A bender of craft beer mergers and acquisitions has upended the annual Top 50 Craft Brewing list compiled by Brewers Association, with four brewers removed from the 2016 list because of recent deal making.
The craft brewers that were removed from the list due to M&A activity were Lagunitas Brewing (#6 in 2015; sold 50% stake to Heineken); Ballast Point (#11, sold to Constellation Brands) and Breckenridge Brewery (#47) and Four Peaks Brewing (#49)—both sold to Anheuser-Busch InBev (BUD). To be a craft brewer, less than 25% of the brewery can be owned or controlled by a big alcohol beverage rival. The brewery must also report production of 6 million barrels of beer or less.
Because sales growth for the craft beer industry has outpaced the overall $106 billion category, Big Beer companies have responded by inking deals to buy upstart brands with the hope that better distribution and some marketing hefty can make those upstarts more nationally successful. Big Beer is buying into the craft beer trend at a time when volume has ebbed for mainstream peers, in particular for American lagers like Bud Light and Miller Lite.
But the deal-making has led to some upheaval in the craft world. When big sellers like Lagunitas and Ballast Point are acquired, their volume no longer counts as “craft,” putting pressure on the industry’s heady growth in recent years. Meanwhile, larger craft brewers like Sam Adams owner Boston Beer (SAM) are finding themselves squeezed out by Big Beer, local craft upstarts and brands like Ballast Point that are acquired by Big Beer but still retain some of their “craft” mystique for some beer lovers. All that is putting pressure on craft beer sales, up 8% in the first half of 2016 but decelerating from 2015’s 13% growth. Full 2016 results will be released later this spring.
“Some of the companies at the top of the Top 50 group are facing a tougher year than in years past,” Bart Watson, chief economist of Brewers Association told Fortune. “That reflects competition from more than 5,000 breweries but also the more aggressive moves by large brewers to enter the full-flavored space by buying brands and investing in them.”
Craft brewers have responded by making deals of their own. Dogfish Head Brewing (#14 in 2016) sold a minority stake to private-equity firm LNK Partners, while Brooklyn Brewery (#11) scored an investment from Japan conglomerate Kirin Holdings.
But perhaps even more interesting is the recent trend of mergers enacted among craft beer peers, a way to compete better on distribution at a time when competition is particularly intense for bar taps and retail shelf space. Those craft beer deals are also remaking the Top 50 rankings. For example, Pennsylvania’s Victory Brewing and New York’s Southern Tier Brewing formed an alliance last year to create a new company Artisanal Brewing Ventures. Artisanal ranked 13 last year—separately Victory was #26 and Southern Tier was #33 on the 2015 list.
They aren’t alone in bulking up and in the process, becoming more competitive in the craft world. Duvel Moortgat bought Firestone Walker in 2015 after also purchasing Kansas City’s Boulevard Brewing Co. and Cooperstown, NY-based Brewery Ommegang. Oskar Blues Brewing, meanwhile, acquired Tampa, Fla-based Cigar City Brewing last year. Duvel Moortgat’s ranking jumped from #15 in 2015 to #6, while Oskar Blues climbed to #10 from #14.
Despite all this disruption, the top five remained steady. Pennsylvania brewer D. G. Yuengling & Son led the list for the third consecutive year (it was added to the BA’s list in 2015 after the trade group expanded the definition of a U.S. craft brewer as it relates to ingredient usage). Rounding out the top five: Boston Beer, Sierra Nevada, New Belgium, and Gambrinus.
The full Top 50 List can be found here.