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July 21, 2015
Grand Rapids, MI
Brew Talks Michigan 2015
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Brew Talks Michigan: Life After the Sale & Growing Market Share

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In a pre-event stroll around Founders’ ever-expanding brewery in Grand Rapids, Mich. on Tuesday, company co-founder Dave Engbers quipped at one point, “That wall wasn’t here yesterday.”

Which is to say, there is a whole lot of change afoot for the company that eight months ago sold to Mahou San Miguel, Spain’s largest brewing company.

But change is hardly unique to Founders. The entire industry is evolving at a pace of unprecedented haste. And for that reason, Founders’ brewery in Grand Rapids, Mich., was the perfect location for our sixth Brew Talks meetup of the year.

During the evening’s headlining panel (video below), Engbers discussed not only the physical modifications the company is dealing with, but also, and more pertinently, the industry-wide changes that are shaping the entire landscape, from the influx of M&A activity to starting up in today’s new world and more.

Founders fits the bill because it is one of the most visible examples of the industry’s heady growth. Like so many other craft breweries, Founders has benefited from a consumer shift toward more flavorful craft products. But even with that tailwind, it stands out, maintaining a compound annual growth rate of 60 percent, scaling production from just 24,000 barrels in 2010 to more than 193,000 barrels in 2014.

The company is on track to sell 270,000 barrels this year, and All Day IPA, a fairly new, “crushable” (i.e. session-strength) IPA that has grown more than 200 percent in supermarkets year-to-date, now accounts for 50 percent of the company’s overall production volume. The company has expanded distribution into 34 states and, as it continues focusing on sales in supermarket and convenience store chains, California and Pacific Northwest market entries could be on the horizon, Engbers said.

Complete video of Engbers’ conversation with Brewbound editor Chris Furnari is featured below and a few notable comments have also been reprinted for your convenience.

Engbers on life after the Mahou transaction and what lies ahead:

Domestically, not much has changed at all. We’re eight months into this relationship, but it’s been great so far. There’s a ton of open dialogue between both teams.

They have distribution networks throughout Europe, Asia, Africa. They’re a big player and it was one of those times when we started looking at this and said, “we’re still fairly young, we’re having a hell of a good time doing what we’re doing, but once we fill in the rest of the United States, which is really just a matter of years, and we’re used to this 60 percent growth rate, what’s the next challenge?” So what if we can be part of this taking North American craft to a global market?

On the increasing M&A activity:

It’s going to continue to happen. I think there’s going to be, you know, probably between 12 to 20 deals in the next couple years. Big deals.

The one thing that is a bit scary is a lot of the private equity deals. The private equity, you know, they’re bankers, they need to make money and they need to make money quickly. Their funds are typically five to seven years. They’re going to go in, they’re going to change management, they’re going to make a bunch of changes, and then they’re going to flip it. So that’s one of the scary things, when you look at some of the deals that are going on, because after they flip it, who are they flipping it to?

On advising upstart breweries in the new world:

I think Founders was able to spend a couple years really honing our craft before we got our ducks in order. The new guys, if you’re not making great beer or good beer or someone has a bad experience, now someone’s on their phone telling the whole world how lousy it was. It kind of goes back to professionalizing our industry. Don’t open your doors until you’re ready.

Engbers wasn’t the evening’s only speaker, however. In the preceding panel, a trio representing all three tiers of the industry provided insight into the Michigan beer market and what it’s going to take to grow statewide market share for craft.

Ian Pennisi offered a retail perspective as the beer program manager of HopCat Ann Arbor, a growing chain of renowned beer bars in the Midwest.

“[Breweries are] finding niches, if anything. We’re getting less, you know, just, ‘hey, we’re a brewery, we make lots of cool beer,’ to ‘we make this specific [style]’ whether we brew all lagers like Wolverine or we brew Belgian style, or we brew exclusively sour,” he said. “I feel like there’s a lot more niche breweries that are going to help us drive Michigan’s business and I think there are many niches and many holes that still need to be filled.”

Fred Bueltmann, a partner in New Holland Brewing, cautioned against breweries getting “ahead of themselves,” just because things are growing.

“I think a lot of it is staying true to your own objectives and your own pace, and that takes some restraint at times. It’s very exciting and growth is exciting and alluring,” he said. “Take the right size bite and grow and expand in a sustainable manner, which is going to be different from brewery to the next brewery to the other brewery.”

Dennis Smith, craft beer manager of O&W, Inc., a Michigan wholesaler, said better chain execution would help craft brewers access another set of beer drinkers that might not currently be as familiar with all of the Michigan brands.

“Getting into the Meijers, getting into the Krogers, making that one of your top priorities – if Michigan breweries can do that, you’ll see a huge jump right away,” he said. “If you can get into the chains, you’re going to see that share hit, no problem, right away.”