AMSTERDAM, The Netherlands and Petaluma, Calif. HEINEKEN N.V ("HEINEKEN"), established in 1864 and now the leading brewer and marketer of premium beer and cider brands, and The Lagunitas Brewing Company ("Lagunitas"), based in Petaluma, California, today announced that they have entered into a powerful new partnership, which will allow Lagunitas to export the exciting vibe of American craft beer globally.
HEINEKEN and Lagunitas will form a joint venture and Lagunitas will continue to operate independently in the US, maintaining the integrity of its brews and culture. Tony Magee, founder of Lagunitas, will remain at the helm, with the same leadership and staff, same brewers, same recipes and same suppliers and distributors helping to drive the brand forward.
Both companies will benefit from the partnership. HEINEKEN provides Lagunitas with a global opportunity to present its beers to new consumers and Lagunitas provides HEINEKEN with the opportunity to build a strong foothold in the dynamic Craft Brewing category on a global scale, with the category growing in popularity almost everywhere now.
"This venture will create a way for Lagunitas to help HEINEKEN's global distribution network participate in the growing craft beer category in places from Tierra Del Fuego and Mongolia to the far-flung Isle of Langerhans," Tony Magee, founder of Lagunitas, said. "Lagunitas will share in the best quality processes in the world and enjoy an open door to opportunities that took lifetimes to build. This alliance with the world's most international brewer represents a profound victory for American craft. It will open doors that had previously been shut and bring the U.S. craft beer vibe to communities all over the world."
Jean-François van Boxmeer, a lifelong beer aficionado and now CEO of HEINEKEN added: "We are very excited to partner with Lagunitas. We recognize and respect the tremendous success of Tony and his team in building one of the great American Craft Beer brands. We look forward to that same team partnering with us to expand Lagunitas globally, so it can reach parts that other craft beer brands have not."
Lagunitas has breweries in Petaluma, California, and Chicago, Illinois, with a total capacity of 1.2 million barrels. A third brewery under construction is scheduled to open in Azusa, California, in 2017, which will help Lagunitas keep pace with current demand. HEINEKEN, on the other hand, has 180 of those buggers everywhere.
The partnership details have been agreed to and signed and is expected to close early in the 4th quarter.
Wells Fargo Securities, LLC is acting as exclusive financial advisor to Lagunitas and Sidley-Austin LLP and McNeil, Silveira, Rice & Wiley served as legal counsel.
This UPDATE form Tony Magee at Lagunitas Brewing:
The Future will not be like the Past
Furthur….
So….. this morning you may have heard the exciting news that we announced a powerful joint venture with Heineken to export the exciting vibe of American craft beer globally. If you did, then you know the reason for my previous ten blog entries. What you might not know is how the thinking came about that brought us to this opportunity or how it is that this new relationship will work. If you’re interested, dear reader, please read on.
Our time in Craft Brewing didn’t begin on Craft’s first day, that day came thirty years before we started. Initially in SanFrancisco on 8th Street and then 20 years later around California and the Pacific Northwest. However, from the first day the world of Craft resembled the river in the proverb by the Greek philosopher Heraclitus which says that ‘You can never step in the same river twice; It won’t be the same river and you won’t be the same person’.
The nature of Craft has been on a never-ending curve towards something that it never imagined for itself. In total in the U.S.A. Craft Beer still represents only 9% of all the beer enjoyed. That’s less than one-in-ten. Yet, in places like San Francisco and the Pacific Northwest it approaches and even exceeds 50% of the world of beer. This past February, for one week, our IPA 12-packs were the #1 beer package in the whole of the Bay Area. Number 2 was a big brewer’s 30-packs and #3 was another big brewer’s 24-pack. That kind of thing was not even dreamt about just 5 years earlier. I believe that the West Coast scene is a forecast for the rest of the country and even the rest of the world. It’ll take time, but it is entirely possible. So it is that we have worked hard and grown with that opportunity and we have been driven by a spirit of adventure.
A blog post here a few episodes back was called ‘On Finishing a Poem’ and in it I thought through the nature of the terminal point of a creative adventure. How do you know when you have put the right amount of the right stuff into a thing? Well, you only know when you know, and sometimes it takes a baseball bat to the forehead to notice. For me it was the ill-fated trade-mark dispute back in April. After the dust settled, which took a while, I looked at Lagunitas and realized that we had already infused it with a lot of the right stuff and that it didn’t need to be endlessly recreated for it to have a good time interacting with beer-lovers across the country. By that time we were already looking towards Lagunitas#3 in Azusa with a view towards another brewery after that. We already had ideas of new flavors and we had ideas about new ways to make more connections with more people. The domestic future was a living thing in our minds. In other words, we were already working out an exciting path of worthy challenges within the 50 states, but there is the whole world to think about too…
About the same time we launched Lagunitas in Ireland and I met people there who were big fans of U.S. Craft flavors, some of whom were themselves newly minted brewers, and I realized that the whole damn world of humans may well want to enjoy these same flavors. When I got back home I thought long and hard about how to aim at that truth, how can we get there, to the whole world? I thought about going it alone and working our way through the weeds to that future reality. But I thought also about all of the ‘deals’ going on inside of Craft these days. Private Equity money, Budweiser and now Miller/Coors buying our peers. Family Offices investing. People with big money from the get-go coming in alongside all of the rest of us inspired amateurs.
Here’s my thinking on things, if it matters. I’ve watched for the last few years as some good brewers have made their own decisions about their own futures and the futures of their people and brands. I’ve watched and felt strongly that it was a problematic thing. I’ve watched and tried to learn what it was that was happening. Craft Brewing, the thing itself and the environment it lives in, is freakin’ complicated enough. The entrance of giant piles of Private Equity money and Mega Brewers is disturbing. Not because any of you here will be corrupted by it all, but because the distribution and retail tiers and the merely-craft-aware peeps out there can be corrupted. Beer is an old biz in the US and it used to be very orderly. Craft disrupted that and now the old order wants to find a way back to the past. It won’t work, but it’s going to try.
Amid all of this uncertainty, and being 55 years old going on 80, I had to think long and hard about how to steer our ship into these new waters. There are basically five categories of options that range from indifference all the way to going head-first over the transom and selling the business to someone else to steer the ship instead.
I wrote about the five structural creatures that constitute the zoology of ‘Optionality’ in another blog post and that post ended with the question, ‘is there a sixth way?’. Our new Joint Venture with Heineken is that ’sixth way’. It represents a mutual respect society, a meeting of equals, a partnership of peers. The graduation of American Craft Brewing along with the people who brew it onto the world stage.
Selling one’s business entirely is one thing. This is not that. Selling a stake to a PE fund that will need to re-sell it in a few years is another thing. This is not that. ESOPs are cool but they do not pave a road to bigger opportunities for the people and the brand. This is not that either. What we have created in this relationship is a wide staircase to the sky for all of our people and for our brand as well as for the home-grown vibe of American Craft brewing.
Some might say I’ve changed my mind. Well, I have. But the world around us has changed too and if learning leads to new insight, that’s the best kind of change imaginable. The hard part is discovering truly positive change within the possible avenues forward.
I have also thought about all of the inspired new breweries coming to the scene and that the landscape may well become uncomfortable someday soon. I worried that Craft was beginning to compete with other Craft, a thing that hadn’t happened in the past when everyone looked to the far horizon for opportunities. But that’s not a terrible thing, it’s just nature doing its Darwinian thing. And there is the reality that I’m not really even middle-aged anymore unless I expect to live to be 110, which I don’t. I thought about how all of the people who have made their bets alongside mine would do if I wasn’t here. Maybe everything would be fine, and maybe not. Some of them are my age while others are just beginning their very own working lives right now with Lagunitas.
If I was going to do anything at all it would have to provide big opportunities for those same people and not just be safe-harbor for me and my shareholder partners. It would have to provide something that we could not readily build for ourselves. Historically, the history of breweries shows them to be two or three-generation endeavors, but I only have one of those for myself. I think that a lot of Craft Brewery owners might well be thinking the same thing. After all, no one gets out of here alive. I thought long and hard about how I wanted to spend the next ten of the dwindling count of years remaining on the clock and I decided that I did not want to spend it worrying about what would happen in the fifty states alone. I decided that I wanted to build a ‘sky-hook’. I wanted to see if anyone else saw what I saw in the rest of the global market for great tasting beer.
There’s a pertinent Friedrich Nietzsche parable about a ‘madman’ who comes into a town square holding a lighted lantern declaring to the town that he has important news. He tells his story and the people laugh and berate him in disbelief, throwing stones to drive him off. Finally he gives up saying, ‘I have come too soon’’. He drops the lantern, the light goes out, and he departs.
I wondered if my idea of globalization for American Craft too had also come soon. I thought about who might see what I saw and if the time was right to reach out to that other brewer. I thought about who that other brewer might be and the list was very short. The list of truly global beer brands is a short one. It certainly would not include the ‘bankers’ who own the great Anheuser-Busch now, nor would it be the South Africans who control the other two large brewers in the US who are themselves essentially ‘bankers’. The global brewing scene is a very consolidated one. Consolidation has been the modus operandi for the last 40 years, so there really are very few global brewers, and at that maybe only one actually global beer brand! In my mind only one Brewer stood out as truly global, family-owned and still brewers first; Heineken. We talked with a few others but there was really only one relationship that seemed acceptable.
When we, the Madman in the Parable, came into the square with our lantern, holding up the light of our ideas, we was stunned to see that that one particular brewer understood what we were talking about. They welcomed a dialogue about these crazy ideas of order. They saw what we saw- a global beer business in a state of change, and they wanted to work together to explore this brave new world. We had indeed NOT come too soon.
In them we met a global brewer who uses no adjuncts in their flagship beer; malt only. We met a brewer that is still controlled by its founder’s great-granddaughter. We met a brewer whose CEO/Chairman understood the details of the brewing process. We met people who thoroughly understood the revolutionary aspects of what beer-lovers have wrought in the America. We met people who laughed easily along with us at our own history and our predilections. After all, they are from Amsterdam, if you get my drift. More to the point, we met a company that saw and understood that we could only work together if we could continue as we are, steering our own ship here and abroad, being ourselves and exporting exactly that to communities all over the world, beginning with Mexico…! They wanted what it is that we wanted.
What grew from these conversations was an opportunity like none other to-date: An open door to a planet filled with beer-lovers and a conduit to meet them in our own way. One beer writer commented to me that he was struggling with the ‘having our cake and eating it too’ quality of this relationship, but that’s exactly what we have achieved. It’s come about because we lucked out and found a space where our desires were in sync with the other’s needs. We wanted what they wanted.
Things that are born grow, and mature and become. That process of becoming is endless and all of craft rolled together is itself a thing becoming. It is not one thing, rather whatever you see of it today represents only one point on a curve. Breweries that were born decades ago are at one locus on that curve, ones that were born a few months ago are at a different point on that curve, but all are becoming, endlessly.
So it is for Lagunitas, and this new adventure represents no more or less of an inflection point on that curve than did moving the brewery to Petaluma in 1994, or switching our flagship from Pale Ale to IPA in 1995, or borrowing $52 million to build Chicago or promoting the talented Jeremy Marshall to full Brewmaster status in 2013.
This is not the end of anything at all at Lagunitas, except maybe it is the end of the beginning, meaning that we are now standing at the threshold of an historic opportunity to export the excitement and vibe of American-born Craft Brewing and meet beer-lovers all over the Planet Earth, our true homeland. This could one day even be seen as a crucial victory for American Craft Brewing.
By the way, in the official press release I say that we’ll be available from Mongolia to the far-flung ‘Isles of Langerhans’. Those lovely sounding islets are actually some tiny structures inside your pancreas and I stole that from the Firesign Theater. Everything comes from somewhere, and Lagunitas comes from the U.S.of A. ….available everywhere soon! Cheers, to the ongoing victory of American Craft brewing….!
From Heineken:
Heineken has announced the acquisition of a 50% shareholding in the Lagunitas Brewing Company, the fifth largest craft brewer in the United States by volume. Lagunitas owns a stable of award-winning brands, including Lagunitas IPA. Lagunitas IPA is the largest India Pale Ale brand in the United States and has become a benchmark for the category. The transaction will provide HEINEKEN with the opportunity to build a strong foothold in the dynamic craft brewing category on a global scale, whilst it provides Lagunitas with a global opportunity to present its beers to new consumers in a category that is showing exciting international growth opportunities.
Founded in California in 1993, Lagunitas is estimated to sell c. 1 million hectolitres of beer in 2015 from its two world-class breweries in Petaluma, California, and Chicago, Illinois. A third brewery is currently under construction in Azusa, California. The brewer has a strong track record of growth, with 2012 – 2014 revenue CAGR at 58%. Its other leading brands include A Little Sumpin’ Sumpin’, Daytime, Pils, Sucks, Hop Stoopid and Maximus. Lagunitas has a nationwide presence in the United States and the brewer has expanded into a number of other markets including the UK, Canada, Sweden and Japan, offering strong potential for continued growth outside the United States.
In the United States, craft beer continues to outperform the overall beer market, and now represents 11% of total volumes. Within the craft segment, IPA is the fastest growing category.
Lagunitas will continue to be led by Tony Magee, its founder and Executive Chairman, alongside the existing management team and the company will continue to operate as an independent entity.
The transaction is subject to customary closing conditions and is expected to complete in the 4th quarter of 2015. Financial terms are not disclosed.
Commenting, Jean-François van Boxmeer, Chairman of the Executive Board & CEO of HEINEKEN said: “We are very excited to partner with Lagunitas. We recognise and respect the tremendous success of Tony and his team in building one of the great U.S. craft beer brands. We look forward to that same team partnering with us to expand Lagunitas globally, so it can reach parts of the world that other craft beer brands have not.”
Tony Magee, founder and Executive Chairman of Lagunitas, added: “This venture will create a way for Lagunitas to let HEINEKEN participate in the growing craft beer category across its global distribution network in places from Tierra Del Fuego and Mongolia to the far-flung Isle of Langerhans. Lagunitas will share in the best quality processes in the world and enjoy access to opportunities that took lifetimes to build. This alliance with the world’s most international brewer represents a profound victory for U.S. craft. It will open doors that had previously been shut and bring the U.S. craft beer vibe to communities all over the world.”
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