Announcing on his blog yesterday, Lagunitas founder Tony Magee reveals that he has purchased stakes in three US craft breweries. These are Moonlight Brewing Company of Santa Rosa, CA, Independence Brewing Company of Austin, TX and Southend Brewery and Smokehouse of Charleston, SC. The latter of which will be turned wholly into a Lagunitas branded brewpub.
Magee also commented that his company, which sold a 50% stake to Heineken last year for a reported $500m, is to open two ‘non-profit fund raising community rooms’ in Portland, OR and San Diego, CA.
WHY IT MATTERS
Magee writes at length, but always chooses his words carefully, as he does with phrases like “joint ventures”, ”combining resources” and “learning together while having a blast doing it” rather than "acquisition" and "competition." There’s quite a bit of cleverness at work that tends to obscure the business benefits that consumers might be turned off by. You can’t really blame the guy, except that he’s constantly blaming others for the same thing.
In an interview with the Chicago Tribune, Magee speaks differently and candidly, citing the advantages and importance of “affinities,” local relationships, and “expanding” the market rather than “consolidation,” which is a term he uses to cast a spell over his competitors AB-Inbev, MillerCoors and others who have previously acquired craft breweries and taken a public whipping from Magee for it. In the interview, Magee seems almost resigned to their subsequent success.
Citing the new brewpubs from Goose Island and 10 Barrel as examples of his competitors working the “local” angle around the country, Magee seems compelled to follow in their footsteps as he has in the past — but puts a different spin on it. As much as he derides his largest competitors, he tends to follow their lead often, as he does with his efforts to consolidate distribution and control store shelves and retailers' buying behaviors by creating recommended "shelf sets." But in this case, Magee is nervous about watering down the Lagunitas brand by appearing to do the same things that Goose and 10 Barrel have. So it’s through these local brewery acquisitions that Magee hopes to earn local relevance and growth, which positions him in a role more akin to AB-Inbev than Goose Island in his own metaphor.
The “community rooms” are where Magee most attempts to thread the needle on community relevance and business benefits in his language. Having seen the uproar of a 10 Barrel brewpub in San Diego, a tight, discerning beer city if ever there was one, Magee has opted to run non-profit tasting rooms that benefit local charities instead. And while that model has precedence in his existing tasting rooms in Chicago and Petaluma (they both offer charity takeover nights) the real benefits here are for the business. As Magee states in the Tribune interview: “it’s a big expense, and there’s the risk of not being in the right neighborhood, and the question of whether retailers will rebel because you're invading their territory…we wont even have liquor licenses at them.”
These community rooms will provide a critical brand presence for Lagunitas, enable them to compete directly with San Diego breweries and bars (many of whom will have removed Lagunitas tap handles after the Heineken acquisition), and require almost no investment in the property, licensing, or many other factors that can be handled by the charity partners. In this competition, Lagunitas doesn’t even need to turn a profit, but rather, will intentionally, by design, run at a major loss. How someone in San Diego competes with that is beyond me.
“We’re just renting the space to make it available. We'll provide the staff and the beer and the room for free.” says Magee. Of course, these are all major business write-offs as Lagunitas works to establish an actual taproom or brewpub in the area down the road after mitigating the risk and monitoring their acceptance in the community.
The language used by Magee is careful not to use terminology that indicates how much of a stake he has invested in each of these operations and what his company stands to get out of it. It’s reported that the decision to make these acquisitions was made entirely by Lagunitas without the involvement of its partner Heineken — which is easy to believe considering the relatively low relevance any of these brands could have to the larger partnership. But as we’ve seen with the AB-Inbev and SAB merger, breweries who thought they made one deal can quickly end up in stranger places.
And then there’s Charleston. Like AB buying Rolling Rock and shutting down the plant that an entire town took pride in (an example of AB’s evil ways often cited by Magee) Charleston may be disappointed to learn that a local business appears to be having its identity wiped out entirely in favor of a Lagunitas outpost.
Magee says this is just the beginning. What’s next?
— Matthew Curtis + Michael Kiser
Making Change for a Living… — Via Tony Magee’s personal blog
Lagunitas buys stake in 3 smaller brewers; founder Tony Magee isn't done — Via The Chicago Tribune (featuring interview with Magee)