On the heels of Colorado's CANarchy Craft Brewery Collective (parent company of Oskar Blues, Cigar City, and other breweries) snapping up Dallas' Deep Ellum Brewing, consolidation is still front and center in the craft brewing industry.
VinePair has tracked sales of craft breweries in the U.S., and the tally has eclipsed 40 in the last three years. With AB InBev's 2015 acquisition of Littleton-based Breckenridge Brewery and Boulder's Avery Brewing selling a 30 percent stake to Mahou San Miguel in 2017, this reality is hard to ignore in Colorado.
But fierce pushback to AB InBev's acquisition of Wicked Weed in 2017 led the beer megalith to announce it wouldn't acquire more craft breweries. This was likely welcome news to other macrobreweries happy to hear there is one less bidder in the market.
It's a natural cycle. Fragmented industries tend to consolidate. A 2002 study published in the Harvard Business Review found that fragmented industries typically took 25 years for the top three players to go from a market share of 10 to 30 percent to 70 to 90 percent.
The survey of industries in the study found brewing to be in the second stage of the consolidation cycle back then, but the industry has defied forecasts as the number of new entrants has skyrocketed past the frontier of predictable plausibility.
At that point, the U.S. was home to 1,513 breweries, and the number had actually dipped from the late 1990s. Conventional wisdom saw 2002 as a milepost on the road to more market share for the big three, but the opposite has actually happened, as more than 6,000 craft breweries accounted for 23 percent of the U.S. beer market in 2017.
Hindsight is 20/20, but it's not too hard to see why brewing defied economists' expectations: Compared with airlines, pharmaceuticals, telecom, and most other industries, the barriers to entry are much lower.
And consumers of craft beer want to support independent local businesses; it's in their DNA to shun the breweries that sell to moneyed interests. But they wouldn't be as likely to buy a ticket on a dinky new airline that started up on a shoestring as they would to plunk down $5 for an experimental pint.
In the end, there is a limit on how many breweries the U.S. and Colorado can support. But it's got more to do with viable exit strategies for the owners of regional breweries than it does to do with traditional patterns of consolidation.
Heineken's staggering $1 billion acquisition of Lagunitas set a high bar for craft buyouts to come. After the Dutch brewing colossus bought a 50 percent stake in 2015, it acquired the remaining half of Lagunitas in 2017.
Lagunitas founder Tony Magee wrote in the aftermath that the brewery had only become a "real business" following the deal. "It worked really, really well," he noted in a lengthy blog post . "It also allowed us to 'earn our stripes’ and for Heineken to come to understand us without the ability to eat us."
Lamenting the limitations of independence ("our own balance sheet can only carry so much leverage," wrote Magee), he saw the possibilities of becoming a truly global brand as too tantalizing to ignore and that the chance to advocate for craft with one of the industry's biggest bullhorns was more about "great beer" than "domination or selling out."
When rumors of a New Belgium sale frothed up in 2016, they were quickly dismissed by spokespeople for the Fort Collins-based company, the nation's fourth-largest craft brewery. But co-founder Kim Jordan talked about the implications of such a deal in a 2017 Forbes story where she likened the process of shopping the employee-owned brewery to potential suitors to a "death march."
It's a hedge for the big breweries, sure. With beer sales flat as craft continues to gobble up market share, it makes good business sense to buy upstarts. But such acquisitions also results in the loss of some of the customers that helped build the brand with their unwavering support. If their go-to local brewery no longer is suitably independent for their tastes, there are more to choose from all the time.
Eric Peterson is editor of CompanyWeek and BreweryWeek. Reach him at firstname.lastname@example.org.