Friday, November 09, 2012

NOT PJ: Dunedin Born and Brewed

This week, Bernard Darnton is drinking locally, and thinking globally.

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Dunedin Born and Brewed

Emerson’s Brewery, a Dunedin icon, was sold to Lion on Tuesday and so is now part of Kirin Holdings, the Japanese brewer. (Kirin, in turn, is part of the Mitsubishi keiretsu, making it a sort of drinking-and-driving conglomerate.)

I drove down to Dunedin the day after the announcement to check that the beer was still OK. It was.

The brewery itself is still in a crappy little industrial building in North Dunedin. You can still take in your empty plastic Coke bottle and get the receptionist to fill it with Bookbinder or London Porter while you peer into the factory floor where the alcoholic alchemy takes place.

I was worried that international conglomeracy might have change the place but I didn’t see any MBAs, PowerPoint presentations, or anyone realigning the supply chain strategy going forward. Just a few people milling around while the malt and hops turned into bloody good beer.

So, is it bad that Emerson’s has been sold? Presumably Richard Emerson doesn’t think so, or he wouldn’t have done it. I can still get great beer at a mildly exorbitant price, so I’m happy too.

But economically? Every recession we’re urged to export our way back to wealth. If it’s good to export beer, surely it’s even better to export a beer-making company and get all the cash in at once.

“But all the profits will go overseas,” cry the opponents of foreign investments. Economists will come in here and compare the sale price to the net present value of the stream of future profits. But I have just one word: Crafar. If you think that the flow of profits overseas is what economic nationalists object to, then the kerfuffle over the bankrupt Crafar Farms is baffling. The objectors should have been overjoyed that some foreign mug was foolish enough to buy that dog. Think of all those lovely losses flowing in from Shanghai!

The first comment I heard about Emerson’s after it was sold was, “There goes that,” as if being part of a big corporate would somehow taint the beer. If they’re not insane, Lion will leave Emerson’s alone to do its thing. The reason corporate brewers want into the craft beer market is because rich, sophisticated drinkers like me refuse to drink the piss-weak lolly water that’s marketed at teenage boys. Why would I drink Tui “pale ale” when I could drink Emerson’s 1812?

A huge part of the purchase price for a respected brand is “goodwill”. They’re certainly not paying for the physical plant, which is not much more than an overgrown home-brew kit. When I see a beer bottle with the Emerson’s logo on it, I think happy thoughts. That’s gold. To imagine that the new owners will blandify the beer for the mass market is to imagine that big corporates know nothing about market segmentation and that they hate profits.

For many entrepreneurs, the thing they do well isn’t making products, it’s making companies. If New Zealand can get rich by making and selling butter, we can get doubly rich by making and selling companies.

The end result is that Richard Emerson has the capital to expand, Dunedin still has it’s brewery, and I still have my beer. I’ll drink to that.

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5 Comments:

Blogger Kiwiwit said...

I like your thinking. New Zealand could become an exporter of exporters!

11/09/2012 01:26:00 pm  
Anonymous Richard McGrath said...

1812 is a lovely drop.

11/09/2012 03:36:00 pm  
Blogger Mark said...

Whilst I'm not one to normally jump on the "everything corporations do is bad" band-wagon, in this case you might find it's not good for craft beer.

Firstly most corporations I've ever dealt with are sluggish and resistant to change, so whilst they may not change existing beers, I doubt you'll find them pushing lots of new beer styles. 1812 pale ale is a fine beer, but even there's only so many hoppy pale ales one can drink before you start looking for something else.

Secondly there's a good chance their accountant will want to tinker with the their cost structure to (try to) increase profit, which probably means a poorer product. This may be against their rational self interest ultimatley, but a lot of corporate accountants just focus on costs and have no clue of what's needed to actually get revenue.

Thirdly, I understand the beer corporates often do deals with pubs so that only their beer can be on tap. That's their right of course, but it means that where Emersons is on tap, you're unlikely to see other craft beers.

Fourthly, once you know it's owned by a big corporate and maybe mass produced, your whole perception of the product changes and you're unlikely to ever pay top dollar for it. Take Boundary Road for instance; fine beer, but now that I see it everywhere not something I'd ever pay $5-10 a bottle for.

11/09/2012 03:54:00 pm  
Blogger Greig said...

I've spent most of the week debating this, so it's odd to see it pop up on one of the few non beer related blogs I enjoy.

To imagine that the new owners will blandify the beer for the mass market is to imagine that big corporates know nothing about market segmentation and that they hate profits.

While I've been arguing the very same points Bernard Darnton has against the doomsayers and corporate haters, I'm afraid that historically, this point has not stood in the past. I'm not sure I can think of many examples of microbreweries being bought out where the quality of the beer has remained untouched for a long period of time.

That said, I'm not sure it needs to. We craft beer geeks are grazers. We try a new beer, and it excites us about flavour, so we seek out more beers. In the same way that wine drinkers are seldom brand loyal, nor are craft beer drinkers. Increased distribution of Emerson's will most certainly drive more people into expanding their range when it comes to beer drinking, which will lead them to other craft beers. Emerson's may yet be the best gateway beer in history! :)

So if the beer changes, I might be a little sad, but the long term result could be more craft beer drinkers, so more demand, so more great craft beer available elsewhere. Thanks Kirin!

11/10/2012 09:00:00 am  
Anonymous Mark.V. said...

Look what happened to Monteiths, once a fine beer before it was sold to Lion and then production was transferred to Auckland. I predict it will not be long before Lion's accountants decide that Emmerson's brewery in Dunedin is not big enough to handle any increase in production so they will transfer production to one of Lion's brewing factories and Emmersons will become just another mass produced product.

11/12/2012 11:38:00 am  

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