AB-InBev buys interest in Chicago’s craft brewer Goose Island
For the world’s number one brewer, AB-InBev, spending USD 39 million on Chicago specialty brewer Goose Island is a joke. But the deal, announced on 28 March 2011, highlights a shift in consumer preferences that matters to the USD 91 billion brewer. In the U.S., sales of mass-market beers have been in decline while those of high-end beers are growing.
For investors in Big Beer, any move to buy more craft brewers won’t be a big financial outlay. Anheuser-Busch can easily pay for Goose Island out of its petty cash.
Goose Island’s annual production of 150,000 hl beer pales next to AB-InBev’s 348 million hl. However, Goose Island produces only high-end craft beers. While total U.S. beer sales fell about 1 percent in 2010, the craft beer category leaped by some 11 percent. Over at Anheuser, weak U.S. volumes, down 3 percent, drove a sales decline of 1.3 percent last year.
Growth in American mass-market beer sales is expected to lag GDP growth for the next five years, according to industry researcher IBISWorld.
That’s bad news for Anheuser, whose Budweiser and Bud Light brands account for the bulk of the company’s 49 percent share of the beer market. It’s also not great for the country’s other brewer MillerCoors. The two account for about 80 percent of all beers sold in the United States.
When John Hall, 68, opened Goose Island brewery in 1988, craft beer sales were minuscule. Now, craft beer accounts for 11.6 million hl beer.
Anheuser-Busch, which is owned by AB-InBev is said to want to invest USD 1.3 million to expand Goose Island’s brewing capacity. The move comes as many popular craft brewers are faced with cutting their distribution areas because of capacity constraints.
"We’ve been growing, and you reach a point and you have to keep growing or you stop," Mr Hall told media following the sale. "We’ve had difficulty meeting demand."
Goose Island’s quandary has become all-too familiar in the craft and regional brewing industry. Several popular brewers, Dogfish Head, Allagash, and New Glarus among them, have been unable to meet demand.
That’s why several have had to sell their companies. Four of the top 20 craft brewers in the U.S. sold their companies in 2010: Pyramid, Magic Hat, Anchor Steam and Kona. Goose Island would make five.
Last autumn, the Hall family admitted that Goose Island was having difficulty meeting demand and that it was outsourcing some production to New Hampshire. In February this year, the family confirmed it hired an investment banker to try to line up financing to add brewing capacity.
The sale to Anheuser-Busch wasn’t all surprising. Goose Island has had ties to Anheuser-Busch since 2006, when it sold a stake in the company to the Craft Brewers Alliance, which includes Redhook, Widmer and Kona. Anheuser-Busch owns 32 percent of the Craft Brewers Alliance.
The Goose Island deal is structured thus: Anheuser-Busch said it will acquire Craft Brewer’s 42 percent stake in Goose Island for USD 16.3 million, and the remaining 58 percent of the company for USD 22.5 million.
Harry Schuhmacher, publisher of the online Beer Business Daily, was reported as saying that Anheuser-Busch has a "pretty good" track record of remaining hands-off with the craft-style brewers it has invested in. But it has never owned one outright. That could turn off some drinkers. On the other hand, the best-selling craft beer is Blue Moon, which is owned by MillerCoors.
According to the Brewers Association, a beer cannot technically be referred to as a craft if more than 25 percent of the brewery is owned by any entity that is not itself a craft brewer. That’s why the Brewers Association has not classified Goose Island as craft since 2006.
