Brewery buyout: Big beer company acquires Devils Backbone

Devils Backbone owner Steve Crandall says selling to Anheuser-Busch InBev was a growth strategy, to move from 60,000 barrels produced in 2015 to 150,000 barrels annually. Staff photo Devils Backbone owner Steve Crandall says selling to Anheuser-Busch InBev was a growth strategy, to move from 60,000 barrels produced in 2015 to 150,000 barrels annually. Staff photo

Local craft brewery Devils Backbone announced on social media it was being sold to Anheuser-Busch InBev at 10:35am on April 12. By noon, the court of public opinion had tried and convicted the Nelson County company of selling out.

Brewery ownership was a bunch of “cowards.” They were “greedy,” looking to “cash in,” sold to the highest bidder. Beer folks from Facebook to Twitter to Reddit vowed never to buy another Devils Backbone product. They’d sooner quit drinking beer than support an evil empire bent on crushing craft.

The supporters were slower to come, but they were there. Some said this’ll be a fine thing for Virginia beer. One of our own, they said, has made “the big leagues.” Folks across the country would now get to taste those delicious VA suds.

Local brewers also took their time weighing in. Three Notch’d Brewing Company’s founding brewer Dave Warwick immediately responded to a request for comment—“Here goes…”—but then stepped back. “I need a few,” he said.

In the end, Warwick was measured. “Devils Backbone has gotten to where they are today through successful marketing and smart business decisions but, most importantly, world-class quality beer,” he said. “I wish them the best of luck.”

Devils Backbone owners Steve and Heidi Crandall offered their own side of the story. This was a growth strategy, Steve Crandall says, a way to get from the 60,000 barrels they produced in 2015 to their goal of 150,000 barrels. After failing to get a traditional bank loan and eschewing private banking and private equity, he says the best option was clear.

“We’re one of the fastest growing craft breweries in the country, and you cannot finance new equipment through profitability alone,” he says. “A bunch of groups were interested in buying—we had an offer that was higher, but they didn’t share our vision. Anheuser-Busch are good people. They are not interested in crushing craft. They want to win, but they want to do it in a fair way.”

Devils Backbone brewmaster Jason Oliver, whose beer wins awards at the Great American Beer Festival and beyond year after year, agrees.

“There’s this real us-against-them mentality,” he says. “But I consider myself a brewer first and foremost and a craft brewer second. And so I’ve been a champion of large breweries. People aren’t objective about it. They get emotional.”

Lots of others decided not to comment. Starr Hill, the most widely distributed local brewer and one that many have called an obvious target of big beer, didn’t return several phone calls. A representative of Budweiser declined to go beyond official press statements.

But here’s what we know about some of the behemoth’s business strategies. Through its craft arm, The High End, the company has purchased nine breweries since 2011, according to some estimates paying from $25 million to $70 million each, and has guided them forward in various ways.

Goose Island, the first acquisition, has become a de facto Budweiser craft label. The company’s Honker’s Ale, Goose IPA, 312 Urban Wheat, Summertime, Four Star Pils and Green Line Pale Ale have been scaled up for production at big Bud plants. They’re now available nationwide.

Oregon-based 10 Barrel Brewing, on the other hand, has said it’s been largely left alone to make the beer it’s always made.

In December of last year, when ABI announced it was making another major acquisition, this time of South African Breweries, Brewers Association CEO Bob Pease went before Congress to air what seems to be a consensus among small-brewery owners. Because of ABI’s ownership of beer wholesalers, it can unfairly influence the types of beer chain stores stock. Before letting this monster grow any bigger, Pease said, ABI should be required to divest its stake in wholesalers.

“If ABI is permitted to maintain ownership of wholesalers…ABI will continue to purchase additional independent wholesalers and discontinue sales of competing brands that the independent wholesalers currently sell,” Pease told the Senate Committee on the Judiciary.

The South African Breweries purchase is still under review, so what’s next for ABI is unclear. As for Devils Backbone, the company looks a lot more like 10 Barrel in size and scope than Goose Island (10 Barrel is in the process of expanding from about 40,000 barrels a year to 120,000), and Crandall says no new distribution has been planned for the immediate future. But some have suggested the brewery’s popular Vienna Lager would make a great candidate for national sales. With the right quantities and distributorship, it could compete with Yuengling or Boston Beer Company’s Boston Lager.

Crandall says he’s convinced his new parent has its heart in the right place, and that’s evidenced by the fact ABI hasn’t made any changes to management and is committed to allowing Devils Backbone to operate as is for at least the next five years.

“We want to continue to support craft beer in Virginia,” Crandall says. “We are all in this together. It whittles down to what’s in the glass.”

High End President Felipe Szpigel said much the same. Yes, ABI ran an ad during last year’s Super Bowl that mocked craft beer and said Bud was “brewed the hard way.” But that was a brand statement, not the company’s official stance.

“Budweiser has a voice and pride in the quality of the beer,” he says. “It was never the intention to create discomfort or to be aggressive.”

Try convincing the craft beer geeks on the Internet of that.

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