Big beer companies will step up their attempts to buy successful mid-size craft beer firms around the world because of the superior growth prospects in craft beer, with one of the added drivers in Australia being the highly concentrated liquor retailing sector dominated by Woolworths and Coles.
Eric Ottaway, CEO of Brooklyn Brewing, the 11th biggest craft brewer in the United States which also has a licensing agreement in Australia with Coopers Brewery, said on Thursday that Brooklyn had focused on tap beer first in Australia to build up its brand in part because of the power of the two big retailers.
"Certainly, the fewer players there are to deal with, the more difficult it is," Mr Ottaway said. "In the United States, we don't have quite the same concentration".
Brooklyn generates annual revenues of $US70 million ($88 million) and was one of the pioneers of the craft beer industry in the United States after being established in the late 1980s.
But it attracted some criticism from loyalists in its New York home market in 2016 when the owners sold a 24.5 per cent stake to Japanese conglomerate Kirin. Mr Ottaway said it had previously fielded full buyout offers from a range of players, but had opted for a structure where Kirin-owned a minority stake so it could stay in control of its destiny but still gain the benefits of a serious link with a big player.
"It was the perfect marriage. It is the best of both worlds for us," he said on a visit to Australia. Brewers in the US with a bigger partner with a stake of below 25 per cent still retain their status as a "craft" brewer under the Brewers Association rules.
He said each situation is different, and he expects the string of craft beer company buyouts to continue. It was unlikely that craft beer owners would pursue a stock exchange listing because they weren't of sufficient size, and public company scrutiny often didn't sit well with the craft beer ethos, which is synonymous with the bearded history movement.
AB InBev already owns the Carlton & United Breweries business in Australia that makes Victoria Bitter and Carlton Draught. The craft beer industry in Australia is worth an estimated $740 million annually and is growing at between 15 per cent to 20 per cent per annum outstripping mainstream beer sales, which are going backwards, presenting big headaches for CUB and Lion. Lion makes XXXX Gold, Tooheys and West End and is owned by Kirin.
Backlash against big beer shortlived
Mr Ottaway said in the US, the initial backlash against craft beer brands which had sold out to large conglomerates often resulted in a short-term sales dip in their local area, but it was soon overtaken by faster growth overall as the enhanced distribution channels and bigger marketing clout kicked in.
He said most people didn't care who owned a particular brand. "The vast majority of consumers do not," he said. Instead, they focused on the taste, freshness and other attributes all connected to the beer rather than corporate ownership concerns.
"It's difficult to be both big and small," he said. Craft beer now makes up 20 per cent of the US market but now markets like Australia are catching up. "It was the consumer who decided they were ready to experience a much bigger variety in what they drink and eat".
Brooklyn Brewing signed an agreement in August, 2015 with Coopers Brewery where the Adelaide-based company brews the beer for the Australian market under licence and distributes it. "Since then we've doubled our sales in Australia," Mr Ottoway said. About 50 per cent of sales come from on-premise sales in hotels and bars.
AB InBev became the owner of CUB last year when it undertook a global merger with SAB Miller, which in late 2011 cemented a $12 billion takeover of Foster's Group, the long-time owner of CUB.
CUB is the No.1 beer company in Australia, with a market share of about 46 per cent, ahead of big rival Lion, which has 42 per cent. Coopers Brewery is still family-owned and has a national market share of about 5 per cent. Coopers has stepped up its national marketing presence through an Australian Open tennis sponsorship, where it holds the beer rights at Melbourne Park for the two week event which has been attracting record crowds.
