Heineken Buys Remaining Stake in Lagunitas

May 04, 2017

Heineken completed a deal to take full control of California-based Lagunitas, after the Dutch brewing giant was encouraged by efforts to expand the brand in a handful of international markets.

On Thursday, Heineken (hinkf) said it acquired the remaining stake in Lagunitas in a deal that has been closed. Terms of the transaction weren't made public.

The brewer bought the first 50% stake in September 2015 amid a wave of craft beer acquisitions by large brewers including Anheuser-Busch InBev (bud) and Constellation Brands (stz.b). That pace of dealmaking remains steady, as AB InBev announced the Big Beer company's 10th U.S. craft beer deal on Wednesday when it said it acquired North Carolina-based Wicked Weed Brewing.

Since that first deal occurred, Heineken has helped boost the international presence for Lagunitas, bringing the brand to new markets such as France, Italy and Spain, as well as expanding distribution in the U.K., Canada, and the Netherlands. American-based craft brands actually sell well in markets abroad, as consumers in foreign markets have become increasingly educated about diversity of ale styles and flavors for beers produced stateside by small brewers.

Founded in 1993, Lagunitas grew to become one of America's top-selling national craft brands. It was the sixth-largest craft brewer in the U.S. before the initial Heineken deal in 2015, which resulted in the brewer being removed from the Brewers Association's annual top 50 list. The trade group requires that Big Beer producers own no more than 25% of a craft brewer for it to still be considered "craft."

Big beer companies have been scooping up smaller craft rivals as that sub-segment of the $108 billion U.S. beer business has been outperforming the overall category. Consumers have expressed interest in fuller flavor beers and local brands, trends that craft brewers play up in their beer innovation and marketing. Deals like the Heineken-Lagunitas transaction can at times upset craft beer enthusiasts, though mostly, consumers don't care about the tie-ups (or aren't even aware they occurred).

Heineken said that to retain the culture at Lagunitas, it would remain a separate business entity within the broader Americas region group. Founder Tony Magee will remain active as chairman and the current management team will also stay the same. Magee will also be tapped to help Heineken develop the company's global and local craft strategy. While AB InBev and Molson Coors have both inked a handful of craft deals, Heineken and Corona owner Constellation Brands have each only done one. (Constellation bought Ballast Point.) Most observers expect more craft beer M&A will occur in the years to come.

"Over the last 19 months, we've had the privilege of getting to know the Lagunitas team and learning from each other's experiences," Heineken said in a statement. "We will continue to find even more ways to collaborate with their team where it makes sense."

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