Why New Belgium chose to sell
USA | You could say: when the going gets tough, the tough get going … but the wise will seek an exit.
Kim Jordan, the co-founder and chair of New Belgium brewery, admitted as much in her public statement, where she said that “we’ve needed to balance the cash demands of our ESOP and selling shareholders, with the operational need for more capacity … and the need to grow our brand by reaching more beer drinkers. These are a lot of competing priorities and it has been difficult to do all of them as well as we’d like. As we surveyed the landscape over the last several years, we found that options to raise capital while being an independent brewer weren’t realistic for us.”
Cost-cutting would have hurt corporate culture
In plain English, New Belgium found itself strapped for funds and did not want to resort to further cost-cutting, which would have hurt its sustainability initiatives and internal culture. In 2018 already, New Belgium was forced to cut 28 jobs, or 4 percent of its workforce, at its Fort Collins and Asheville locations. Apparently, it did not want to go through a redundancy scheme again.
Like all old-timers in the craft brewing industry – the polite term is “legacy brewer” – New Belgium has struggled to get heard in an increasingly crowded market. There were only 3,800 craft breweries in 2014, when after years of rising sales New Belgium took the decision to build a brewery on the East Coast in Asheville to meet projected sales growth. This hiked New Belgium’s capacity to about 1.5 million barrel (1.7 million hl) beer.
Sales in decline
Since then the number of craft breweries has doubled, while New Belgium’s beer sales have declined to perhaps 850,000 barrel (1 million hl) in 2019. In 2017, New Belgium produced around 955,000 barrel beer, down from 958,000 barrel in 2016. This is compared to the growth it achieved between 2013 and 2014, when its production rose from 792,000 barrel to more than 945,000 barrel.
Perhaps New Belgium should have sold three years ago. After opening its Asheville brewery, it was estimated to be worth USD 1 billion. This August, The Western Australian, a newspaper, put its valuation at only USD 500 million or roughly USD 600 per barrel beer sold. US beer industry periodicals recently reported that the final price was only USD 450 million.
Read more about the sale of New Belgium in Ina's recent article and the effects of the takeover.
