Last week the Craft Beer Alliance, home to Kona Brewing, reported its second-quarter earnings. It was a strong report for the company that may determine its long-term future…
The elephant in the room for the Craft Beer Alliance (CBA) is the looming deadline for Anheuser-Busch InBev to decide whether it wants to acquire the share of Craft Brew Alliance that it doesn’t already own.
Anheuser-Busch InBev already owns 32.2% of the Craft Beer Alliance. They are also the CBA’s distribution partner, hold has two seats on its board of directors, and a special status in the company’s board committees.
Under an agreement signed in 2016, the global giant has until August 24 to decide if they want to finalize its acquisition of the Craft Beer Alliance
Prior to that date, Anheuser-Busch needs to make “a qualifying offer of $24.50 per share (about $475 million based on the number of shares Craft Brew had outstanding at the end of the last quarter), or else it has to pay Craft Brew $200 million” according to the Motley Fool.
But whether the world’s largest brewer will (or wont) buy the Craft Beer Alliance remains up in the air…And solid arguments can be made for either decision…
Reasons Why AB InBev Will Buy the Craft Brewers Alliance
The Craft Brewers Alliance Kona-driven success continues.
Depletions (sales from distributors to retailers, an industry proxy for consumer demand) jumped jump 8% from last year along with an 11% increase in shipments. And Kona accounted for 70% of the CBA’s total depletions.
Both the Craft Beer Alliance and Kona are outperforming the craft beer industry
Anheuser Busch Is Back in the Acquisition Game.
Between 2011 and 2017 Anheuser Busch went on a buying spree, acquiring 12 American craft breweries before coming to an abrupt halt two years ago.
But with the recent purchase of Platform Beer, a Cleveland-based regional brewer, AB InBev has announced that it is back in the acquisition game. So maybe the CBA?
Taprooms and brewpubs are where the action is.
The Brewers Association just reported that the craft beer industry grew 4% over the first six months of 2019. But most of the growth is happening in local taprooms, and brewpubs. Its recent purchase of Platform Beer brought the company closer to that regional taproom model.
The Craft Brew Alliance’s purchase of Appalachian Mountain Brewery, Cisco Brewers, and Wynwood Brewing also came with taprooms. And in purchasing the CBA and the regional taprooms it owns Anheuser-Busch would further its hold on the taproom model that is driving much of craft beer’s growth today.
Reasons Why AB InBev Won’t Buy the Craft Brewers Alliance
Craft Beer Alliance Turnaround Not Yet Complete
In 2015 adopted its Kona+ strategy where it put 90% of its resources to building upon Kona Brewing success. And although that strategy is probing successful…it’s far from a done deal. Craft beer as a segment is slowing.
And given that Anheuser-Busch already owns more than 30% of the CBA, it could decide to keep things as they are, and see where the craft beer industry goes over the next seven years.
Anheuser-Busch InBev Is Burdened By Debt
AB InBev recently agreed to sell its Australian subsidiary Carlton & United Breweries to Tokyo-headquartered Asahi…It’s a billion dollars deal that the world’s largest brewer will utilize to pay off debt which amounted to almost $102.5 billion in 2018.
Buying the Craft Beer Alliance, would add an additional $200 million to a debt load the company has already committed to paying down. So maybe not the best time?