The Indie Beer Business Is About to Boom

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After a popular American craft brewer sold out to the “devil,” some are wondering if more mergers and acquisitions will inevitably follow. And what might that mean to the thriving, vehemently independent craft beer scene?

The recent news that Boulevard Brewing Co., a beloved, well-respected beer maker based in Kansas City that’s grown into the 12th largest craft brewer in America, had been sold to a foreign company was met with groans of displeasure in craft beer circles. “Literally a deal with the ‘devil,'” one observer Tweeted after the sellout, referencing the new owner: Duvel, a Belgian brewer whose name is pronounced “doo-val,” meaning devil in Flemish.

Beyond the name, many were upset that it was a foreign company buying a majority stake in a brewer based in America’s heartland. “It’s happened again. A Belgian company is taking over a Missouri brewery,” the St. Louis Post-Dispatch noted. (Belgium-based InBev purchased St. Louis’s Anheuser-Busch in 2008, creating the biggest beer company in human history.)

In many industries, such news wouldn’t cause any feathers to be ruffled. “Good for the hardworking owners who get to cash in,” might be the typical reaction. But because of the carefully crafted artisan approach and fiercely independent nature of most craft brewers, any selling out is likely to be greeted as, well, a sellout in the worst sense.

As the craft beer scene has flourished and evolved, and industry giants have pressed into the market with so-called “crafty beers,” something of a pecking order has emerged, in which small, independent mom-and-pop operations are respected most of all—and huge global beer conglomerates are derided as “industrial” bullies who care about profits, not quality.

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Yet as more craft brewers enter the scene, and the market starts to approach a possible saturation point, it’s increasingly clear that running a craft brewing operations is a difficult business. As one industry expert told the Minneapolis Star Tribune:

“It is not now and never has been a traditional path to wealth creation,” said Tom Acitelli, author of “The Audacity of Hops,” a well-regarded book on the craft brewing segment. “It is easier to start up, easier probably than it ever has been. To stay in business is a whole another matter, and we are going to find that out in the next few years.”

The typical owner launches a craft beer business largely as a labor of love, and inevitably, some owners will run out of the energy or wherewithal to keep it up. According to Brewbound, John McDonald, who founded Boulevard in 1989 and recently turned 60, had been looking for an exit strategy for a few years. However, McDonald wasn’t looking merely for the highest bid, but for a partner that would help him keep his baby not only alive, but essentially the same as it was under his ownership. It was unimaginable that McDonald's would follow in the footsteps of Goose Island, a popular Chicago craft beer that was subjected to tons of criticism after it was purchased in 2011 by the mega-corporation Anheusuer-Busch InBev.

Boulevard’s deal with Duvel Moortgat is reportedly worth at least $100 million, and it was decided on terms that McDonald could live with: No employees will lose their jobs; no recipes will be changed; and McDonald will remain very involved with the company. Duvel is also a relatively small company that makes high-quality Belgian brews that beer aficionados praise. And because its 2003 acquistion of upstate New York’s highly respected Ommegang Brewery hasn’t damaged that label’s reputation or quality, Duvel has demonstrated it can be a hands-off, helpful (rather than meddling, profit-mongering) owner.

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“I’ve done the right thing for the brewery, for me, for our employees and Kansas City,” McDonald told the Kansas City Star. “We’ll make more beer and keep employing people.”

Perhaps surprisingly, Boulevard even gets to still call itself a true craft beer maker. “Yes, Boulevard is still a craft brewer meeting all three pillars of our definition even with new parent company Duvel ownership,” Julie Herz of the Brewers Association explained to Businessweek, referring to its requirements that a business be small, use traditional ingredients, and either be independently owned or owned by a small brewer (such as Duvel) to be categorized as a craft brewer.

For the most part, McDonald’s move is being viewed as a demonstration of the right way to sell out—a merger that allows the owner to sleep at night, in good conscience. By doing so, Boulevard is setting a pattern for other owners to potentially step away from their businesses without feeling like they’re selling out to the devil.

What’s more, the fact that it was a foreign company that paid a handsome sum for Boulevard shows that overseas interest in American craft beer is high. “We’re not just seeing growth domestically. Drinkers aren’t just buying American craft beer because it’s local,” Jennifer Zegler, beverage analyst at Mintel, said in a phone interview. “The quality of American craft beer is viewed as superior. It speaks to how good and how creative American craft brewers have become.”

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The owners of Duvel apparently agree. As one told the New York Times in a story about the Boulevard takeover:

“I see here in Europe that consumers are getting more and more interested in American craft beers,” Michel Moortgat, one of three brothers who own Duvel, said in a telephone interview from Belgium. “In the future, with this partnership, we will be able to develop the taste for those beers more substantially here and in other countries like Japan and China.”

That obviously bodes well not only for Boulevard, but for all sorts of American craft brewers hoping to expand their businesses. We’ll have to see, however, if some or all of the craft players will be able to maintain their standards, their original visions, and their quirky, lovable independence once they can’t be considered local microbrews anymore.