Brooklyn Brewery responds to comments made by Sixpoint re: 21A & Funkwerks deal

Brooklyn Brewery Defender

[Photo credit: Brooklyn Brewery File Photo]

Last week, The Brooklyn Brewery, 21st Amendment Brewery and Funkwerks announced a joint sales and marketing partnership, supported by The Brooklyn Brewery’s minority investment in the two breweries.

As announced last year, Kirin Holdings and Brewery Company acquired a 24.5% stake in The Brooklyn Brewery. After last week’s announcement, a representative with Sixpoint Brewery chimed in on a Reddit thread discussion around the new partnership. The representative writes, in part, “21st Amendment is now partly owned (with a path to full control) by the Kirin Group, one of the world’s largest brewing conglomerates.” Brooklyn took issue with the comments made and published a long response on Sunday clarifying the nature of the deal and Kirin’s lack of involvement. Sixpoint has also published another response in what has become something of a point-counterpoint argument.

Below you can read Sixpoint’s original comments followed by Brooklyn’s response followed by Sixpoint’s latest response.

Original Post from Sixpoint:

21st Amendment is now partly owned (with a path to full control) by the Kirin Group, one of the world’s largest brewing conglomerates. Kirin is using Brooklyn Brewery as a holding company to make investments in American craft breweries in the same exact way that Heineken (the world’s second largest brewer) is using Lagunitas Holdings as a shell company to acquire American craft breweries (they have already acquired 4 of them and are seeking to buy more). Expect both Heineken and Kirin to gobble up more American craft breweries (and craft breweries around the world, for that matter) with this acquisition scheme. The specifically do it this way because it has better optics for press releases than stating a direct acquisition from Heineken or Kirin. Who wants to hear about their precious local American craft brewery being bought by a Dutch or Japanese conglomerate? Needs better optics.

“Retaining independence” is a false statement in this regard, and its insulting to the truly independent craft brewers (like multi-generational Sierra Nevada or Bell’s or Deschutes to the myriad of true independent small brewers) and we need to call people out on their total bullshit. “Independent” has become a real buzzword in the light of all of the recent buyouts so please stop posting that word all over your website, packaging, and interviews if you have a massive global brewing conglomerate in your equity pool with a path to control or they own your ass outright.

Response From Brooklyn:

We’re disheartened by the comments from our craft neighbor here in Brooklyn. We couldn’t agree more with Sixpoint on the point that the industry is getting controlled by some big powerful players. That is why we decided to try to get stronger by partnering with some craft friends.

As announced months ago, Kirin bought a 24.5% share of our brewery. Kirin’s main interest is developing the Brooklyn Brewery brand in Japan, and to that end we kicked off our joint venture with them in Japan beginning in March this year.

The partnership with 21st Amendment and Funkwerks is between the two breweries and Brooklyn, not Kirin. The minority investments came from Brooklyn, not Kirin. The assertion that Kirin has a “path to control” of 21st Amendment, Funkwerks, and Brooklyn Brewery for that matter, is 100% incorrect. Why Sixpoint feels they need to spread false information to the contrary is disturbing. Craft brewers would be better served by working to continue the incredible craft beer revolution that has gotten us to a 12% share of the market, not casting false aspersions.

Further, Brooklyn Brewery has no path to control of these two breweries. Our minority investments are in support of the partnership and demonstrate our commitment to a national sales platform with 21st Amendment and Funkwerks. They allow 21st Amendment and Funkwerks to invest in improving their quality, their efficiency, and their capacity. Last we checked those were all desirable things for any craft brewer. We believe this sort of collective action is essential for independent craft breweries to compete in the US market.

We understand that the current state of the craft beer industry is a passion point for many, ourselves included. Regardless we all must commit to building our conversations and opinions on a foundation of facts. The beauty of the craft beer industry is in the many paths that have been chosen. We encourage every craft brewer to choose their own path, be transparent about it, and celebrate it, not disparage those of others.

Thanks for listening,
Brooklyn Brewery

Response from Sixpoint:

Brooklyn Brewery is an awesome neighbor and a pioneer of the craft brewing industry. I consider Steve Hindy a friend and he has been nothing but polite and kind to us over the years. I have tremendous respect for their longevity what they have done with their brand and how they raise the bar for American craft beer worldwide. I think all American craft brewers should feel a great sense of gratitude about those awesome contributions they have made.

However, the Brooklyn Brewery blog post seems to gloss over the point of our original commentary or tries to sidestep it, instead of addressing the main issues raised. It never said that Kirin as a single standalone entity has a direct path of control of the aforementioned craft breweries. The whole point of the commentary is the insidious nature of the current consolidation wave in craft beer that allows the brewing conglomerates to achieve a controlling stake in American craft breweries through a series of interrelated LLCs while maintaining good optics in press releases. That’s the point.

Similarly, Heineken Brewery does not directly have a stake in Short’s Brewing, Independence Brewing, or Moonlight Brewing in the United States. Please note when those equity stakes were announced, it never said that Heineken acquired ownership in those companies. The fact is those breweries are now partly owned by “Lagunitas US Holdings” which by definition is a completely different company than Heineken. But please, let’s remember that Heineken now wholly owns Lagunitas Brewing Company. So we can argue until our face turns blue about the fact that these American craft breweries are “not owned by Heineken” but we all know they are owned by a brewery’s name that is 100% owned by Heineken.

Also please note that all of these “partnerships” and “equity stakes” by both Lagunitas and Brooklyn Brewery were not announced until after Heineken took their stake in Lagunitas and after Kirin took their stake in Brooklyn Brewery. That is not a coincidence. As mentioned, this is all part of an M&A craft strategy that was put together by both parties at the time of the investment with the logical endgame being consolidation. Both Heineken and Kirin have a craft strategy, and they need an aggregator for brands.

Curiously, the specific mention about Kirin’s “24.5% stake” in Brooklyn Brewery and the press release associated with that seem to only reinforce the commentary that these press releases are often about optics. Kirin could have elected to take a 15% stake in Brooklyn, or a 20% stake, or a 30% or even 49% stake. But the 24.5% stake was specifically chosen because that is right near the maximum amount allowed by the Brewer’s Association and still maintain the “independent” definition of a craft brewer. Of course, that definition has been revised many times over the years, so that number may change arbitrarily again…just as other aspects of the definition have changed.

One thing I do agree about in Brooklyn Brewery’s blog post is that we should continue to concentrate our efforts in making awesome beer and push forward in getting more market share for craft beer – above and beyond the 12% we have achieved so far. But one thing that does not help that effort is the recent string of press releases that seem to be at odds with the underlying reality in craft beer – it is incrementally being gobbled up by major global brewing conglomerates (AB-InBev, SAB-Miller (now AB-InBev), Heineken, Kirin), and sometimes these activities are glossed over in optics-driven press releases.

One critical point of clarification as well – a “direct path to control” as referenced in the original post I hope is clarified via the confusing and interconnected nature of how these entangled structures work. Often a single brand is invested in as a platform and used as an aggregator for a parent company, and although that aggregator brand is the one that makes equity investments in other breweries, the aggregator brand itself is partly or wholly owned by a parent company conglomerate.

This is by no means atypical. And perhaps most important, this is a pretty clear goal of most global conglomerate companies: they want to garner as much global market share as possible, and maximize profits. A hallmark of capitalism no doubt – but that doesn’t mean we can’t all be real about the subtext of a press release.

11 thoughts on “Brooklyn Brewery responds to comments made by Sixpoint re: 21A & Funkwerks deal

  1. Interesting points raised about ownership / investor disclosures though in M&A announcements even if they don’t apply quite as well in this specific case as much as other recent cases.

  2. Glass Houses Sixpoint. They should show you what their ownership/investor sheet looks like.
    To further it’s distribution over other brewers in those houses… check it out

  3. regardless of who has ownership and as long as the QUALITY of the product continues and does not change the consumer will not notice!!!
    ex. Shock Top … AB … product was never a quality craft product to begin with ..

  4. I come from the tech world where making money and having an exit strategy are extremely important to the life cycle of innovation. Someone will have a good idea, get some money to do it and, if it’s successful, sell the business to some mega company. Then that person will go out and start another company and do it all over again. That’s the life cycle of innovation. Sure you get a Apple, Facebook or Google that makes it but the vast majority of company’s get absorbed by larger (often less innovative) conglomerates.

    The Craft Brewing industry should embrace this life cycle not bemoan it. In the Tech industry, as in the Craft industry the fun part is the startup. If you started a beer company that has grown to mega proportions most likely you are not brewing beer but managing and planning.

    The Craft brewing industry is going to get a lot of cash injected into as the mega-conglomerates reach their fingers into the pie. I’m hoping this will empower more breweries to spring up. More small investors will see an exit stagey and a way to get their money back. They will invest more and generate more brewery starts. In the old days if you invested in a brewery the only thing you got was a seat with your name on it. Now the industry is a viable investment for small investors.

    A business model where more hard working people get a payoff will generate more startups and more innovation.

    Many people see this kind of deal as the end of craft brewing but I see it a newer and brighter, more lucrative, version of the Craft Beer Revolution.

  5. Fact Check-Lagunitas had announced partnership with all of their current breweries, with the exception of Shorts, long before the 100% buy out.

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