Good Acquisitions, Bad Acquisitions

Yesterday two large concerns announced two very different acquisitions. The first was routine: Constellation Brands, who stunned the beer world by paying a cool billion dollars for Ballast Point two years ago, announced the purchase of Florida's Funky Buddha. It's more in line with the kinds of purchases AB InBev and MillerCoors have made of late--smallish but growing regional breweries with potential; last year Funky Buddha made 27,000 barrels, and this year "expects to produce as much as 35,000 barrels" (whatever that means).

The newly-bought brewery talked a lot about the way in which this would help their brewers make great beer yadda yadda and the acquiring brewery fawned over its shiny new toy. Everyone has finally figured out how to talk about these things. But despite the mundane nature of the purchase, there was this remarkable quote from Constellation's Paul Hetterich 19 paragraphs into a story at Brewbound (bolds mine):

“At the time we acquired Ballast Point, we thought there would be more national brands that broke out,” he said. “Things went more local, and it doesn’t appear that you’re going to be able to build new national brands in the space really quickly. That made us recognize – we need a lot more brands in the portfolio to build up a reasonable presence in the craft space overall.”

Hey, no worries, Paul--it's not like you paid a billion dollars for Ballast or anything. Err...

Many people assume--and I guess I'm in this group--that when a company of Constellation's size spends that much money on a brewery, they have a game plan. But it appears that the strategy consisted of this: 1) Spend an insane amount of money to buy Ballast Point; 2-4) something something; 5) have a national brand that sells millions of barrels a year.

A far more interesting story broke simultaneously, and we learned of a complex deal that seems to be all about plans and vision.  New Belgium and Belgian lambic-maker Oud Beersel teamed up to buy troubled but interesting San Francisco-based Magnolia. Magnolia is known for its cask ales, and has been a stalwart in the Haight district for twenty years. However, after an expensive expansion in 2015, the brewery found itself on the wrong side of debt and filed for bankruptcy protection.

In a fascinating twist, the brand is going to start blending Oud Beersel beers and apparently making their own spontaneous ales. In a further fascinating twist, Dick Cantwell, founder of Elysian, which sold to AB InBev (against his strong dissent with two co-owners) will join Magnolia's Dave McLean at Magnolia. Here's what we know so far:

Oud Beersel joins the partnership as a contributing experimenter, with the goal of eventually shipping containers of its traditionally-produced and spontaneously fermented beers for blending with Magnolia-crafted beers. Installation of a coolship is planned, along with the wooden aging vessels for which both New Belgium and Oud Beersel are known.

There are the deeper roots of the story. Oud Beersel and New Belgium have already built a relationship through their collaboration on Transatlantique Kriek. And Kim Jordan, co-founder and executive chair at New Belgium, and Cantwell are a a couple already living in San Francisco, " a place Dick and I call home." The public comments haven't revealed much about these behind-the-scenes relationships, but they illustrate the personal nature of the connections behind the deal.

So compare and contast. One large company is apparently buying breweries at random with no real plan for what to do with them, while another company spearheads a deal with two other breweries and one of the more celebrated brewers in America. It's as if the two announcements were coordinated to make this very point: not every acquisition is knocked out from the same kettle. Sometimes a brewery like Palm sweeps in to save one like Rodenbach, and sometimes a brewery like AB InBev buys an indifferent craft brewery like Blue Point. Sometimes the acquiring brewery is interested in the spirit and direction of their new acquisition, and sometimes it's a line item in a budget, the future of which depends on whether it turns red.

I can't imagine anyone in America actually cares about what happens to Funky Buddha going forward. Magnolia? Its future is absolutely fascinating--and one it wouldn't have had without this buy-out. I have no idea whether Constellation's move will ultimately make business sense. But, as a beer drinker, which of these two newly-purchased breweries are you going to watch more closely?

PHOTO: Oct28 Productions