L to R, Brewmaster Grant Wood, founders Rhett and Ron Keisler of Revolver Brewing. The business in Granbury, Texas sold to MillerCoors earlier this year.

L to R, Brewmaster Grant Wood, founders Rhett and Ron Keisler of Revolver Brewing. The business in Granbury, Texas sold to MillerCoors earlier this year.

Jae S. Lee/The Dallas Morning News

When Granbury-based Revolver Brewing sold a majority interest in its company to MillerCoors this summer, it became the first in North Texas to make a deal with a major brewer. The brewery also joined an increasing list of more than 20 craft breweries to enter some sort of equity deal in the past five years.

Anheuser-Busch InBev (AB InBev) arguably got the ball rolling in what's become the "buyout era" with its purchase of Chicago's Goose Island Beer Co. in 2011, but it took another three years before financial dealings started to pick up steam. Since then a wave of craft beer mergers, acquisitions and other accords have flooded the market, providing independent brewers new ways to fund equipment upgrades and tap into wider distribution networks.

Why the recent surge, though? 

According to Bart Watson, chief economist for the Brewers Association, there are many reasons why the industry has seen an increase in deals, especially acquisitions.

"One reason is that craft has continued to be a growth engine of the industry and the large brewers have struggled to build brands that compete in that space," says Watson. "The large brewers need new products that their distributors are excited about and acquisitions are one way to continue offering them products they want."

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Momentum plays a part as well, says Watson, since once a major player starts acquiring breweries, it's almost a given others will jump on the bandwagon. Additionally, he concedes that AB InBev has done well in scaling up Goose Island, which shows success is a possibility.

For brewers, though, Watson argues seeking out a deal may simply be a matter of identifying an exit strategy. As the industry ages, it makes sense for brewers who lack a clear succession plan to consider acquisition or another type of transaction.

While acquisitions get a lot of attention, especially when a large brewer is involved, employee stock ownership plans (ESOPs) have become popular as well. Companies like Harpoon Brewery, Left Hand Brewing Co. and Odell Brewing Co. have used ESOPs not only to bridge succession, but also to raise money without giving up majority ownership. Plus, being "employee-owned" is a better brand image than "under the thumb of Big Beer."

Of course, succession isn't the only reason for a deal to go down. Sometimes it's more about pooling resources. Take, for example, the Duvel Moortgat portfolio, which includes brands Boulevard Brewing Co., Firestone Walker Brewing Co. and Brewery Ommegang. This type of collaboration allows all three breweries to produce beer and distribute it in each partner's local market.

Then, there is the union of Austin's Independence Brewing Co. and California-based Lagunitas Brewing Co. Though terms have not been disclosed, Independence co-founder Amy Cartwright believes it's an alliance unlike the others. Lagunitas' investment affords the company a way to engage the Texas market, while also providing resources to help Independence grow.

"Our deal with Lagunitas is very unusual compared to the AB InBev acquisition strategy," says Cartwright. "It's still an idea that's taking shape, but we are thinking of ways to do nonprofit work and community events with Lagunitas because we found that we have similar causes that we've gotten behind."

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Regardless of reason, the question remains as to how these partnerships affect the industry at large. While Watson thinks the variety in size and structure of current deals makes it difficult to determine whether they are (or will be) good for craft beer long-term, he sees changes in the marketplace that can be directly attributed to acquisitions.

"An immediate impact is that acquired brands get advantages that aren't available to independent brewers, like stadium and concert venue deals, not to mention better access to raw materials," Watson says. "The distribution advantages will clearly happen in a variety of places, but in the end we'll see what demand is for scaled-up brands acquired by the large brewers."

In other words, he's not quite ready to declare a price war between independent brewers and acquired brands, especially since other factors influence the buying decisions of craft consumers.

"There is plenty of evidence that flavor is only one reason consumers pick craft, and that a majority of craft purchasers factor in the small, local and independent aspects into their purchase decisions," says Watson. 

"For the acquired brands, it's easy to get distribution if you've got scale. To keep it, you need sales."

Translation: Being part of something bigger doesn't always make things better.

Since one North Texas brewer joined the ranks of Big Beer, industry personnel were eyeing the state's other major markets, where they believed the transaction would likely take place. They were right -- on Nov. 3, Anhueser-Busch announced plans to acquire Houston's Karbach Brewing Co. Watson expects more deals to come.

"We've clearly been in a window where the growth potential of craft has led to lots of players trying to get into the space," says Watson. "As things slow down, though, the number of people offering to buy will drop ... and if that drops so will the prices offered, which may lower the number of people willing to sell.

"With that, I think we'll see new models, since brewers have shown themselves to be as innovative on the business side as they have in the brewhouse."

By Brian Brown/Special Contributor

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