Fuller’s—London’s largest independent brewery—has entered into an agreement for the sale of its entire beer business by Asahi Europe Ltd. The £250 million ($327M) deal gives Asahi control of Fuller’s brewing and distribution business, including its historic brewing site and iconic brands such as London Pride. However, Fuller’s will keep its 380-strong pub and hotel estate—a substantial thing indeed, considering that 87% of its profits come from the estate, according to the BBC.
The official announcement of the deal notes that the Fuller's enterprise was bought at a multiple of 23.6 Earnings Before Interest Taxes and Amortization (EBITA), which is well above both an all-industries average and at least one estimate for brewing specifically, which notes the average multiple for acquisition is about 16.3 times EBITA. The overpayment—compared to global averages, at least—comes at a time when the Japanese Yen is showing strength in markets and the Sterling Pound continues to act volatile due to ongoing debates over Brexit.
"Right now with the pound still very undervalued it looks to be a good time to swoop,” Neil Wilson, chief markets analyst at Markets.com, told the BBC. This isn’t the first time Asahi has made moves for heritage beer companies, either. The Japanese firm finalized a purchase of other heritage breweries Grolsch, Peroni, and Plzensky Prazdroy, maker of Pilsner Urquell, in 2016, as well as London's Meantime Brewery.
From that perspective, the deal seems like a win-win. Fuller’s gets paid a hefty sum for what amounts to be a minority of its annual profits, while Asahi gains yet another global brewing icon to add to its widening portfolio. “Brewing has formed an integral part of our history and brand identity, however the core of Fuller’s and the driver of our future growth is now our premium pubs and hotels business,” Fuller’s CEO Simon Emery said in the deal’s announcement.
The deal comes at a time when the UK beer industry looked to Fuller’s as proof that independent breweries can thrive in the modern beer market, but the BBC reports that it was those changes to the industry that had prompted the sale. In a statement to the outlet, Fuller’s noted the deal was necessary due to "structural changes to the beer industry."
Anheuser-Busch InBev may be the world's largest brewing company, especially having made headlines in recent years for acquiring craft breweries around the globe and its merger with SABMiller, but Japan's leading beer businesses have been busy as well. In addition to Asahi's recent moves, Kirin bought a minority stake in Brooklyn Brewery in 2016, and Kirin-owned Lion bought London's Fourpure Brewing last year.
In an interview with Reuters, Jonny Forsyth, associate director for food and drink at Mintel, said that a move like this could be indicative of more acquisitions in 2019 as a way to close a gap between AB InBev and the world’s other biggest brewing companies.
Founded in 1845 in Chiswick, London, Fuller’s was one of the few remaining regional family brewers in the UK. It survived two World Wars and mass industry consolidation in the 1970s, leaving it as one of just 10 breweries left in London by 2007. In the sale’s announcement, Fuller’s CEO Simon Emery said the protection of this unique heritage was “particularly important” to the board during the sale.
“We remain incredibly proud of the Fuller’s Beer Business, its history and the high-quality, premium beer and cider portfolio that we have developed,” Emery says in the release. “I am delighted that this transaction maintains Fuller’s long association with the Beer Business and that we will continue to enjoy a strong relationship with Asahi as a key supplier.”
For a while, it seemed like Fuller’s was in the business of acquisition rather disposal, buying cider producer Cornish Orchard in 2013 and Sussex brewery Dark Star less than a year ago. Asahi paid a high sum for Fuller’s, but it starts to make sense when taking into account Fuller’s goodwill, additional brewing brands, and excellent wholesale infrastructure via its acquisition of Nectar Imports in 2016.
Fuller’s has built a reputation during London’s craft brewing revolution for supporting startups. Lead Fuller’s brewers like Derek Prentice and John Keeling joined the London Brewers Alliance and regularly met with brewers on the way up—the likes of Andy Moffat of Redemption and Evin O’Riordain of The Kernel. Fuller’s has even collaborated with breweries such as Cloudwater, Thornbridge, and Marble through its Fuller’s & Friends initiative.
The massive cash injection coupled with a 4.2% growth in sales year over year in the estate creates the opportunity for an acceleration in the pub and hotel expansion plans. From a business perspective for Fuller’s, it’s likely to be a no-brainer, but beer enthusiasts don’t always carry the same point of view for beloved breweries, especially one with such a historical connection and narrative. But as the company seeks to use this moment to modernize and plan for the future, it’s now up to those same drinkers to determine how or if ownership matters.
—Jonny Garrett & Bryan Roth