Craft Brewing’s Hotbeds Have a Warning for the Rest of the Industry

Consolidators. Saviors. Grim Reapers scything through once-vivid American dreams of true independence and harvesting “synergies” as they fall. Whatever you call them, they are roving these United States looking for craft breweries facing declining sales and rising rents to add to their holdings. Many firms clinging to the craft brewing industry’s flailing “long tail” should be so lucky, because the alternative is closing up shop. It’s rough out there for the once-hot, now-not segment, for reasons we discuss all the time. But half a decade into all this rolling up, your humble Hop Take columnist has noticed a pattern. It’s happening all over the country to some extent, but it’s happening most prominently in craft brewing’s first-wave hotbeds. Even the most solvent of craft breweries in the country’s youngest markets should take heed.

Earlier this week, Brewbound broke the news that Barrel One Collective — a portfolio of ~20 mostly New England-based breweries and brands including Harpoon, Long Trail, Smuttynose, and over a dozen others — was acquiring Greater Good Imperial Brewery in Worcester, Mass. The week before, Wilding Brands added Denver’s Station 26 Brewery to its stable. It became the 10th brand in a portfolio of breweries and adjacent businesses in the Rocky Mountain State, which is also where Left Hand Brewing Co. and Drydock Brewing Co. are building a “second shakeout” life raft. This follows similar craft-on-craft roll-ups earlier this decade across the Pacific Northwest and California (e.g., Great Frontier Holdings, composed of Ninkasi Brewing, Wings & Arrow Brewing, Ashland Hard Seltzer, and Ecliptic Brewing), as well as North Carolina (see Made By The Water, which started with an acquisition of Asheville’s Catawba Brewing before sprawling across the Southeast). In regions where craft beer won its earliest converts, many formerly pioneering breweries are either rolling up, or getting rolled up themselves.

Before I get into why this industrial trend is important, I want to put a little definition around the type of consolidation we’re seeing now, which to my mind is the third or fourth we’ve seen in the past century. Virtually since Fritz Maytag first took over a failing Anchor Brewing Company in the mid-1960s, there’s always been some consolidating in the craft brewing business. Such is the nature of a fledgling industry still casting about for product-market fit with limited access to capital. But through, say, the late 1980s, these tie-ups were very localized, small, and rare. There was no real point to any sort of grander consolidation strategy. The country had under 300 breweries still in operation, and Anheuser-Busch (A-B) and Miller Brewing Co. were too busy trying to clobber each other in the Light Beer Wars to take an interest in what were then pejoratively known as “microbrews.”

I don’t know if Miller’s acquisition of fellow Wisconsin legend Leinenkugel’s in 1988 was the absolute first macrobrewer acquisition of what we’d now think of as a craft brewery, but regardless, the move was still an outlier back then. It wasn’t until 1994 that its St. Louis rival took a 25 percent stake in Seattle’s Redhook Brewery, and 1997 before it struck again with a 31 percent stake in Portland’s Widmer Brothers. The country’s macrobrewers had moved on from ignoring these pesky little firms selling full-flavored beer, and had mostly given up trying to make their own (with the notable exception of Blue Moon, which Keith Villa first cooked up on Coors Brewing Company’s pilot system in 1995). But they still hadn’t begun to buy into the segment in earnest. You could point to the 2008 formation of the Craft Brew Alliance, or even A-B’s acquisition of 42 percent of Goose Island Brewing Co. two years prior, as the beginning of the second era of consolidation. But I mark A-B’s 2011 deal for the rest of the Chicago firm as the starting gun on so-called “strategic partners” throwing money at whichever red-hot craft brewers were willing to “sell out.” Last decade, we also started to see the private equity industry — talk about a synergy-obsessed Grim Reaper of American dreams — run the ol’ scoop-and-bundle, with a family office bringing together a handful of craft breweries as Artisanal Brewing Ventures starting in 2014, and Fireman Capital cobbling together CANarchy Craft Collective out of half a dozen breweries in 2015.

The pandemic, the ZIRP-ocalypse, and a dozen other factors, marked the segue into the third era of craft consolidation, the one we’re currently living through. Monster Beverage Company acquired CANarchy in 2022, angling for a turnkey distribution network for its soon-to-come venture into flavored malt beverages. Big brewers, either convinced they’d wrung all they could out of their craft acquisitions or itching to cut their losses in the slowing segment, have almost fully shed their stakes. Following firesales by Anheuser-Busch InBev (in summer 2023) and Molson Coors (summer 2024), many of these erstwhile breweries wound up underneath the aegis of Tilray Brands, which is now doing a whole lot of loss cutting of its own.

This brings us back to the present. As the craft brewing industry has matured, the nature of its consolidators has changed, shifting from major corporate brewers and private equity firms, to adjacent-category interlopers, to craft-on-craft roller-uppers, sometimes with smaller-bore PE backing. This is driven by who’s still buying, sure, but also who’s most motivated to sell — and where. That the biggest and most substantive of these “craft platforms” (as they’re known in the jargon) have emerged in the industry’s most mature markets is not coincidental. For one thing, by definition these are regions where craft breweries have been around for the longest, meaning there are more founders reaching retirement age and looking for a return on decades of sweat equity. These are also places where customers have had the most consistent exposure to the best the segment has to offer. In my experience, drinkers in Oregon are much more apt to know what excellent craft beer tastes like than those in, say, South Carolina. And they’re much less likely to tolerate mediocre craft beer (or taproom experiences, owners’ shitty politics, etc.), especially when there are lots of terrific alternatives. Some of the breweries getting rolled up in craft’s legacy markets are doing it to scale up and hunker down against the segment’s many headwinds. But the reality is that many of them simply lost their edge, or never really had one to begin with. In competitive, crowded markets, that’s a death knell. Or at least, the signal to find a buyer before the bell tolls for thee.

There are still plenty of breweries in craft’s early hotbeds going it alone, and impressively so. Look at Fiddlehead Brewing Co. (Vermont) and Georgetown Brewing Co. (Washington) leaping up the Brewers Association’s volume leaderboard; or Prost pushing the envelope in owned-and-operated on-premise draft iN tHiS eConOmY out in Colorado; or California’s iconic Russian River Brewing Co., still eking out growth and trying new moves as it approaches its 30th anniversary in the fiercely competitive Golden State. There are advantages to operating in these legacy markets, and smart, scrappy independent breweries are playing to them. But younger breweries in less-mature markets would do well to hedge against those aspirational stories by bracing for the more brutal ones that are currently playing out among so many OGs.

There are hard-won lessons to be learned from the latter. It’s never just about the beer. Channel-specific strategies matter; branding and marketing matter just as much, and sometimes more. Condescending to your customers on flavor and presentation will cost you. The rent will go up if it hasn’t yet; wholesalers will lose interest if they haven’t yet; capacity will go underutilized if it hasn’t yet. Older corners of the industry are already facing these harsh realities, and not every brewery is built to withstand them. Build for that future, because it’s coming.

Better yet, don’t build at all — there’s a lot of empty tank space out there just begging for a contract to fill it. Spare the overhead, and live to see whatever the fourth form of craft brewery acquisition turns out to be. After all, all waves crest at some point. And as so many closed and rolled-up breweries can attest, you’ll want to be on solid ground when they break.

🤯 Hop-ocalypse Now

Consolidation in the middle tier is bad for most craft brewers for the intuitive reason that fewer, bigger distributors means less focus, less market access, and more getting ignored in favor of the hot new [insert canned cocktail/riot punch/energy drink/etc. here]. Are megadistributors like Reyes Beverage Group able to “capture efficiencies” and “leverage synergies” from their unprecedented scale? Sure, probably, to some extent — but if you’re a craft brewer waiting for those gains to trickle down to your bottom line, get comfortable, it might take awhile. Anyway, last week, Hand Family of Companies announced plans to acquire Scout Distribution in Los Angeles via its California subsidiary Sunset Distribution. This, three months after acquiring Stone Distributing and Classic Beverage in the Golden State, and just weeks after the middle tier’s heaviest heavyweights began sniffing around Republic National Distributing Company’s assets in the state for anything worth gobbling up. At least there’s always self-distribution?

📈 Ups…

Yuengling will expand to Michigan later this summer as part of its joint venture with Molson Coors… Blue Moon’s hip new celebrity endorser is [checks notes] “Saturday Night Live” anchor Colin Jost… Texas’s governor vetoed its legislature’s THC ban, calling instead for a special session to hash (!) out regulation… Some dudes made Wade Boggs a custom 73-pack of Miller Lite, dudes rock… Congrats to the 40 biggest beer companies in the world according to BartHaas…

📉 …and downs

Sapporo-Stone Brewing made a “small-scale reduction” in its workforce, which is corporate-speak for “laid off some employees”… Beer’s underperformance in the off-premise in the second week of June “surprise[d]” even Circana’s analyst, great… Lowering the drinking age is worth serious consideration, but this confused Wall Street Journal op-ed is, uh, not that…

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