoholic drinks from 1 September 2022. It is assumed that from this date mandatory electronic labels will need to be put on kegs, and from 1 December on the other types of beer packaging. A trial is currently underway, which will end on 31 August. The move is to dry out counterfeit beer.
The proposed terms were criticised by the Association of Beer Producers (APP), representing the three largest players on the Russian market – AB-InBev/Efes, Carlsberg Group (Baltika) and Heineken – which control a combined 70 percent beer market share. APP said the designated deadlines are unrealistic and could lead to shortages.
It will all end in tears. In December 2021, Kirin filed for arbitration in Singapore to terminate its joint venture with Myanma Economic Holdings (MEHL), a military-controlled conglomerate with ties into industries as diverse as beer, tobacco, transportation, textiles, tourism and banking.
Kirin took the action after it failed to reach an agreement with MEHL for Myanmar Brewery, the biggest beer company in the southeast Asian country of 54 million people, and one of the two ventures Kirin runs with MEHL. The other project involves Mandalay Brewery, the fate of which is still being discussed between the two parties.
It is unknown how MEHL will respond and whether it will comply with a decision issued by the Singapore arbitration centre.
Constellation Brands, the brewer of Corona beer for the US, agreed to build a new brewery in southeastern Mexico, according to a Wall Street Journal report. The agreement between Constellation Brands and Mexico’s President Andres Manuel Obrador, announced in December 2021, comes two years after the government forced Constellation to close its nearly completed 10 million hl Mexicali plant near the US-Mexican border.
The new plant’s exact location has yet to be announced. What is certain is that it will add between 1,000 miles (to San Antonio, Texas) and 2,500 miles (to San Diego, California) in Constellation’s transportation costs.
Over in the UK, many wonder if the craft beer bubble has burst. Carlsberg Marston’s is looks for buyer after closing London Fields Brewery in December 2021. The decision came just four years after Carlsberg bought the brewery for a reported GBP 4 million (USD 4.9 million).
Among the many London breweries, London Fields was perhaps better known for its colourful past than its beers. It was founded in 2011 by Julian de Vere Whiteway-Wilkinson, a former event organiser, upon his release from prison. He had served half of a 12-year term for cocaine smuggling. After he failed to pay taxes, he was charged with tax evasion in 2017 and was forced to sell the firm. He was later acquitted of cheating the tax man.
Carlsberg Marston’s decided to close the brewery after its beer sales decline significantly during 2020. As The Grocer, a trade magazine, explained, London Fields was not a huge player in the off-premise or the managed on-premise.
Next to the more successful Brooklyn brands, which Carlsberg has distributed in the UK since 2016, and the other craft beers it gained through the merger with Marston’s in 2020, London Fields could have begun to look unnecessary.