As European interest in U.S. craft beers begins to mirror the mania for them stateside, the Duvel Moortgat Brewery of Belgium announced a deal on Thursday to buy the Boulevard Brewing Co., a craft brewery in Kansas City, Mo.
The acquisition of Boulevard will give Duvel ownership of a large U.S. craft brewer that is well known in the Midwest and produces a wide variety of beers under its own name and others. Boulevard’s brands range from 80-Acre Hoppy Wheat Beer, described as citrusy with a slightly sweet flavor and light bitterness, to Dark Truth Stout, an “inky” beer with hints of chocolate, coffee and fruits.
“I see here in Europe that consumers are getting more and more interested in American craft beers,” Michel Moortgat, one of three brothers who own Duvel, said in a telephone interview from Belgium. “In the future, with this partnership, we will be able to develop the taste for those beers more substantially here and in other countries like Japan and China.”
Boulevard, the 12th-largest craft brewer in the United States, has distribution approaching 180,000 barrels this year.
The acquisition will give it access to wider distribution in the domestic market and an avenue into international markets using Duvel’s worldwide system.
John McDonald, Boulevard’s founder and owner, said he had been pondering an exit strategy for the last few years.
“I talked to several other breweries and different types of financial institutions that might be interested in partnering with us, and about three months ago I decided to go talk to Duvel,” said McDonald, who recently turned 60.
He said he liked the way his company could mesh with the Belgian brewery and the cultural alignment between the two businesses. “I was looking to give up control of my brewery, and to do that, I had to feel really good about the people I would be giving control to,” McDonald said.
The craft boom
While big beer brands like Budweiser and Coors have struggled with stagnant sales, craft beers have grown increasingly popular. New breweries opened last year at the pace of one a day. There are some 2,600 craft breweries in the U.S., and volume sales of their beers grew 11 percent in 2011 and 14 percent in 2012, according to the market research firm Technomic, reaching almost 13 million barrels.
Technomic expects similar growth this year and puts craft beer’s share of the overall beer market at 6.3 percent.
Donna Hood Crecca, senior director of the adult beverage resource group at Technomic, said the craft boom today differed from the micro-brewing craze of the early 1990s, which fizzled except for a handful of breweries like the Boston Beer Co., maker of Samuel Adams, and the Brooklyn Brewery.
“The consumer palate has evolved and is more interested in the flavor nuances and complexities inherent in craft beer styles,” Hood Crecca said. “In addition, there is the overall interest in local and handcrafted food and drink products, and craft beers fit those bills to a T, often with an interesting or unique back story and sense of authenticity.”
Consumption of craft beers is growing quickly among Hispanic consumers, whose palates favor the kinds of spice and fruit flavors that are hallmarks of craft beers.
Women, who have long preferred wine to beer, also have jumped on the bandwagon, forming craft beer-drinking groups with names like Crafty Ladies in Denver and Barley’s Angels, which has chapters around the country.
“Anytime you go to a tasting room or any bar with more than 10 taps, 30 to 40 percent of the patrons are women,” said Carol Dekkers, who started the second Barley’s Angels chapter in Tampa, Fla. “Drinking craft beer is like being introduced to really fine Italian food when you’ve only ever had pizza from Pizza Hut.”
Restaurant chains like the Cheesecake Factory and Ruby Tuesday are installing taps behind their bars, and grocers are making space in their refrigerated cases for craft beers.
“No longer does a light American lager satisfy every beer lover,” said Julia Herz, the craft beer program director at the Brewers Association, the trade group for the craft brewing industry. “Light beer sales are down, and the majority of the top 10 brands are losing market share.”
That is not to say that companies like Anheuser Busch, Molson Coors and SABMiller are absent from the fray. The Tenth and Blake Beer Co., owned by a joint venture between Molson Coors and SABMiller, produces Blue Moon and Leinenkugel’s, and the Goose Island Brewery in Chicago was bought by Anheuser Busch, owned by giant InBev, in 2011. But the major beer companies’ names are nowhere to be found on those units’ websites or on bottles of the beer they make, which has been a source of controversy in the craft beer world.
Defining a craft brewer
The Brewers Association, which has called on the beer giants to put their names on their craft beer bottles, defines a craft brewer as “small, independent and traditional.” That means, Herz said, a brewery producing 6 million or fewer barrels a year — a lower limit was dropped when Samuel Adams exceeded it — and can include partial ownership of less than 25 percent by an alcoholic beverage company that is not a craft brewer. If a brewery does not meet the trade group’s classification, it cannot be a voting member of the association.
“By traditional, we mean all malt-based, using adjuncts such as corn and rice only to enhance flavor, not to lighten it, which is how the mass domestic brewers use those grains,” she said.
Although Duvel is Belgium’s second-largest brewer after InBev, Herz said its ownership of Brewery Ommegang, a craft beer maker in Cooperstown, N.Y., had not cost Ommegang its craft status under the association rules.
Moortgat said he was somewhat concerned that Boulevard would not be considered a craft brewery by the association’s members because of its new ownership. “But first let me say that, if you look at barrels sold, InBev sells 500 times the number of barrels we do,” he said.
Duvel and its other European breweries, which include La Chouffe and De Koninck, will sell about 700,000 barrels of beer this year, he said, while Ommegang will sell about 45,000. Moortgat said sales were on track to reach around 200 million euros ($270 million) by the end of this year, up from about 180 million euros at the end of last year when the company went private, with profits increasing at roughly the same rate.
“We have made acquisitions in the past and always really, really made sure that we respect their specificity, their traditions, their authenticity,” he said. “Instead of chasing synergies and cost-efficiencies, we try to develop them along the lines they would have if we were not involved.”
He said that Duvel would continue to invest in Boulevard’s production facilities and equipment, and that Boulevard’s sales team would market Duvel’s beers in its regions while Duvel USA’s team would sell Boulevard beers on the East and West coasts of the U.S.
“One of the things we have come to realize is that American craft brewers are more creative, more daring than we are in Europe, and we don’t want to change that,” he said.
In a nod to U.S. creativity, Duvel three years ago started a fruit beer made from things like strawberries, raspberries and elderberries. The company wanted to suggest serving it over ice to make it more refreshing, Moortgat said, but was worried “that the whole industry would be shouting at us — ‘You can’t put ice cubes in beer.’”
Leifman’s Fruit Beer over ice turned out to be a hit in Europe, but what about Coconut Banana Cream Pie Ale?
“One of the things I like best about craft beer is the collaboration you get between breweries,” Dekkers said. “Like last year, a brewer from Angry Chair got together with his roommate, who brews for Cigar City, after they saw a recipe for coconut banana cream pie on a food show and brewed a coconut banana cream pie beer.”
“I don’t like dessert,” she said, “but oh, my, it was so good.”
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