Heineken buys remaining 50 percent interest in Lagunitas Brewing Co.
Heineken International announced Thursday that it is buying the other 50 percent stake of Lagunitas Brewing Co. of Petaluma in a deal to help propel the craft beer sector globally amid a rapidly changing industry.
Heineken, the world’s second largest brewer, acquired an initial 50 percent ownership of Lagunitas in September 2015.
Tony Magee, Lagunitas founder and chairman, will become Heineken’s director of global craft and will report to its executive board on the global and local craft strategy for the Amsterdam brewing company. He will continue to oversee the culture, brand and recipe creation for Lagunitas, known for its very hoppy India pale ales and an irreverent, pot-friendly attitude.
The deal comes at a time when national craft beer sales have slowed, although Sonoma County brewers appear to be bucking the trend.
“From this place, I will be able to shepherd Lagunitas,” Magee said in an interview. Lagunitas will operate as an independent company within Heineken and will report to its Americas region, led by president Marc Busain. No layoffs will occur and the current Lagunitas management team will remain in place.
Magee, who started Lagunitas with batches of beer brewed on his kitchen stove in 1993, said that recent business trends in the craft sector didn’t drive the decision. The overall U.S. craft sector is experiencing declining growth compared to past years; an increase of 6 percent in volume in 2016 with overall production of 24.6 million barrels was still a decrease from the 13-percent rise in 2015. But locally, the industry remains strong, with both Russian River Brewing Co. in Santa Rosa and Bear Republic Brewing Co. in Cloverdale, for example, opening additional taprooms.
In addition, mergers and acquisitions have picked up, most recently with Anheuser-Busch InBev on Wednesday buying Wicked Weed Brewing Co. in Asheville, North Carolina.
Magee said the sale was more about the comfort level and trust he felt with Heineken executives and “tearing down the walls to tap into the resources of Heineken.”
For example, he said the purchase will allow Lagunitas to access capital to build new breweries, including one planned for Europe; more easily obtain work visas in foreign countries for its employees; and price its beer more properly overseas, as Heineken owns 165 breweries in more than 70 countries.
Magee, 57, explained his thoughts in a rambling blog post, in which he also noted that he “still successfully wake(s) and bake(s) most days” with marijuana.
“I had a strong sense from the start that we would find a way to play a larger role within Heineken. They are calmly aware that they are not able to do the things that we do so easily, that small brewing has a destiny in the world, that they want and even need to be a part of it. And I am aware that they can easily do things in the world at large that we cannot do at all either,” Magee wrote.
Jean-François van Boxmeer, CEO of Heineken, also praised the deal and noted that Lagunitas will serve as its leading brand in the craft beer business.
“Our partnership with Lagunitas has been a great success and today’s announcement marks the next stage of an exciting journey. We look forward to accelerating the rollout of Lagunitas to many more markets, and sharing craft beer with many more beer lovers around the world,” van Boxmeer said in a statement.
Terms of the deal were not disclosed, though Lagunitas was valued at $1 billion in the 2015 sale, according to a knowledgeable source.
“At this point, we are their lead craft brand,” Magee said. “But there will be others that we will partner with and others we will help develop.”
In contrast, Anheuser-Busch already has ?10 different U.S. craft brewers in its “high-end” portfolio, a brand strategy more akin to that of the wine industry. Large wine companies, such as Jackson Family Wines and E & J Gallo Winery, create numerous brands in different categories as opposed to relying on a single flagship winery.
Dan Clivner, the Los Angeles lawyer who represented the Lagunitas partners, said the sale was unique because much of the negotiations centered around preserving the culture under Heineken control as opposed to the final sale price. The company has 781 employees nationwide.
“Even though they had full power and control... they agreed to be very thoughtful on the autonomy,” Clivner said of Heineken.
Magee has stressed that the original 26 investors were not “big money guys” and had to wait almost ?20 years to finally receive a profit from their initial investment. The group includes a veterinarian, a dentist, a retired U.S. Navy chaplain, a police officer and a retired school teacher. Mike Buckley, president of Bibbero Systems in Petaluma, once served on the Lagunitas executive board.
Lagunitas has held up better than most of its craft rivals as its sales at major retail outlets have increased about 20 percent over the past year. But it also was among the most ambitious in terms of growth, building plants in Chicago and Azusa, east of Los Angeles, as well as opening taprooms in Seattle and Charleston, South Carolina. The Heineken ownership will provide a greater cash cushion going forward.
In the aftermath of the announcement, some craft beer fans took to social media to lament the purchase and accuse Magee of “selling out.” But the effect in the marketplace may be negligible.
Joe Tucker, owner of the RateBeer website, observed in a Facebook blog post Thursday that recent acquisitions haven’t triggered much of a stir among craft beer fans. The more than 400,000 registered users on his website rank their favorite beers on a five-point scale.
“I was very surprised to see that even connoisseur-biased reviewers don’t seem to care as much about ownership as I’d thought. I expected opposition to be evident in ratings. It’s not,” Tucker wrote.
Magee contends that the sale allows Lagunitas to remain sustainable into the future, especially as he has no children to succeed him in the business.
“He (van Boxmeer) wants to turn Lagunitas IPA into the Heineken of craft,” Magee said.
You can reach Staff Writer Bill Swindell at 707-521-5223 or email@example.com.
Business, Beer and Wine, The Press Democrat
In the North Coast, we are surrounded by hundreds of wineries along with some of the best breweries, cidermakers and distillers. These industries produce an abundance of drinks as well as good stories – and those are what I’m interested in writing. I also keep my eye on our growing cannabis industry and other agricultural crops, which have provided the backbone for our food-and-wine culture for generations.