Handicapping the Anheuser-Busch California Brewery Acquisition Targets

Inside this building, A-B executives are no doubt plotting
to acquire at least one California brewery

There's plenty of well placed speculation Anheuser-Busch (A-B) is actively seeking to acquire a California brewery, as they continue to invest in the fast growing "craft" beer market. If A-B acquires one of your favorite brewery, I think you should have no fear. Goose Island seems to be doing fine since A-B acquired them with no perceptible drop off in quality. While the jury is still out on the Blue Point, Elysian and 10 Barrel acquisitions, it's a reasonably good bet these acquisitions will have similar results as with Goose Island. In face, with A-B's considerable resources behind them, it's quite possible the beer from A-B acquired breweries will actually improve. Industry consolidation is a fact of life, so let's try to have a little fun with it. So without further ado, here are my fearless predictions of fifteen California breweries and their likelihood they get acquired by A-B.

Firestone-Walker Brewing Company (0.1%)
If A-B was eyeing Firestone-Walker as a takeover target, Duvel Moorgat beat them to it.

Sierra Nevada Brewing Company (0.2%)
Awfully hard to see this happening.  Enormous clash of corporate cultures, Ken Grossman doesn't need the money, and given some of Grossman's business partnerships have gone south, hard to imagine he would willingly agree to take on A-B with so many obvious conflicts needing to be resolved. In addition to all that, Sierra Nevada would command a pretty high price tag well above what A-B may be willing to pay.

Speakeasy Ales and Lagers (2%)
It could happen. I just don't think it will happen.

21st Amendment Brewing (2%)
In recent tweet, Budweiser declared,"Nobody cheers for the guy who bring a watermelon wheat beer". Those reading tea leaves thought this was an ironic signal from A-B that an acquisition of 21st Amendment, known for their popular "Hell or High Watermelon Wheat", was imminent.  No so, said 21st Amendment co-founder Shaun O"Sullivan, who quickly quashed that speculation, saying the brewery had no intentions of selling to A-B. Hard to see 21st Amendment back tracking on that, but then, stranger things have happened.

Gordon Biersch (2%)
Would be really complicated given Gordon Biersch's brewpub business and contract brewing operations. Plus Gordon Biersch focus on only traditional Germanic styles means they don't brew any of the currently hot beers like session IPA's and only would do so over Dan Gordon's dead body. With all due respect to Gordon Biersch, this isn't a brewery A-B would be all that eager to acquire.

Karl Strauss Brewing Company (2%)
A reader on my Facebook page suggested Karl Strauss. An intriguing choice, but that more I think about it, a situation very similar to Gordon Biersch.

Bear Republic Brewing Company (2%)
A-B could accomplish plenty with Bear Republic's flagship Racer 5 IPA.  Bear Republic expansion plans have been stifled by water resource issues in Sonoma Country so could thrive with A-B's vast brewing capacity available to them.  Other than that, it's hard to see this family owned business selling to A-B.

Green Flash (2.3%)
A strong, steady brand A-B would likely find desirable but Green Flash owners Mike and Lisa Hinkley don't strike me as ready or willing to sell.

Drakes Brewing (2.4%)
Owners John Martin and Roy Kirkorian have a good thing going in San Leandro and are well respected and ingrained in the California craft beer community. Its hard to see them making this seemingly idyllic life a lot more complicated by selling to A-B. A solid brand in the Bay Area but not as well known elsewhere, it probably isn't high on A-B list of acquisition targets either.

Anderson Valley Brewing Company (3%)
This long time, old school craft brewery was acquired from its founder by Trey White in 2010, who might be willing to part with it for the right price.  How interested A-B would in a steady, but not always spectacular brewery is another matter, as well as whether the Anderson Valley bucolic rural cultural vibe would mesh well with A-B's corporate culture.

Stone Brewing Company (4%)
Forget about Stone CEO Greg Koch's usual bluster against fizzy lagers, the guy likes selling lots of beer and building a brewing empire. So if he thought selling A-B would be necessary further that, he'd have no problem jumping on board. Which is why I think it's likely he won't since Greg Koch is building an empire just fine on his own.  Koch also strikes me as one of those guys who really likes being in charge which would no longer be the case if he sold to A-B.

Lagunitas Brewing Company (5%)
Tony Magee does a lot of weird, hard to believe things. Selling his business to A-B seems totally bizarre, even by his standards.  Still, I wouldn't put it totally past him and you would have to think A-B would want to buy such a strong brand, even though it would be a pricey acquisition. There are many sides to Tony Magee and being a hyper-capitalist is clearly one of them, so Magee selling to A-B isn't that far-fetched.

Now it starts getting interesting.  The next three breweries stand out in my mind as far and away, the best acquisition candidates for A-B.

Saint Archer Brewing (20%)
This brewery isn't even three years old but with three million in funding, Saint Archer has been blowing through California with an aggressive distribution expansion. Coupling craft beer with extreme sports, you'd have to think A-B would be looking hard to acquire the fast growing business that would give it instant access to two hot trends.

Anchor Brewing (20%)
Former Sky Vodka executives Keith Greggor and Tony Foglio who bought Anchor Brewing from craft beer icon Fritz Maytag in 2010 are no strangers to large corporate beverage conglomerates and would seem to be more comfortable fit with A-B than the home brewers turned businessmen who run most other breweries.  It also helps that Anchor's flagship beer is a cold fermented beer dating back to the late 1800's. Remind you of another classic American beer? Anchor is a solid brand with lots of mainstream appeal, yet plenty of craft beer cred.  The combination of Anchor Brewing and A-B seems rather effortless.

Hangar 24 Craft Brewery (33%)
The more I think about Hangar 24, the more I think it's the most logical choice. Hangar 24 reminds me an awful lot like A-B's last acquisition, 10 Barrel Brewing, with its young ambitious management, a significant barrel-aging program, and a balanced line-up mix of accessible lawn mower type beers, hop monsters, and experimental brews. With a strong presence in both Southern and Northern California, A-B would kill those two birds with one stone. Hangar 24 has plenty of growth potential and would probably be cheaper to acquire than Anchor. Hangar 24 is my leading pick.

So there you have it.  It's worth noting that given the percentages, I figure there's a 73% chance A-B will acquire either Saint Archer, Anchor or Hangar 24.  But even for the top pick Hangar 24, there's a 67% chance A-B will acquire a different brewery. So whatever the CA brewery A-B ultimately acquires is still pretty wide open.

Let the rampant speculation and the arguing begin!

The Greening of Anheuser-Busch

This windmill provides power for the Anheuser-Busch Fairfield Brewery

People say a lot of things about Anheuser-Busch.   Plenty sneer at their products, caling them watery and tasteless but they still sell more beer than any other American brewery. They've gotten a reputation as a big evil corporate Goliath, but there's another side of Anheuser-Busch few know about.

Anheuser-Busch is serious about reducing their impact on the environment.  A lot of this is on display at their brewery in Fairfield, CA which I visited late last year. Intrigued by what I saw, I contacted Anheuser-Busch to learn more.  It took a while, but through an e-mail routed through their media relations department, I posed some questions to Damon Waker, a resident engineer at the Fairfield Brewery about the water reduction and alternative energy generation at this facility, and how this is being extended company wide.  Here's what he had to say.

1) What's your involvement in the various environmental initiatives at the Fairfield brewery?

Part of my role is implementing more efficient ways to make the quality beers our customers expect. This includes the resources required to make beer, a significant one being water use which is very important in California as we continue to face drought conditions. 

2) Can you describe the various efforts at the brewery to reduce water usage?  How much did each save?

The Fairfield brewery has reduced its overall water use by 47 percent since 2007. Employee engagement programs that result in new ideas on how to conserve and use water more efficiently is what drives the greatest progress. We also internally designed and implemented ways to reclaim water used in the brewing process and then re-distribute it in operations areas, such as cooling towers. The brewery also recycles more than 99 percent of the solid waste used in the brewing and packaging processes.

3) Can you describe the efforts for alternative energy sources at the brewery? 

The expansion of alternative energy sourcing is part of Anheuser-Busch’s commitment to environmental stewardship from ‘seed to sip.’

The Fairfield brewery’s total alternative energy generation is 4.1 megawatts, or approximately 30 percent of electricity needs from alternative energy.

The Fairfield brewery is an industry leader in generating self-sustaining energy needs through a 7 acre solar array and now two turbines – one completed in 2011 and the second one being completed now.

4) What we the main motivations of these efforts?

Anheuser-Busch has a long history of environmental stewardship, both inside and outside its breweries. 

Alternative energy sources including seven acres of solar arrays, two wind turbines, bio-energy recovery systems (BERS), recycling and water conservation efforts, contribute to making Anheuser-Busch’s Fairfield brewery one of the greenest breweries in the industry.

Water reclamation equipment at the Fairfield Brewery

We want to increase both efficiency and sustainability wherever possible. This is part of our Seed to Sip environmental platform that focuses on reducing water and energy use while increasing efficiency, recycling and reuse across our supply chain. Like most companies, any project we undertake must present a business case in addition to the environmental benefits.

5) What were the challenges in getting these efforts implemented?

Projects that require external partners, like wind turbines, bring a series of challenges as you develop the size and scope of a project and tackle planning stages.  

6) Are there plans to expand these programs at the Fairfield site to other breweries?  

We are always considering ways to increase sustainability while maintaining the quality of our products. We have water conservation plans being enacted across all our breweries as well as efficiency projects looking at energy, reuse and recycling.



Some may claim this is all largely a big corporation cost reduction strategy masquerading as a feel good environmental program.  And you know what, they could be right. But so what?  Environmentalists have claimed for decades that good business and good environmental practices can co-exist.  At the scale of Anheuser-Busch, some pretty serious environmental change is happening at the scale of tens if not hundreds of craft breweries, and they still do it profitably.  That my friends, is beer brewed the hard way.  

There's a lot of A-B beer fermenting away in there.

Checking out the Anheuser-Busch Brewery in Fairfield, CA

Say what you will about Anheuser-Busch, some of the finest brewers in the world work there. While an Anheuser-Busch product is something I rarely reach for, I do enjoy drinking an ice cold Bud maybe twice a year.   Furthermore, I have tremendous respect for the beer itself. You can learn a lot about a beer by going to its source, so I've long wanted to trek up to their brewery Fairfield, CA to take the Anheuser-Busch Brewmaster Tour on a chilly late December Saturday afternoon, finally getting the chance to look inside the imposing building in I've seen several times driving through Fairfield on Interstate 80.

I honestly didn't know what to expect when signed up for the Brewmaster tour, which at $25 promised a more in-depth experience than the standard complimentary brewery tour.  Was I paying twenty-five bucks for just a sales pitch with some extra swag thrown in?  Or would I get to stand next to the Brewmaster, hearing all his deep words of wisdom for creating a clear, iconic lager as he pitched the yeast for the next batch of Budweiser?

One of the two electricity generating windmills outside the brewery

As you might guess, the tour turned out to be somewhere between the two. One of the first thing our guide showed us was a couple big windmills outside the brewery.  One was installed in 2011, the second one last August. Together, they supply about 40% of the brewery's total electrical power. Our guide also explained that in the last four years, the brewery has reduced its water usage by 40%.   Most craft breweries are pretty forward thinking when it comes to the environment, but how many can claim things like that?  

As for the brewery itself, having visited plenty of other smaller breweries, the immense size and scale of the place was the first thing that struck me.  Of course, I expected it to be bigger than all the craft breweries I've visited but somehow walking down the long hallways lined with huge tanks directly confronted me with the tremendous scale Anheuser-Busch brews at.  A considerable amount of engineering is required just for all the plumbing and mechanical support of all the huge equipment.  Say want you want about Anheuser-Busch products, they are clear results of impressive ingenuity and know-how.

Water is reclaimed in these tanks, which helped the brewery reduce
its water used by 40% in the last four years.

Our guide was personable and well trained, recounting all the basic steps of the brewing process. She even talked about IPAs and other beers Anheuser-Busch didn't brew, seemingly admitting that the beers brewed inside the factory walls were mired a slow, tedious and most likely irreversible decline .  Since the Fairfield facility brews Anheuser-Busch beer destined for Northern California and the Pacific Northwest, this brewery, out of the twelve Anheuser-Busch operates nationwide, has been hit especially hard by the craft beer revolution.

Perhaps the fact that Anheuser-Busch falls on the trailing edge of America's beer tastes was most evident when our guide took us into the hop storage room.   Standing in the hop room at any brewery and inhaling all the pungent aromas is easily of the most stimulating experiences know to humankind. On that score, the Anheuser-Busch hop room was a bit of a let down.  Like their beer, their hop room just really wasn't that hoppy.  The hop aromas were noticeable but lacked the powerful, almost intoxicating presence in a hop room at any craft brewery I've been to.

We did get the opportunity to taste four beers straight from the fermentation tanks.  Bud Light was crisp and clear with the light green apple flavors of classic Budweiser.  Natural Ice had a slight, unexpected sourness.  Busch Light tasted like absolutely nothing.  Shocktop Wheat compared to those three was positively a flavor explosion and underlined what a radical departure Shocktop must have been from the standard Anheuser-Busch line when it was first released.

Sampling the beer straight from the tank.

The tour over, my wife and I used our complimentary drink tickets to try a couple Anheuser-Busch beers in the tour tap room.  I was actually quite impressed with Shock Top's Shockolate with plenty of rich chocolate flavors. The combination of yeast and chocolate worked well together, but it was a bit too sweet.   Less sweet and it would've been a really interesting Wheat Beer.  A little more sweetness and it would've been a disgusting alcopop, although some might argue it was already there.  

As for the tour itself, let's say I was pleasantly surprised.  I thought it was well worth the twenty five bucks, even without the complimentary baseball cap and tasting glass.  The free tour doesn't go to hop room or fermentation tanks, and much of the tour is pre-recorded so I say spend a few bucks and take the Brewmaster tour.  While I didn't learn any profound truths about how the Anheuser-Busch beers are brewed, I certainly got an inside look at major American brewery and a much better appreciation of what goes on inside. I also saw that Anheuser-Busch has a genuine interest in becoming a more environmentally sustainable corporation, a side of the company I didn't expect and few actually see.

With that, I'll leave you with a few more pictures from that afternoon.