AB-InBev buys Los Angeles’ largest craft brewer Golden Road
And we thought that “flipping it” – selling a house on quickly and make a profit – was a strategy confined to real estate. But no. Brewers are doing it too. Merely weeks after MillerCoors bought the two-year-old craft brewer Saint Archer, AB-InBev on 23 September 2015 snapped up a Californian up-start brewery too, acquiring Golden Road, which is Los Angeles’ largest craft brewer.
Financial terms of the deal were not disclosed, but as The Wall Street Journal says, recent brewery acquisitions have priced craft brewers at more than USD 1,000 a barrel.
Founded only four years ago, Golden Road expects to sell 45,000 barrels (53,000 hl) beer this year and is on track to open a second brewery and pub in Anaheim next year.
In the Los Angeles area, with a population of about ten million people, the number of craft breweries and brewpubs has swelled in recent years, from just a handful in 2010 to well over 30 today, with half a dozen more expected to open in the next six months.
When accusations were flying that she was doing a “flip” – after all, it has since transpired that it was Golden Road which called AB-InBev first – a defiant Meg Gill, President and co-founder of Golden Road, retorted: “This wasn’t a sellout move for me.” Ms Gill said she hadn't planned to sell to a Big Brewer but “as soon as we saw that vision, both companies were excited to be a part of what the other was doing.”
Craft beer continues to outperform the overall U.S. market, where it represents 11 percent of total volume (2014). In California alone, there are nearly 600 craft breweries, the most of any state, according to the California Craft Brewers Association.
For AB-InBev it’s the fifth craft-brewery acquisition since 2011. AB-InBev bought its first craft brewery Goose Island in 2011. It has since picked up Blue Point in New York, Oregon’s 10 Barrel, and Seattle’s Elysian brewery.
Although the Golden Road transaction pales next to the potential merger with SABMiller, it is more representative of AB-InBev’s U.S. strategy as it grapples with the rise of craft beer. In the U.S., AB-InBev has lost 4.9 percentage points of volume share between 2009 and 2014, while craft beer more than doubled its share to 11 percent over the same period.
It’s unlikely that AB-InBev’s acquisition of SABMiller will shake up the U.S. beer market. Most analysts assume that AB-InBev will have to sell SABMiller’s stake in MillerCoors, the number two brewer in the U.S., to get the deal past antitrust regulators.
The sale of the stake could net AB-InBev about USD 9 billion, with the most likely buyers being Molson Coors — current co-owner of MillerCoors — Heineken or Constellation Brands. Without such a sale, AB-InBev would end up controlling 70 percent of the U.S. beer market.
