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As Anheuser-Busch Dials Back on Craft Beer, Tilray Goes to 11

Traditionally, very little news is made during the summer in general and the month of August in particular, for the obvious reason that it is hot out and journalists, like everyone else in this country, would much rather be drinking beers on a boat than working. But thanks to Anheuser-Busch Inbev’s corporate foot-shooting showcase sponsored by Bud Light, and Sapporo USA’s unceremonious and baffling mismanagement of l’affair Anchor, the past couple months have been absolutely lousy with big beer-business stories. Can a humble Hop Take columnist catch a break around here?

Absolutely not, said Tilray Brands’ chief executive Irwin Simon, who earlier this week announced that his global cannabis conglomerate would double-down on its adventures in the American beer industry by acquiring seven brands from ABI’s wobbling craft brewing portfolio.

Though Canada’s biggest weed purveyor has amassed a considerable position in stateside beverage alcohol over the past few years, scooping up SweetWater Brewing Co., Green Flash/Alpine, Breckenridge Distillery, Red Truck Brewery, and Montauk Brewing Co., those moves seemed fairly deliberate and cautious. By contrast, its acquisition of a baker’s half-dozen of breweries and brands across the country in one fell swoop has no precedent within the company, and barely any within the industry, save for Monster Beverage Corporation’s early-2022 acquisition of the CANarchy Collective. Compared to that $330 million purchase, this one is dirt cheap: according to a recent Tilray filing with the Securities and Exchange Commission, Simon and co. are paying just $85 million for Shock Top, Breckenridge Brewery, Blue Point Brewing Co., 10 Barrel Brewing Co., Redhook Brewery, Widmer Brothers Brewing, and Square Mile Cider Company. Because the grab-bag also included Hiball Energy, a non-alcoholic Celsius competitor that ABI actually discontinued in May 2023, the per-brand price works out to around $10.6 million — a lot of money to you or me, but not a lot of money to a firm with Tilray’s $2 billion market capitalization.

It’s also not a lot of money to ABI, which despite four months of plummeting Bud Light sales in the U.S., still managed to beat analysts’ forecasts when reporting its second-quarter earnings earlier this month. That gives the lie to conservative content farms’ breathless claims that the transphobic boycott of Bud Light forced the macrobrewer to shed a chunk of the craft brewing assets it accrued and improved to the tune of some $730 million over the past dozen years.

It also undermines the thrust of a statement provided to Hop Take by a company rep on behalf of the president of The High End, ABI’s craft brewing division. “Winning in craft remains a key pillar of our strategy to lead and develop the premium segment,” reads a portion of the statement from Andy Thomas, who ABI declined to make available for an interview. “We remain committed to the amazing craft brewery partners in our portfolio and focused on working with them to lead growth in the segment.” Were I an employee at one of the ABI’s 11 remaining craft breweries, that boilerplate wouldn’t reassure me in the slightest. If the firm is still all in on its one-time craft brewing aspirations, why is it cashing out for rock-bottom prices?

The more likely explanation, I think, is that after double-digit annual growth for much of the past decade, the house lights have come up on the entire craft brewing industry, and ABI, which never had all that much success on the dance floor, is headed for the exit. The firm has been dialing back its forays into the once-red-hot, now room-temperature segment over the past few years, slow-walking or flat-out memory-holing its once-splashy investments in craft beer-aligned assets. And this year, it started getting rid of actual breweries. In late February, ABI shut down Platform Beer Co. entirely after just four years at the helm, orphaning a few of the Ohio firm’s beers, which’ll now be produced elsewhere in its national network. A week later, in March 2023, ABI laid off an unknown number of sales and marketing employees that worked on The High End’s brands. Then in May, the company sold Appalachian Mountain Brewery back to its founders, presumably at a loss. The music has stopped, the hot potatoes are burning, and Big Beer’s biggest player wants out. Tilray gave it the opportunity to crank that dial back a bunch of notches all at once.

But if craft brewing is such a vexing game for big conglomerates like ABI and Constellation Brands (which made its own humiliating exit from the segment earlier this year), then why in the world does Tilray, which has less beer experience than either of them, want in? Tilray did not immediately respond to Hop Take’s request for an interview with CEO Irwin Simon. But rest assured, it’s not to make weed-beer. Though the firm will surely hit the ground running on craft-esque THC beverages if and when federal legalization of marijuana arrives, mixing alcohol and THC is regulatory suicide. And besides, Tilray’s prior moves in the American craft brewing industry, coupled with the statements Simon and other execs have made before and since announcing this deal, suggest the company sees an opportunity to leverage its newly acquired economies of scale to become a major player in the segment on its own terms.

“We will change that industry,” Simon told investors on the company’s Q4 earnings call on July 26. “Craft beer is cool and will become cooler.” Many brewers struggling with supply-chain issues, rising input costs, and lukewarm consumer interest would beg to differ. But craft beer has been cool for Tilray: analysis of the cannabis heavyweight’s financial reports by Beer Marketer’s Insights indicates its beverage-alcohol brands grew a whopping 33 percent for the fiscal year ending May 2023, making a small clutch of craft brands a full 15 percent of its otherwise “flattish” annual revenues.

Maintaining or accelerating that momentum is crucial as Tilray waits, hopes, and prays for legalization. Simon outlined the plan to pull it off in a meeting with analysts on August 7, where he said the acquisition “reflects the ongoing strides we’re making in diversifying our overall business.” His PowerPoint deck highlighted the strategic geographic placement of the acquisitions, as well as the company’s newly minted status at the country’s fifth-largest craft brewer by volume (as measured by the Brewers Association.) “It’s not what the brands were doing before, it’s what we can do with them going forward,” Simon said.

Consider Shock Top. Anheuser-Busch (pre-InBev) launched the brand in 2006 to answer the rising threat from Blue Moon, a MillerCoors (now Molson Coors) product. Despite the fact that it peaked in 2017 and I sorta-forgot it existed, Shock Top is a huge brand that adds hundreds of thousands of barrels, miles of valuable shelf space, and thousands of tap handles around the country to Tilray’s portfolio off the rip. If the company can successfully shed (or even just blunt) the try-hard ABI stank that swirls just above the anthropomorphic Shock Top man’s orange mohawk these days, it could make real dough. It’s a crazy bet, sure. But is it crazier than buying Ballast Point for a billion dollars? Crazier than launching NFTs based on Goose Island’s vaunted barrel-aging program? You get the point.

At this level, the beer business is mostly a game of scale and operational efficiency, and with this deal, Tilray gets both, plus instant exposure to top-in-class ABI distributors already carrying the acquired brands across the country who understand the retailers and drinkers in the markets in which the firm needs to deepen its penetration. The cut-rate price and newfound stature won’t make craft brewing any cooler in the short term (the opposite is more likely true), but it does give Simon and Tilray an outsider’s shot at making real money in the long term — and making real news along the way.

? Hop-ocalypse Now

If you listen to Taplines, the podcast I produce and host about modern American beer history, you know that packaging alcohol and caffeine for sale is a good way to get yourself Four Loko’d by the Food and Drug Administration. But thanks to the regulatory quirk that allows for caffeinated booze when the compound is naturally and inherently derived (as opposed to synthesized in a lab and added after the fact), caffeinated hard coffee is very much a thing — which makes it all the more disappointing that the new Dunkin’ Spiked flavored malt beverage mix-pack, produced by longtime Massachusetts collaborator Harpoon Brewery, does not appear to have any actual caffeine in it. How is America even supposed to run on this?!

? Ups…

Old Style will be brewed in its hometown of La Crosse, Wis. for the first time in a quarter-centuryPumpkin beers are already hitting shelves this season, and as a known sicko, I actually welcome the inevitable discourse… Faux-stalgia craft lagers are kinda-sorta working for some breweries, which is nice… With flat growth company-wide through Q2 2023, Diageo is drafting (ahem) off Guinness’ strong performance…

? …and downs

GOP politicians that bashed Bud Light for accidentally admitting trans people exist also accepted ABI’s latest campaign donations, huh… Fall resets are looking rough for core beer, folks… Ball Corp. took an 8.5 percent Q2 hit due to Bud Light’s decline…

The article As Anheuser-Busch Dials Back on Craft Beer, Tilray Goes to 11 appeared first on VinePair.

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