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Thread: How Terrapin quietly sold out to Big Beer

  1. #1
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    Jan 2003
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    How Terrapin quietly sold out to Big Beer

    This is how Terrapin quietly sold out to Big Beer and betrayed its fans

    The all-too-common model craft breweries are following in 2016

    By Jim Vorel
    http://www.atlantamagazine.com/drink...betrayed-fans/

    [Editor’s Note: More than 50 hours after the news broke and after this story was published, Terrapin posted a note on its Facebook page announcing the buy-out].
    Visiting the Facebook page of Terrapin Beer Co. on Thursday morning, nothing looks particularly out of place. You’d think from the company’s recent posts that it’s business as usual. But then you glance at the reader comments and start to skim over the recently arrived visitor posts. To grab just one:“Couldn’t be more disappointed in you. Four years ago you said it was just a minority interest and no big deal. How do you spin a majority interest, other than a sell out? Good thing I have other locally owned choices. Enjoy your money.”
    And with that, the situation becomes perfectly clear: It’s yet another craft brewery buy-out by a macro beer conglomerate. This time it’s Athens’ beloved Terrapin Beer Co., which had been one of Georgia’s most prominent and influential craft brewers since 2002, selling out to the MillerCoors-operated “craft and import division,” Tenth and Blake, which previously owned a 25% stake in the company.
    Of course, you wouldn’t have known any of that from Terrapin’s official social media or web postings. Although MillerCoors seems pretty psyched about the acquisition, Terrapin has been completely mum, even though it’s been 48 hours since the news broke. No official Facebook announcement, or copy-pasted boilerplate response to all of the angry and disappointed comments. No announcement tweet. No news post on their website, even. You’d call it strange, but in reality, what you’re seeing is a cynically calculated response that time and experience have now proven most effective for breweries in Terrapin’s position. Their PR team (and MillerCoors’ team) are following a set of informal best practices that have developed in the beer industry over the last five years, which might as well be titled “How to Sell Out and Move On.”
    It’s not as if there’s been a shortage of examples for Terrapin to observe. Ever since Goose Island sold out to Anheuser in 2011, major regional breweries have been falling like dominoes. Blue Point, 10 Barrel, Breckenridge Brewery, Devil’s Backbone Brewing, Elysian Brewing, Four Peaks Brewing, Golden Road Brewing and Saint Archer Brewing are just some of the names that have been acquired since then by either AB-Inbev or MillerCoors, joining other regional breweries such as Lagunitas and Ballast Point that also sold stakes, albeit to companies that aren’t quite as reviled. Beer writers like myself have been reporting on these acquisitions and PR firestorms, and over time, the vitriol has somewhat softened. Indeed, breweries now know how to announce and frame their acquisitions to minimize the PR damage of their buyouts. Here’s how they do it:
    Step 1: Obfuscate what “majority interest” means

    “Partnership” is just a much nicer-sounding word than “ownership,” right? In some cases, it can be helpful if part of the company is still “independently operated,” as Goose Island’s brewpubs were during the initial sale—until they too were quietly acquired by AB-Inbev in February of this year. In the same way, Terrapin’s ownership was able to get part of the backlash out of the way back in 2012 when they sold off 25 percent of the company to MillerCoors, while implying that they had no intention of giving up the rest of the company within a few years’ time. And by the way, in case you’re thinking of drafting up an “AB-Inbev and SABMiller are different companies” comment below, you’ll at least want to read about the just-approved $107 billion merger between the two, which is admittedly more global than U.S. in terms of impact.
    Step 2: Emphasize that “nothing will change”

    Assuaging fans who are understandably afraid that all their favorite beers will be discontinued or changed in some way is critical. AB-Inbev demonstrated that this was the most effective strategy with Goose Island, as they didn’t drastically change the lineup of year-round beers. They just moved production of them from their Chicago home to New York, which pissed off fans for entirely different reasons.
    Of course, it’s a complete fallacy for the brewery to act as if they can make this promise, given the literal definition of having ceded ownership. If Tenth and Blake wants MillerCoors to add a grapefruit version of Hi-5 IPA to their lineup, it’s not as if they can say no. Oh wait, Terrapin is already adding Grapefruit Hi-5 to the lineup, never mind.
    It’s also become standard practice to ask/require that the former craft brewery ownership stay on in a “consulting” or advisory role (i.e. a figurehead) after the sale, presumably to aid in mitigating the PR fallout and put a familiar face on things. Just look at industry icon/Elysian Brewing founder Dick Cantwell, who had the company sold out from underneath him to AB-Inbev in 2015 by his business partners, and was more or less forced to stay on for several months until a loophole in his contract allowed him to leave and start speaking honestly about the company and the situation. At Terrapin, meanwhile, co-founder John Cochran is departing after 14 years despite both companies hoping to keep him on, and is “ready for a change,” according to Reid Ramsay over at Beer Street Journal. Co-founder “Spike” Buckowski will remain.
    Step 3: Focus on market/beer lineup expansion

    Every craft brewery buy-out press release somewhere contains a line like “…and these wonderful new resources and distribution channels will allow us to bring beer to markets that have never enjoyed our product before.” Never mind the fact that it will be the MillerCoors distribution network at work, putting pressure on grocery stores/liquor stores to stock the product favorably and push local beer off the shelves. Never mind also that a portion of both the macrobrewer and distributor profits will be parlayed into political lobbying, in the form of campaign contributions to those local legislators of yours who somehow seem to independently decide that craft beer-positive bills “are not in the public interest.” If you’re wondering how Georgia manages to be one of only four states in the Union (hello there, West Virginia) where you can’t buy a pint of beer at a brewery, this would be why.
    Step 4: Assume that local fans can be replaced

    It’s jaded, but it’s true. Every time a popular regional brewery sells out to AB-Inbev or MillerCoors, their social media platforms are flooded with long-time customers and fans who now swear to never purchase the product again. But if there’s one thing that breweries such as Elysian have taken away from this scenario, it’s this: Even if your Facebook wall is full of people denouncing you, it simply doesn’t translate to lost sales in a practical sense. It has become standard operating procedure to simply assume that any angry fan reaction will be negated by an influx of new customers, especially as the brand expands to new territory. Who cares if these people represent the company’s most ardent supporters, customers who have spent a decade or more drinking or filling growlers in the taproom? You can always replace those old faces with new, nameless customers three states away who have never tried your beer before.
    Step 5: Only provide as much information as necessary, to as few people as possible

    Terrapin might be executing this particular tenant more skillfully than any other major regional brewery that has sold out. By announcing the acquisition exclusively via MillerCoors, and none of their own social media accounts or website, they guaranteed a narrowed audience. Those 44,000 Facebook fans? Many of them will simply never realize that beers such as Hopsecutioner or RecreationAle are no longer locally owned. Terrapin now gets to cordon off its fan base into two separate groups: Assertive beer geeks to whom they can offer platitudes and reassurance, and a far larger group of “average drinkers” who they’re hoping will never know the difference. It’s a containment strategy built to retain as many of the older customers as possible while focusing on the new ones.
    Conclusion

    As the dominoes continue to topple, these actions and talking points have simply become rote, the boilerplate that should be expected every time a craft brewer sells out. With every one that falls, the lines continue to blur for rank-and-file drinkers who can’t be expected to spend hours researching which breweries are truly “craft.” A time may well be coming when even the beer geeks can’t keep these matters of ownership straight, and you can be certain that this is exactly what Big Beer wants.

  2. #2
    Join Date
    May 2016
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    18
    At least Terrapin sought out private industry for financing.


    Emerging is a disturbing trend in the brewing industry. Economists call it Corporate Welfare. Taxpayer's dollars going to subsidize and even build private brewing facilities (e.g. Melvin Brewing in Wyoming).
    Going to a government for aid is a signal that the business idea did not go over well with private capital investors. When government builds a plant for one company or purchases and renovates a facility for another, it increases the incentive for private businesses to lobby for government handouts instead of acting in private markets. This practice puts tax dollars at risk and makes unqualified government actors the misallocators of scarce resources in the economy.

    Another, perhaps key, issue with corporate welfare is that it props up businesses that would have not entered the market or perhaps failed. Moreover, subsidized businesses create unfair competition for unsubsidized businesses - who can compete against the deep pockets of government? Government does not rely on economic viability only taxing authority. Corporate welfare can drive unsubsidized businesses out of business and encourages people to serve politicians and government instead of consumers.
    Many a story (like the above piece) has been written on "crafty" beers owned by faceless big beer companies, with the implication that consumers should shun them and support independent breweries instead. Whatever the merits of that, perhaps consumers should do the same for breweries that finance their growth with loans, grants or outright gifts from taxpayers.

    If you'd rather see breweries live or die by the quality of their beer rather than the strength of their political connections, that's something to consider the next time one scans a tap list deciding what to drink.

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