Tuesday, October 22, 2013

Six Reasons to Toast Duvel's Purchase of Boulevard Brewing Company

It's been less than one week since the big announcement that Boulevard Brewing Company was being sold to Belgian brewer Duvel Moortgat (the first part is pronounced DOO-Vell, in conversation I suggest just dropping that second bit). Much of the on-line reaction that immediately followed the news was decidedly negative with Facebook and Twitter flaring up with cries of "Sellout!", "You can't do this!", and varying versions of, "I'll never drink Boulevard again!". No one should be surprised by the knee-jerk reactions and the ensuing hyperbole. After all it's like your best friend walks into the room and announces, "Guess what? I'm getting married!" and you're all like, "Wut? I didn't even know you were dating!" But you know what? I think everything is going to be A-OK. I'm an optimist at heart anyway but having given the whole thing a lot of thought here are the reasons that I think everyone in Kansas City should embrace John McDonald's decision to sell his beloved brewery:

Full disclosure of ignorance: I do not know nor have I ever met Boulevard founder 
John McDonald. I doubt I'd recognize him if we were in the same room together. My 
comments below on Boulevard's valuation, his motivation, and future plans are 
nothing but speculation on my part.

  1. There's A Lot of Money Coming to KC
    We'll probably never know the full financial details of the transaction but just for laughs and simplicity let's assume that Duvel is paying $100 Million for Boulevard. Uncle Sam and the Great State of Missouri will wind up with about 28% of that sum (where it will subsequently evaporate into the ether) leaving $72 Million in the hands of Boulevard's owners. This is a significant cash infusion into our local economy from a true outside source. Unless they put the money under a mattress it will find it's way throughout the area in the form of investment, asset purchases, philanthropy, and new business ventures.

    Some will argue that Boulevard's owners could have made the same or similar investments with their annual profits going forward. True enough, but by selling the company they are able to realize those profits today. You see, the price Duvel pays to buy the brand and brewery is based less on what it's already done and much more on Boulevard's future profit potential.
  2. Boulevard Will Stay Local 
    As I understand it, 50% of Boulevard's sales come from within 50 miles of the brewery. Duvel has no financial interest in moving production elsewhere. Beer has to be shipped to customers (sadly we still can't send beer as a digital file but not for lack of trying on my part) and most of those customers are right here in KC.

    In addition to market proximity, Boulevard contains a great deal of state-of-the-art production equipment. Possible to move elsewhere? Sure. Likely? No.
  3. This Sale Will Inject Vitality Into the Local Craft Beer Market
    Oversimplifying this, there are two types of people that are likely to start a craft brewery to compete with Boulevard:

    ~ Entrepreneurs that hope to build and grow a quality brand and make a lot of money
    ~ Artisans that eschew money and the trappings of success and just want to make good beer

    Both should be emboldened by this sale. The former will see that there are big dollars in play in the craft brew market and have a financial incentive to give it a go. The latter will see Duvel as a corporate poser and use the opening to do some really innovative things with their own hand crafted brews. Bring it!
  4. Boulevard Will Still Make Great Beer
    There are well over 2500 craft breweries in the US. Some are not too far from KC. Duvel cannot afford to let quality or innovation slip - even a little. Beer drinkers have too many choices and will punish slackers by spending their drinking dollars elsewhere.
  5. Boulevard Was Getting Too Big To Stay Small
    According to the New York Times, a beer maker is considered a craft brewer if it produces six million barrels or fewer a year. Boulevard ranks 12th at 173,793 barrels and is just a stone's throw from being well inside the top 10 (though they are far from catching #1 craft brewer Boston Beer and their 2,125,00 barrels of annual output). Anyway, with growth and sheer size comes baggage. So many things become harder: purchasing consistently high quality ingredients, maintaining quality control, efficient nationwide distribution, managing many, many employees, etc... None of this is impossible but it gets easier when the reins are given (sold) to an organization like Duvel. Founders of successful companies that want the business to continue on its path of success often find themselves lacking the skills, passion and/or experience to do it effectively. Like sending your child off to college there comes a time to let them go and thrive under the foundation you provided but with the ideas and experience of others.
  6. This Guy Earned It
    The headlines should read, "Local Man Works Hard, Builds Brand, Makes Fortune". Who can't get behind that? It's certainly one version of The American Dream. Once a person has achieved success it's easy to forget the personal and financial risks that were necessary along the way. Not to mention what were certainly ridiculously long hours, weeks, and months in the early years.

    Founder and majority owner John McDonald has stated that he isn't actually going anywhere. He will retain some ownership and hold a seat on the board of Duvel. It's not my place to say but I suspect he's not done doing good things for Boulevard, its customers, and for Kansas City.


  1. Thanks for articulating some solid reasons to applaud this move. I'm not much of a beer drinker, but I love Boulevard's original owner for bringing Ripple to this town at a large $cost, recycling glass for fiberglass insulation and countertops.

  2. I'm not against a person building a company, putting it up for sale, and getting a nice BIG profit for all of his hard work. I applaud him. What I have a problem with is overlooking many, many American investors/buyers who would have loved to have bought the brewery. Thus keeping all future profits in the United States of America not the United States of Europe.

    1. Michael, I've seen similar comments from you on other sites and I see your point, but you've got not idea who McDonald talked to or didn't talk to in doing his due diligence. We do know he talked to Tenth & Blake (MillerCoors' craft beer division). Personally, I'd much rather have them owned by Duvel than MillerCoors. There might truly have been no better option that would secure the future of the brewery here in KC, still making beer the way McDonald wants to.

    2. Michael - I hear you and understand your opinion. The real economic engine for the community (and the US for that matter) is the money made by direct employees and the value stream related to suppliers, shippers, contractors, etc... The best part about it being a foreign investor is that it's "new" money into the US economy, not "recycled' as would be the case with a US purchaser.