Mergers and Acquisitions

The brewing world is ripe with stories of mergers and acquisitions mostly stemming from ABInBev’s insatiable appetite for its competitors. The biggest of these recently was their consumption of SABMiller, their largest competitor. All while negotiating this mega-merger they have been actively pursuing craft breweries around the country, of which the most notable are Goose Island and Blue Point. Several other large craft breweries have been purchased by other companies, such as Ballast Point for $1 billion to Constellation Brands and Lagunitas’ merger with Heineken International. New Belgium is not immune to the merger frenzy going on in the craft brewing world with rumors swirling they were exploring sale options in December 2015. Following the successful transition to a 100% ESOP, the sale appears to be off the table with Kim Jordan vowing in August of 2016 to stay independent. Only time will tell if the employee-owned company will maintain this position and fend off the many suitors.

Strategic Alliances

The craft brewing world is a collaborative group by nature. Many began their brewing adventure as homebrewers who learned to make beer from each other, only to then take those skills to the ‘Pro’ world and make a job of it. This leads to a collaboration mindset among the brewers and New Belgium is no different. To celebrate their 25th anniversary, New Belgium gathered 5 breweries to have each produce a distinctive “Riff” on their flagship beer, Fat Tire Amber Ale. Each brewery conceived their own unique take or twist on Fat Tire and New Belgium packaged two of each in a unique collaboration 12 pack. As one of the collaborating breweries pointed out, the process involved the brewery designing the beer and then going to New Belgium’s brewhouse to brew the beer together. New Belgium took care of finishing, packaging and distributing the beer with each of the collaborators participating in the promotion of the final product. It is unclear what the financial arrangements of the collaboration was, but this appears to be a standard nonequity alliance which is very common in the craft brewing world.

Agency Problems

Frequently agency problems arise between the management teams of firms and their equity investors. Investors seek to maximize the present value of their investment which may conflict with the managers of the firm they are invested in. Managers may become risk averse or spend company capital on managerial perks, which do not add value to the corporation. New Belgium has taken a rare approach to handling agency problems by becoming 100% employee owned. Current Board Chairman and acting CEO Kim Jordan sold all of her shares to the ESOP program which makes the employees the equity owners. If the managers and employees are the holders of equity in the firm, they by default will act in their own best interest which goes a long way to preventing agency problems from arising.

In other news

Due to a surprise announcement from New Belgium CEO Christine Perich that she is stepping down after only a year on the job, co-founder and Board Chairwoman Kim Jordan will assume the daily duties of the CEO job. While it is unclear what the motivation for the sudden departure is, having the founder and past CEO available to take back over, should ensure a smooth transition for New Belgium.


New Belgium has chosen a limited corporate diversification strategy and is essentially a single-business firm focused solely on the production of beer. This is not unusual in the craft brewing market with most breweries pursuing this strategy. The one revenue stream outside of beer is brewery swag that is sold online and in their taprooms. This swag while revenue generating, is essentially a marketing tool. Because New Belgium is privately held it is difficult to gain access to their detailed financials, but it is difficult to imagine this tiny amount of t-shirts, hats, and other New Belgium branded merchandise amounts to even 5% of their sales. Instead of pursuing a diversification strategy, New Belgium continues to focus on their original plan of producing great beer while behaving as a socially conscious employee-focused company.