As Mergers And Buyouts Persist, What’s Next For Arizona Craft Beer?

Has there ever been a more important month in Arizona beer history than what we are about to experience in March? Just off the heals of Arizona Beer Week and one month before the newly reformatted Baja Beer Festival – formerly the Top Hops homebrewer challenge – this month will be known for more than just spring training baseball, March Madness, and St. Patrick’s Day.

There are some serious changes going down in the next couple weeks in the Arizona craft beer world. Much of this is behind the scenes, so let’s pull back the curtain and see the levers the beer wizard is pulling.

Consolidation isn’t going away.

(Credit: San Tan Brewing Co.)

(Credit: San Tan Brewing Co.)

Congrats to Chandler’s SanTan Brewing for becoming Arizona’s highest-producing and highest-profile craft brewery. While they certainly have put in the work over the years, they gained that title only after fellow Valley-based contemporary Four Peaks Brewing decided to accept a multi-million-dollar buyout from industry conglomerate Anheuser Busch InBev. San Tan, founded by former Four Peaks brewer Anthony Canecchia in 2007, now stands atop of the list of craft breweries in Arizona.

Of course, they are at the top like the Tour de France winners from 1999 to 2005. You know, after Lance Armstrong had his titles stripped.

But it’s not as simple as Four Peaks “selling out.” The complete deal will be completed in the next week or so, then it will be official. But, there is a pretty interesting back story to the whole thing, one that may make you appreciate Tempe’s pride and joy a little more.

Yes, Four Peaks kegs will soon be delivered with AB InBev labeling. Yes, they are no longer officially a “craft” brewery. Yes, they are owned by a Belgian company.

But you know what, the same can be said for Chicago’s Goose Island Beer Company, which was purchased by InBev in 2011 for $38.8 million. They still produce some of the most sought-after beers, namely their Bourbon County Stout lineup that draws lines of people when it arrives year.

Goose Island, one of about a dozen craft breweries purchased by InBev during the past decade, still operates autonomously from the parent company. The larger-volume beers are brewed in an AB InBev factory in upstate New York, but the specialty selections are still crafted in Chicago at the original brewery, by the original brewers.

The Goose Island success story has been so well-received, that much of the Four Peaks brewery staff, along with those from recently purchased Colorado-based Breckenridge Brewery, will visit the Goose Island plant to learn about operations in the semi-autonomous world of The High End, the parent company’s portfolio of craft breweries.

Nobody has lost their jobs. The beer, according to Four Peaks sources, will stay the same. It will be business as usual.

We’ll have to wait and see, but in the meantime, here’s a little bit of information you anti-consolidation folks may find interesting. AB InBev was not the first to make an offer to the buy Four Peaks. It turns out that Oskar Blues, based in Longmont, Colorado, made a play for the Tempe brewery. Yeah, a craft brewery trying to buy out another craft brewery.

Get used to it folks. Consolidation is the name of the game now. It  may not come from the big conglomerates like AB InBev and MillerCoors, but rather from mid-level breweries looking to increase their exposure and revenues. In March 2015, Oskar Blues purchased Michigan-based Perrin Brewery. Less than four months prior, San Diego-based Green Flash purchased fellow San Diego brewery Alpine. There are plenty of similar examples out there.

This is the next step in the craft brewing industry. Acquisitions are on the way, whether they’re from the international conglomerates or craft breweries themselves. When 37 percent of the craft brewing market is actually owned by AB InBev, the “little guys” are going to have to get creative.

Distribution will follow suit

Hola Hefeweizen from Barrio Brewing (Photo credit: Barrio Brewing)

Hola Hefeweizen from Barrio Brewing (Photo credit: Barrio Brewing)

Last month, Phoenix-based Hensley Beverage Company purchased Tucson-based Golden Eagle Distributors, sending shockwaves throughout the Arizona craft beer industry. Hensley, owned by Cindy Hensley McCain, the wife of Arizona Senator John McCain, will now become one of the nation’s largest distributors of AB InBev products.

According to sources from Golden Eagle, the majority of sales reps and drivers have kept their jobs, however a number of long-time office employees in both Tucson and Phoenix have been laid off due to job redundancies between the soon-to-be merged companies.

Financial information about the sale has not been made public, but rumors have run rampant. On the low-end, some say the acquisition is around $40 million while high-end estimates have hit $200 million.

The merger has already cost Hensley two breweries distributed locally by Golden Eagle. Delaware-based Dogfish Head Craft Brewery and Colorado-based Upslope Brewing Company have decided to not be distributed by the same company as AB InBev products, which include, among many others, Budweiser, Goose Island, Shock Top, and Kona breweries. Dogfish Head representatives have made it abundantly clear that they will not work with distributors who carry AB InBev products.

Tucson-based Barrio Brewing nearly followed-suit, but last week, decided to stick with Hensley. Rumors are out that the influx of new breweries from Golden Eagle has forced Hensley to trim its portfolio of suppliers, including Tempe-based Sleepy Dog Brewery.

The Golden Eagle purchase will be official on March 14.

More on the horizon

(Credit: Four Peaks Brewing Company)

(Credit: Four Peaks Brewing Company)

The movements within the beer industry look very familiar to another industry I’ve worked in – newspapers. As a former reporter for Gannett-owned properties The Tucson Citizen and The Arizona Republic, and the Phoenix Business Journal, owned by American City Business Journals, I’ve seen the effects of consolidation of smaller properties.

The Citizen no longer exists. The Republic, once one of the nation’s largest dailies, is a shell of its former self. When done incorrectly, consolidation can have a devastating, lasting reach through generations of people.

So what is it like in the beer industry? Well, unlike newspapers, beer is not only here to stay, it is getting bigger by the day. This is why there is a push to gather as many breweries under one flag as possible. The money is huge, while regulation is trying to keep up. And new breweries are popping up daily to meet the needs of a growing craft beer market.

But just like all my fellow reporters, editors, photographers, and other newspaper folks who cared more about the craft than the measly paychecks we received, brewers and beer lovers must take a step back every so often and see where the industry is headed. We all must decide where to play our pieces.

I love Goose Island beer. I love Four Peaks beer. I love Firestone Walker beer. Yet all three, like so many others, are owned by a large international beer conglomerate. I am not going to disown them merely because of who owns them. I’m not saying you should follow suit, but I do think it’s important to balance personal taste with personal ideology.

Ty Young has worked in the Arizona Craft beer world for 15 years, including time at 1702, Old Chicago, Casa Film Bar among others. He's also a longtime local journalist reporting for the Tucson Citizen, The Arizona Republican and the Phoenix Business Journal.