Lagunitas deal shows big potential for US craft beer worldwide: Mintel

By Hal Conick contact

- Last updated on GMT

Is Lagunitas poised to grow into a worldwide, craft beer superstar?
Is Lagunitas poised to grow into a worldwide, craft beer superstar?
There’s still room for newly minted superstars in the worldwide craft beer industry, one Mintel analyst says.

Last week's deal between Heineken Brewing Company and Lagunitas Brewing Company saw Heineken buy a 50% stake in Lagunitas to help distribute and sell the US-based craft beer brand globally.

It's a move that will enable Lagunitas to capitalise on a global thirst for US craft beer, helping it on its race to the top, Jonny Forsyth, global drinks analyst at Mintel, told BeverageDaily.

“There’s this huge demand, and it's growing quickly, for American craft beer. It is seen as the best, as [American breweries have been] doing it for 20 years,”​ Forsyth said.

Ramping up business

Lagunitas’ story​ has been one of growth, as it started as a small brewery in California, grew larger, opened in Chicago and is now trying to spread its wings for worldwide distribution via the new Heineken deal.

“I think it’s a quite unique case,”​ Forsyth said. “I think they’ve been really surprised how much demand there is in foreign markets for a US craft beer.”

Forsyth said Lagunitas has likely taken cues from breweries such as the US-based Sierra Nevada, Brooklyn Beer and Goose Island, as well as UK-based BrewDog, all of which have started to see more global distribution.

Growing large, staying craft

While this deal will certainly see Lagunitas grow much larger, brewery founder Tony Magee was quick to call out critics and stomp out potential backlash in an in-depth post on BeerAdvocate​.

Although distribution will grow larger for the company, he promises the company will stay in control of the beer creation and stay a true craft brewery.

“What this represents for us is the construction of a stairway to the sky,”​ he wrote, posting under the screen name DogTown. “In the US and elsewhere we will continue to be as completely independent, as we are now, because even they are inspired by what we American craft brewers are doing with beer.

"Internationally we will have our own Lagunitas people working alongside Heineken’s distribution channels because they believe that the vibe of US craft can change things everywhere.”

Forsyth named losing core fans as the only possible downside of Lagunitas growing larger. However, he said this may not be a big issue, citing a 2013 UK Mintel report that showed 40% said they’d drink a craft beer from a major brewer, 41% neither agreed nor disagreed and 19% said they would not.

“I slightly worry that in being so ambitious in their claims they are going to lose some brand equity,” ​Forsyth said. “But consumers, by and large, don’t really mind. But if you look at Sam Adams for instance, their CEO has recently been saying ‘Look, Sam Adams isn’t cool anymore cause we’re too big and I don’t think that’s fair. We still make really good beer.’”

“Being so nakedly ambitious about being the biggest [craft brewer] in the world, that’s my only concern for Lagunitas. They’re going to get off that craft runway. They won’t be received as properly craft anymore.”

Worldwide growth potential

In the end, losing a few hardline fans certainly will not hurt the company’s bottom line. Craft beer doubled from 2013 to 2014 in the US and has potential to grow again. It took 11% of the beer market 2014, according to the Brewers Association, and Forsyth believes it could go up to 25% in the near future.  

How much growth Lagunitas and other craft breweries can experience is the big question, Forsyth said.

“The rest of the world, craft beer is only 1% to 2% of the market, so it’s really behind,”​ he said. “There’s loads more potential in Brazil, Norway and other countries. There’s more attention on craft beer now with potential for growth. Only in the last few years has it taken off outside of America, in places like UK and Sweden. It’s literally only been in the last two years that it has really taken far in those markets.”

Canada is the biggest importer of US craft beer, with Sweden second and the UK third, Forsyth said, but the rest of the market across the world is open for the taking.

“Craft beer is becoming a global thing, it really is,”​ he said. “Look at different markets, like China, Argentina, Chile, Brazil, Mexico; they’re all crazy about craft beer. It’s growing everywhere, every single market, apart from Africa and the Middle East.”

“There’s definitely an opportunity for two or three absolute stars, but they have to act quickly and have a distribution network. I think [Lagunitas has] been quite clever and has seen the future.”

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