The recently announced transaction between Lagunitas Brewing Co. and Heineken N.V. marks the third transaction over the last 10 months between a major U.S. craft brewery and a large foreign brewery. The prior two transactions were Firestone Walker Brewing Co.’s joint venture with Belgium-based Duvel Moortgat (July 2014) and Founders Brewing Co.’s sale to Mahou San Miguel, the largest Spanish beer company (December 2014).
As discussed in my article last month, joint ventures with large foreign breweries are becoming increasingly popular alternatives to deals with AB InBev or MillerCoors, for reasons that include the following:
- As shown by the Lagunitas-Heineken deal, large foreign brewing companies are increasingly considering strategic investments in U.S. craft breweries as a way to direct funds into a growing market segment and as a way to diversify their business.
- These transactions have the potential to open up international distribution opportunities for U.S. craft breweries without compromising existing production plans or disturbing U.S. distribution channels (subject, of course, to the terms of existing contracts and obtaining any required consents thereunder).
- The joint venture can be structured as a cash sale of a portion of the craft brewery’s equity (often with a post-closing contractual arrangement concerning management, distribution, etc.) or an exchange of craft brewery equity for stock in the acquiring company, depending on the legal and financial needs of the parties.
- The reaction among craft beer drinkers to these transactions has been less negative than to similar transactions involving AB InBev or MillerCoors. This allows a U.S. craft brewery to increase its resources and begin distributing to a larger audience, without sacrificing the allegiance of their core demographic.
The impact of the Lagunitas-Heineken transaction (and other international joint ventures) at the bar and in the bottle shop initially may be minimal but will have an important impact on the craft beer industry, including by raising its profile globally and allowing U.S. craft breweries to tap into a pool of resources previously allocated exclusively to worldwide production of light lagers. Others of this kind are on their way.
Kyle Leingang is a corporate attorney in the Southern California office of Dorsey & Whitney, LLP. Kyle’s law practice includes representing craft breweries and investors in M&A and financing transactions, including ESOPs. Kyle is also a certified BJCP judge and avid homebrewer. Kyle can be reached at [email protected].