Better together

Opinion

5 May

Michael Donaldson looks at the benefits of consolidation
in the local brewing industry...

There’s a lot of change and consolidation happening in the New Zealand beer industry right now as economic pressures continue to put breweries under the pump.

Two major moves – DNA’s acquisition of Hop Federation, and Three Sisters buying Gisborne’s Sunshine Brewing – are a signal that New Zealand is slowly catching up with the rest of world when it comes to putting multiple brands under one umbrella.

This has been happening in America and Australia for some time, with consolidation a critical part of the landscape in those countries. It’s been tried here in the past but at a small-scale level, including Brandhouse producing both Renaissance and Funk Estate from their new base in Kaiapoi, previously home to ChinChiller, and before that the ill-fated Eagle Brewing.

And there’s opportunity for further acquisitions and mergers with two other breweries on the market, both of which offer the chance to add brands to a portfolio.

“New Zealand is slowly catching up with the rest of world when it comes to putting multiple brands under one umbrella.”

David Nicholls, co-founder of Blenheim’s DNA deliberately went for a brewery with extra capacity when he set up five years ago. Initially he wanted added space to do contract work for other breweries while he slowly built the DNA brand. But that capacity created the opportunity to buy Hop Federation when the popular Motueka-based brewery was destined for closure by previous owner Kono last September.

Nicholls sees consolidation as necessary in New Zealand. “I can see the market changing, with more mergers and acquisitions – consolidation rather than breweries just shutting up shop. I do think there’s too much stainless steel in the country and this will be a way of making things more efficient for everyone.”

There’s also huge efficiency coming for New Plymouth’s Three Sisters after their bold move to buy Sunshine Brewing. Sunshine had been on the market for about a year and, without an obvious buyer, was close to being liquidated because the owners wanted to free up capital as they eyed retirement.

Buoyed by a decent crowd-funding campaign, Three Sisters pulled off an audacious move to secure the business and they now own two breweries: a big one (2,500L) in Gisborne and a little one (600L) in New Plymouth, as well as three taprooms thanks to their recent Wellington opening.

The Gisborne brewery will be used to do large-volume core range beers for both breweries, particularly the flagship Gisborne Gold, and it allows Three Sisters to keep up with export demand, which they struggled to do in New Plymouth. They’ll do small-batch brews for both brands in New Plymouth.

There’s risk attached to this, particularly as export markets are never guaranteed, but there’s huge upside and potential to further grow the iconic Gizzy Gold brand, which is now on tap at Three Sisters brewpub in New Plymouth.

Also on the market now is Kaikōura’s Emporium Brewing. Owner-brewer Paul Finney has decided it’s time to move on after almost 10 years. The brewery is profitable thanks to the associated minigolf and escape room businesses, and there’s plenty of room to grow.

It’s perfect for a brewer who wants to go from employee to owner-operator. The built-in capacity means, for example, an incoming brewer could produce Emporium beers while they built their own brand.

It’s a similar situation in Auckland where Black Sands is for sale. The strong west Auckland brand has been a family-run business for 13 years – Ian Hebblethwaite started it and his son Craig is now running it – and it’s profitable.

They are only selling because personal circumstances changed for the family. Again, the brewery has capacity to grow having previously produced two brands (the other was Weezledog) under one roof.

So with consolidation now firmly on the local industry’s radar, the question isn’t whether more deals will happen – but who will be next to make a move.