By Bill Anderson
Craft beer is a trailblazer for almost all other segments of the beverage industry. Craft is up 12% in dollars this year through June, after being up 14% in 2011. Its marketing sets the defining standards for authentic, local and artisanal focus and tone. It connects with its consumers with real brand stories. Craft brewers have fun and they’re not afraid to take on some of the brewing giants – which makes them even more likeable as the underdogs against some large international conglomerates.
Crafts also provide the model for long-term, profitable businesses that create real legacies for their employees and their local communities. Unlike some non-alc entrepreneurs, craft brewers are rarely in it for a quick hit. They’re patient and their desire to build something enduring is in large part why they are financially successful.
But there are hurdles ahead for crafts, and the biggest may come from a likely need for capital to maintain their growth cycle. Recent demands on craft brewers make it clear there’s a high likelihood that new money, probably from private equity, will be arriving on the craft beer scene. Some brewers may be rightly thinking it is the appropriate time to exit, while others are seeking long-term investors who can help them build out additional brewing capacity and a more comprehensive sales team. New money is just a matter of time.
These new players could change craft beer in a multitude of ways. Some may be less sensitive or aware of craft’s pricing strategy, which is smart and premium-focused. Some may push the volume button, rather than maintain current pricing standards, all for the benefit of pure volume. The bias against contract brewing may be lifted by some of these new parties. It’s also likely that some of these new outside owners could inevitably change the very core of craft branding. The brand stories will be altered, in some cases radically.
This is not to say that all new money is bad for the industry. There are firms and individuals with a high degree of interest in investing in crafts, including many industry players, who understand how any craft investment must be structured so that the brand story and the founders’ legacy are preserved. Finding that ‘right’ source of long-term, patient capital dedicated to preserving and growing an iconic brand – be it from an industry leader, a small private equity firm or a family office– will be the next big challenge for crafts.