Today's news brings word that craft beer's fast-growing darling, Lagunitas Brewing, is now 50%-owned by BigBeer's green-bottled stalwart, Heineken.
Also in the press is the expected spin that "nothing much will change" at Lagunitas, and that the deal's a win-win. Heck, the Lagunitas founder even tried to suggest the two companies already share the same approach to brewing. (Funny, we missed craft brewers gushing about Heineken's quality commitment until now.) But, what else would you expect from the parties? Candor?
Heineken: "We'll end up with all the cards on our side, just wait."
Lagunitas: "It's about money. Lots of money. Duh."
The truth is, becoming larger--organically or through merger--is an imperative for any company. And often in ways the founders of the smaller entities never imagined, or endorsed. Sam Adams founder, Jim Koch once famously ran an ad proclaiming there'd never be a Samuel Adams Light.
Also in the press is the expected spin that "nothing much will change" at Lagunitas, and that the deal's a win-win. Heck, the Lagunitas founder even tried to suggest the two companies already share the same approach to brewing. (Funny, we missed craft brewers gushing about Heineken's quality commitment until now.) But, what else would you expect from the parties? Candor?
Heineken: "We'll end up with all the cards on our side, just wait."
Lagunitas: "It's about money. Lots of money. Duh."
The truth is, becoming larger--organically or through merger--is an imperative for any company. And often in ways the founders of the smaller entities never imagined, or endorsed. Sam Adams founder, Jim Koch once famously ran an ad proclaiming there'd never be a Samuel Adams Light.
Never say never.
What lies ahead
Craft brewing's already-established get-bigger trend--or more accurately, its become-part-of-something-bigger trend--will only gain momentum from this latest lash-up. The market will support fewer and fewer independent mid-level craft brewers, as the more successful find bigger partners, and the less successful lose traction and fall back among the gaggle of small players. There, only to be a key source of volume for BigCraft: The likes of Lagunitas-Heineken, Founders-Mahou San Miguel, Elysian-ABI, Firestone Walker-Duvel Moortgat and more to come.
To mourn all this as the end of the "true craft" movement--as some small brewers will certainly lament--is nonsense.
In business, "big"--so often ridiculed by the crafties--is really all about being "efficient." And efficiency simply means producing the same thing (or an acceptable substitute) at lower cost. Why do that? It's straightforward economics: Because lower costs mean more money to put in people's pockets. Certainly in the pockets of the owners of the breweries (and their stakeholders), but also in their customers' pockets by inevitably trimming prices.
Eliminating inefficiency. Now that sounds like a win-win. Or maybe more like a win-win-lose. Because if you're one of the un-married smaller craft brewers left with high costs and squeezed on the price end, you won't be feeling the win-winning. For you, it's going to get really nasty, probably sooner rather than later.
Beaten upon not only by BigCraft, but by BigBeer, BigDistribution, and BigRetail, running many a smaller craft brewery is going to feel like being on the receiving end of a mugging.
Markets abhor inefficiency. And markets show no mercy.
Craft brewing's already-established get-bigger trend--or more accurately, its become-part-of-something-bigger trend--will only gain momentum from this latest lash-up. The market will support fewer and fewer independent mid-level craft brewers, as the more successful find bigger partners, and the less successful lose traction and fall back among the gaggle of small players. There, only to be a key source of volume for BigCraft: The likes of Lagunitas-Heineken, Founders-Mahou San Miguel, Elysian-ABI, Firestone Walker-Duvel Moortgat and more to come.
To mourn all this as the end of the "true craft" movement--as some small brewers will certainly lament--is nonsense.
In business, "big"--so often ridiculed by the crafties--is really all about being "efficient." And efficiency simply means producing the same thing (or an acceptable substitute) at lower cost. Why do that? It's straightforward economics: Because lower costs mean more money to put in people's pockets. Certainly in the pockets of the owners of the breweries (and their stakeholders), but also in their customers' pockets by inevitably trimming prices.
Eliminating inefficiency. Now that sounds like a win-win. Or maybe more like a win-win-lose. Because if you're one of the un-married smaller craft brewers left with high costs and squeezed on the price end, you won't be feeling the win-winning. For you, it's going to get really nasty, probably sooner rather than later.
Beaten upon not only by BigCraft, but by BigBeer, BigDistribution, and BigRetail, running many a smaller craft brewery is going to feel like being on the receiving end of a mugging.
Markets abhor inefficiency. And markets show no mercy.
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