CLOSING THE BOOK ON TERRAPIN

I’m sure most of you are as sick of reading about the Terrapin/MillerCoors situation as I am of writing about it. However, it’s important enough in the grand scheme of the craft beer movement that I thought it necessary to jot down a few final thoughts on the subject. I’ll try to be brief, but, as most of you know, that’s not exactly my strong suit…

I’ve read a number of counter-arguments and rebuttals to my original piece that essentially boil down to, “You just don’t understand how the business world works.” That’s fair. I never painted myself as an industry insider or a business expert. And no, I’ve never had to deal with a situation involving greedy investors trying to sell my company out from under me. I honestly feel for Spike and John in this scenario. They, presumably, put together local funding from sources they trusted, only to have those sources try to undermine the company. They needed the financial leverage to buy their company back from those investors and that’s where Tenth and Blake came into the story.

I get all of that. And I never, NEVER said that I had a problem with Terrapin taking out a loan or converting that loan to an equity stake. Very few breweries have the liquid capital to expand or buy out investors without taking a loan. And, once a large loan is granted, I fully understand the desire to convert it to to equity rather than being saddled with debt. Makes perfect sense to me. My problem with this situation wasn’t WHAT Spike and John did…it was WHO they chose to do business with. See, in my mind, if you’re an independent, American craft brewery and you need some capital, there are really only two companies you should NOT call. Anheuser-Busch InBev and MillerCoors.*

*To quote Bill Simmons, “That’s it! That’s the list!”

Two companies to avoid. Is that really so hard? I know many, many people have argued that MillerCoors won’t adulterate Terrapin’s beers…that it would be foolish of them to get involved with Terrapin and hurt their business model. I agree! Completely! There’s no way Tenth and Blake snapped up an equity stake in Terrapin just to hurt the company. I’m sure they have EVERY intention of helping Terrapin grow, build up market share, and increase distribution. The issue is that Terrapin has now gotten involved with one of the two companies that has spent untold dollars and untold hours trying to hurt the very industry that Terrapin is a part of. The well-documented legislative battles in Wisconsin are just part of the story. MillerCoors, in their endless battle for supremacy with Anheuser-Busch InBev, has fought the emerging craft beer market at every turn.

Tenth and Blake is just a ruse. A parasite. A company designed with the sole purpose of seeking out willing, independent craft breweries and cutting deals with them. In this interview with the Tenth and Blake CEO, Tom Cardella, the interviewer asks if the company intends to “increase its presence in the craft beer market, similar to what we saw earlier this year with the AB-InBev Goose Island deal.” The response is that such deals are “a key pillar of our strategy”, but that they are looking for “alliance” strategies instead of true acquisitions (like Goose Island). Here are the key sentences:

This is a long term play, and the answer isn’t just buying things, but building an alliance, maybe becoming a minority partner and using the scale of MillerCoors to help them grow in a way that lets them invest and reinvest in the business.

When you look at our existing craft breweries, what people don’t realize is that [they were built by] a passionate entrepreneur who was given resources to create something.

The first sentence should sound familiar since the Terrapin scenario is exactly what they are describing. First, they gave the brewery a loan, and then they became a minority partner. And I’m sure they will absolutely “use the scale of MillerCoors” to help them grow. It all sounds rather benign. It’s that second sentence that should give you chills as a craft beer lover. “When you look at our existing craft breweries…”

Let’s do just that. Let’s look at Tenth and Blake’s existing “craft” breweries. They own three:

Leinenkugel’s: Purchased outright by Miller in 1988. Makers of such well-respected offerings as Leinenkugel Light (an adjunct pale lager that has been compared unfavorably to Miller Lite) and Leinenkugel Summer Shandy (a wheat beer mixed with lemonade). Outstanding!

Henry Weinhard’s Private Reserve: A staple of the Portland, OR brewing scene for over a century…until Miller bought the company in 1999 and shut it down. They kept the brand name though…which is nice.

Blue Moon Belgian White: The jewel in Tenth and Blake’s crown, Blue Moon was created by a brewer at the Coors Field’s Sandlot Brewery (the small, on-site brewery at the Rockies home field that is owned outright by Coors). The witbier gained some notoriety as one of the first “Belgian-style” brews made in the US and has since exploded. It’s now second only to Sierra Nevada Pale Ale in terms of overall beer sales for an all-malt brand. Relative to other witbiers, it’s an abomination, but even I’ll admit that it’s a good gateway beer for someone who has only had macro lagers before and is just learning about all-malt brews.

That’s Tenth and Blake’s “portfolio” right now. A brewery that mixes lemonade with wheat beer. A brewery that was shut down immediately after being purchased. And a “brewery” that was always wholly owned by Coors, that was never considered either craft or independent, and that specializes in a dumbed-down version of a classic, Belgian style. That’s quite the murderer’s row. I can see why a craft brewery would want to to jump on board that ship.

And that gets us to my final concern. Tenth and Blake is a new company…a new subsidiary of MillerCoors. They have NO track record with helping to grow true craft breweries. A look at that short list above only reveals beers and breweries utterly derided by craft beer fans. Why would Terrapin want to be the FIRST true craft brewery to take the plunge? MillerCoors has a terrible reputation both as a brewery and in terms of their on-going battles against the growing craft industry. Why is it unreasonable to have serious reservations about this marriage between a great, independent, local craft brewery and a massive, faceless, international brewing conglomerate?

History does not favor Terrapin in this scenario. The aforementioned portfolio of Tenth and Blake are just some examples…but there are more out there. AB InBev famously owns a piece of Redhook, Kona, Widmer…and now the entirety of Goose Island. The first three are all big, somewhat successful brands. But ask any craft beer fan about the “quality” of their brews and you’ll get a laugh and a sad shake of the head. And while AB InBev helped them all grow, both Redhook and Widmer are getting crushed right now. Only Kona is showing any growth.

As for Goose Island…they were and are the canary in the coal mine. The jury is still out on what their ultimate fate will be, but AB InBev has already shifted a huge chunk of their brewing operations out of Goose’s home state of Illinois to the AB plant in Baldwinsville, NY. And they’ve started trademarking area codes around the country to see if they can mimic the success of “312”, a local wheat ale named for the Chicago area code. The AB InBev machine is eating away the soul of Goose Island and craft beer fans are paying attention.

Will the same happen to Terrapin? I don’t know. I certainly hope not. But the track record of Big Beer is clear. Everything they touch turns to adjunct lager. They make money (a lot of it). They create growth (a lot of it). They throw their weight around, get laws changed to help them and hurt craft, and they sacrifice everything on the altar of marketing, market share, and the bottom line. THAT’S their business model…no matter how benign the executives at Tenth and Blake sound in interviews.

You can disagree with my assessment and question my limited understanding of the business world, which perhaps you should. But I stand by my opinion in this matter. MillerCoors is not, and has never been, GOOD for craft beer. Forming an “alliance” with them may bring rewards to Terrapin, but it’s only helping to bankroll a company with a terrible track record in producing good beer and engaging in thoughtful, organic growth. I’m sure…100% positive in fact…that other breweries will take the bait and let the Tenth and Blake parasite attach itself to their company. And if you want to keep drinking beers made by those companies, you should! Particularly if the quality remains the same. My goal with these posts is not to call for a boycott of Terrapin or to use any pejorative names for their owners (for the record, Spike and John have always come across as very decent, thoughtful people). As I said in the last post, it’s their company…they can do whatever they want with it. I just want consumers to be informed. If you feel the same way that I do about Big Beer (and many do), then you should know what they’re up to when it comes to worming their way into the craft beer industry. And if you don’t feel the same way, well…I still think you should be aware of the situation. A little knowledge never hurt anybody, after all.

So no, I don’t think Terrapin will be the last of the new breed of craft breweries to ally themselves with Tenth and Blake. But I am disheartened…and troubled…that they were the first.

And that’s the last I’ll say about it.

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8 comments

  1. I haven’t read all of the other comments from other pages, but it would not surprise me in the least if part of the strategy was to purchase a large craft brewer for the sake of upping the cost of MillerCoors to InBev when that time comes …. and/or make themselves all that more appealing.

  2. Brandon, I’ve heard other suggestions like that. The issue with that theory is that, in order for InBev to buy SABMiller, SAB would have to “sell” their US share of Miller to Coors. Otherwise, it would create a monopoly in America (since a true InBev/SAB merger would give the company something like 80% market share in the US). SABMiller and MolsonCoors currently have a joint venture called MillerCoors (just in the US). In 2013, the joint venture terms end, and SAB can sell their US Miller brand to MolsonCoors to avoid the whole monopoly thing.

    It’s a little confusing, but in a nutshell, InBev wouldn’t own Miller in the US so purchasing domestic craft breweries wouldn’t really affect the sales prices. Presumably, any craft breweries they have deals with would simply shift to MolsonCoors…which is already part of the parent company that owns Tenth and Blake (so nothing would really change). I’m also not sure there are really any craft breweries out there worth enough to actually jack up the price (other than giants like Boston Beer Company, Sierra Nevada or New Belgium…none of whom, I believe, would sell). SABMiller actually DID buy Foster’s last month which absolutely will increase the purchase price…but that’s a massive company AND since it’s Australian (not American), it would definitely become part of InBev’s portfolio should the deal go through.

    That’s another reason I hate when craft breweries get involved with Big Beer. It’s so fucking confusing to figure out all of these corporate twists and turns when you’re dealing with such huge conglomerates!

  3. Uh oh Barley, should you be a little bit concerned that Sweetwater Brewing is following Tenth and Blake on Twitter? Catchy labels, fantastic marketing, complex yet approachable styles, based in Atlanta. How could Tenth and Blake resist?

    Crap, I think I just jumped on the conspiracy band wagon. How do I get off this stupid thing?

    Full disclosure, Sweetwater also follows Deion Sanders. Maybe they just have broad interests.

  4. Kid Carboy Jr. · ·

    How many pot dispensaries is Sweetwater following, out of curiosity?

  5. I’ve already started drafting a post for when Deion Sanders buys out Sweetwater. I, for one, look forward to sampling my first bottle of “Primetime Porter”.

    Sweetwater is in the midst of a massive expansion right now which has already been funded, so if Tenth and Blake wanted to be their white knight, I think that ship has sailed. And if you read Sweetwater’s blog, they make it clear that they intend to grow slow and steady and will only enter new territories when they believe their existing territories are being well-served. That doesn’t sound like a business model MillerCoors would be terribly interested in.

  6. I love that Barley has finally crossed the line from passionate craft beer industry commentator to conspiracy-theorist nutbar living in a cabin in the woods with a double-barrel 12-gauge loaded with broken Terrapin bottle glass leaning next to the desk where he writes his anti-big-beer screeds.

  7. Anonymous · ·

    Whatever brings Sweetwater, Terrapin and others to Ohio I’m all for it, just as long as the quality and craftsmanship does not suffer.

  8. [...] few months back, we wrote some fiery op-ed pieces in regards to Tenth and Blake’s purchase of an equity stake in the Terrapin Beer Company. Some readers agreed with us that Terrapin was selling a piece of its [...]

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