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That Lagunitas-Heineken deal



“Achieving scale doesn’t change things unless you allow it to change you.”

That’s what Lagunitas Brewing Company’s founder, Tony Magee, told the San Francisco Chronicle, which today reported that beer giant Heineken has bought a 50% interest in the Petaluma, CA-based craft brewer.

(I couldn’t find the Chronicle link, but this is the L.A. Times story.)

I’ve long said that the prejudice against alcoholic beverage companies based on size alone is exactly that: a prejudice. There is no reason, in principle, why a big winery can’t produce wine exactly the same way as a smaller winery—except in larger quantities.

Viticulture? Pretty much the same. Grow in the right [coastal] areas. Do your pruning and cluster thinning, and hope Mother Nature gives you a good vintage. Get the best barrels you can. Apply artisanal techniques: sur lie, pumping over, hand-punchdowns. If this can be done successfully for 500 cases of wine, it can be done for 50,000 cases—or 500,000 cases.

Just why and how “small is better” became the prevalent theme in winemaking is a bit of a puzzle. The Bordeaux chateaux were never particularly small. In an abundant vintage, they can produce 40,000 cases of wine. Much of our notion of the importance of smallness derives from Burgundy, but there, the situation is completely anomalous. Burgundy is a patchwork of small vineyards due to France’s inheritance laws. One could, I suppose, argue that, if Burgundy had evolved another way, with large individual landownings a la Bordeaux instead of tiny parcels, the world would have been deprived of the glories of the terroir for which we rightfully celebrate Burgundy. But we speak of terroir in Bordeaux, and there’s no reason we can’t speak of it in a very large vineyard whose parent company produces many thousands of cases.

If that line of reasoning doesn’t resonate with you, try this: Even in a very large vineyard, you must grant that, if you subdivide it into blocks, you wlll discover nuances of terroir. And that is exactly what many, if not most, large coastal vineyards in California do.

I do hope that Lagunitas doesn’t change. I’m a big fan of their IPAs, which are inexpensive (I pay $8.99 a sixpack at Whole Foods). I will take Tony Magee at his word when he says things won’t change. If they do—if the beers get diluted—I’ll find some other beer: Sierra Nevada, Deschutes, the supply is endless.

But before I trash Lagunitas for “selling out,” I’m going to give them the benefit of the doubt. I won’t leap to conclusions “just because” Lagunitas has partnered with Big Beer!

  1. Bill Stephenson says:

    Considering their humble beginnings, Lagunitas is a true American success story.
    The “420” incident* a few years back cemented their alternative/outlaw status in a way that no amount of paid advertising ever could.

    Everyone in the community is looking at this from the perspective of Lagunitas and the overall Craft Brewing scene here in the states. I see it as Heineken recognizing that they need to “Join or Die” as Stella/Corona on the light side and Craft Beer in other categories may be impacting sales.

    Heineken is growing slowly across global markets but flatlining in the US market since 2011

    Remember when Becks and Bass were popular? Harder to find now than several years ago

    *Authorities attempted a sting due to rumors of cannabis being dealt on-premises. In truth, it was being given away.

  2. Not sure what to make of this yet myself. It runs counter to what Tony has always said his goal for the brand was, however he often contradicts himself so there is nothing new about that. I appreciate their beers but something about the residual complex sugars from their high mash temperature and/or liberal use of hop extract tends to give me and many friends a disproportionate headache the next day after only a beer or two so generally I stay away. I see no reason quality will decrease as a result of this as the techniques they use are already pretty optimized to reduce price when compared to a lot of other craft breweries. Growing up in Petaluma I have seen them develop from a relatively small producer to a major force in the industry and I want to believe this isn’t a turn for the worse and like Tony says will allow greater streamlining of their distribution and also allow them to break into new markets.

  3. Steve writes:

    “Apply artisanal techniques: sur lie, pumping over, hand-punchdowns. If this can be done successfully for 500 cases of wine, it can be done for 50,000 cases — or 500,000 cases.”

    Over at Blake’s blog, he currently is running an anonymous post from a Napa Valley winery intern:

    I don’t think there are enough interns in the labor market for a winery to hire to perform hand-punchdowns on “50,000 cases — or 500,000 cases.”

    Bill writes:

    “Heineken is growing slowly across global markets but flatlining in the US market since 2011.”

    Heineken’s domestic market sales and unit volume growth are coming from its Mexican beers portfolio:

    As for Becks, look closely at its 6-bottle cardboard carton packaging. It ain’t brewed in Germany:

  4. Steve: You are spot on re size and scale. The big guys (wine, spirits and beer) can do pretty much anything. Easier for the breweries as ingredients are mostly available year round. That they don’t attests to the perceived market and volumes just as Gallo produced oceans of plonk while making an historic small batch barrel aged Cab in 1978. Is it possible that Lagunitas got into a money crunch with its rapid expansion and decided to go Dutch?

  5. Maybe these mid-sized craft beer producers are facing the same marketplace “scaling” challenges as mid-sized wineries?

    Excerpts from Wine Spectator Online
    (posted November 12, 2013):

    “West Coast Wineries Are Up for Sale — Quietly”

    (Subheadline: A wave of recent deals show investors see opportunities in wine, while owners see an exit strategy.)


    By Tim Fish

    “. . . ‘I’ve never seen more wineries for sale in California than there are today,’ [said Charles Banks, who through investment groups such as Terroir Selections purchased Santa Barbara Syrah specialist Qupé in October and Napa veteran Mayacamas Vineyards in April.] . . . Banks . . . estimates that between 30 to 50 percent of California wineries are either in financial difficulty or aren’t as profitable as they could be.”

    — AND —

    “. . . While small wineries can succeed by selling most of their inventory direct to consumers and large producers have muscle with wholesalers, those in the middle — annual production of 5,000 to 15,000 cases, for example — can’t get much attention from distributors unless the brand is hot.”

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