Japan’s Sapporo buys Anchor Brewing, so we ask: Why are American craft brands selling to foreign investors?

Remember two years ago, when Sam Adams Founder and Owner Jim Koch opined that he would probably be the last American owner of Boston Beer Co.? He was speaking at a Senate hearing about corporate tax rules. Apparently, America’s corporate tax rate is higher than other countries, which can put foreign investors in a more favorable position when looking to acquire companies in the United States, as they will keep more of their earnings. So, Koch, a craft beer billionaire was there, and had this to say:

“We don’t mind paying our taxes here in the U.S. in gratitude for the opportunities that exist in this country and that I certainly have enjoyed — but don’t mistake that for good financial decision-making. Because of our broken corporate tax system, I can honestly predict that I will likely be the last American owner of Boston Beer Company.”

Just like Koch, we see foreign beverage rollups buying American craft breweries as a continual and concerning trend. In fact, this morning, Sapporo Holdings Limited announced it will acquire all of the equity interest of Anchor Brewing Co., which is basically the grandfather brand of craft beer (founded in 1896 and purchased by Frederick Louis Maytag III in 1965). What’s the rationale here from Sappaoro’s point of view? To the press statement!

Last year, the Sapporo Group formulated the new Long-Term Management Vision “SPEED 150” through 2026, the year marking the Group’s 150th anniversary since its founding. The vision set forth in Speed 150 is for the Sapporo Group to be a company with highly unique brands in the fields of “Alcoholic Beverages,” “Food,” and “Soft Drinks” around the world. Regarding its “Promote Global Business Expansion” policy, a key driver of its group growth strategy, Sapporo Group is pushing forward a distinctive plan that designates North America its business base and the rapidly growing “Southeast Asian” region as its highest-priority markets. In the US where the SAPPORO brand has maintained its position as the No. 1 Asian beer in the country over 30 years, the Group has been considering expanding its beer business through the acquisition of a new brand as well as further growing the SAPPORO brand.

Anchor is a prominent and historic US beer producer founded in 1896 in San Francisco. “Anchor Steam Beer,” its flagship brand, is said to be an icon that ignited the current craft beer boom in the US. Armed with its strong brand power primarily in San Francisco, where it is based, as well as other areas across the US, it has been enjoyed by countless beer lovers throughout the years. The addition of Anchor’s strong brand power and network to the Sapporo Group’s US beer business portfolio through the conclusion of this agreement is expected to accelerate its speed of growth in the US.

The Sapporo-Anchor mashup is just another transaction to emerge from this increasing group of foreign investors looking to get their cut of the American beer market. Lagunitas Brewing Co. is now 100 percent owned by Heineken N.V. (finalized in 2017). Firestone Walker Brewing Co. has a joint venture with Belgium-based Duvel Moortgat (July 2014), and Founders Brewing Co.’s sold a 30 percent stake to Mahou San Miguel, the largest Spanish beer company (December 2014).

In an article written for this very site, Dorsey & Whitney LLP corporate attorney Kyle R. Leingang lists the major advantages of selling a craft brand to a foreign company:

• As shown by the Lagunitas-Heineken deal, large foreign brewing companies are increasingly considering strategic investments in U.S. craft breweries as a way to direct funds into a growing market segment and as a way to diversify their business.
• These transactions have the potential to open up international distribution opportunities for U.S. craft breweries without compromising existing production plans or disturbing U.S. distribution channels (subject, of course, to the terms of existing contracts and obtaining any required consents thereunder).
• The joint venture can be structured as a cash sale of a portion of the craft brewery’s equity (often with a post-closing contractual arrangement concerning management, distribution, etc.) or an exchange of craft brewery equity for stock in the acquiring company, depending on the legal and financial needs of the parties.
• The reaction among craft beer drinkers to these transactions has been less negative than to similar transactions involving AB InBev or MillerCoors. This allows a U.S. craft brewery to increase its resources and begin distributing to a larger audience, without sacrificing the allegiance of their core demographic.

In finale, here are some stats on Anchor Brewing Company, LLC.

Location: 1705 Mariposa Street, San Francisco, California, USA
Year founded: 1896
Representative CEO: Matt Davenport
Number of employees: 160 (as of December 2016)
Production plant: One plant (San Francisco, California state)
Sales volume: Approx. 1.75 million cases (equivalent to 355ml × 24 bottles in 2016)
Annual sales: Approx. 33 million U.S. dollars (about ¥3.7 billion in fiscal 12/2016)