Little Creatures future: way too early to say

Timing is everything. Last Friday I wrote a panegyric to Little Creatures for managing to both grow and maintain quality of their beer. Today, the board of Little World Beverages, which owns Little Creatures, has announced it is recommending shareholders accept an offer from Lion to purchase the almost 64 per cent of shares that it doesn’t currently own.

Has anything changed over those days? No, but it will be interesting to see what comes.

By all accounts the unsolicited offer came quickly and as a surprise. The board of Little World Beverages met over the weekend and recommended shareholders accept they offer. And why wouldn’t they? The Lion offer came at a significant premium and values the brewer at more than $380 million.

Reactions in the Twitterverse have been fairly predictable, with many lamenting the death of Little Creatures. But is it?

The short answer is: no one knows, at least not yet. Everything is speculation, but…

An instinctive reaction seems to have been that Little Creatures is no longer Australian owned. While this is true, it has to be pointed out that many of the beer lovers who point this out also enthusiastically fall upon the latest imports from US, Danish and Kiwi brewers and don’t seem to mind that these too are 100 per cent foreign-owned. If this is you and you then start to draw distinctions about who the foreign owner is, then the conversation isn’t about beer…it’s about politics. If a beer is good – and Little Creatures is good – it’s good no matter who owns it.

Which brings us to will the beer stay good? Again, time will tell. We can look to history for a guide. Lion has held a significant stake in Little Creatures since inception and, by all accounts, hasn’t sought to exert influence over the brewery’s direction. Given the success of the brand, it would be madness to change now…but madness and the corporate quest for ever-growing profits sometimes do go hand-in-hand.

In the short term, little will change. All that has happened so far is that the board has recommended the shareholders accept the offer. While that makes the takeover highly likely, nothing formally is going to happen until September or October. After then, hopefully the key team who have been involved to date will stay involved and Lion will keep up their promise to operate the brand as “distinct and individual”.

It is potentially a good outcome for beer drinkers. Little Creature’s Fremantle home, which has been regularly expanding since 2007, has grown as big as it can be in its current home and no further expansion is possible in its current footprint. The 200 hectolitre brewery is also running close to capacity. Little World Beverages purchased the 11-hectare Valley Mills site in Geelong back in 2010 to cope with its growth. This facility is designed to the same capacity as Fremantle, but with much greater room for expansion. It is due to commence production in the first quarter next year. Lion has apparently committed to see through construction of this venue. It is also worth noting that Lion has no brewing footprint in Victoria, which just adds to the value the company may see in Little World Beverages.

In the short term, thanks to Lion’s distribution reach, Little Creatures could potentially be far more readily available around the country than it is even now. It was interesting to pass through Sydney airport last week and see the bar in the Virgin terminal, clearly Lion contracted, stocking a range of the usual suspects, but also beers such as Hoegaarden and Leffe, two very welcome additions to the in transit beer selection. Lion picked these brands up from CUB in December last year and it is very interesting to see the use they are putting them to already.

The danger is that as Little Creatures outgrows existing capacity, growth that will in all likelihood be accelerated by the takeover, that it will be handled in the same way that the larger brands from James Squire have been. These have been moved to the largest facilities in the Lion ecosystem, which saw some lose complexity and character. However, the Geelong site might offer an alternate facility for the brewery’s craft brands, as well as a facility to produce Lion’s other craft brands that outgrow the Malt Shovel brewery in Sydney. Lion certainly has the resources to develop the Geelong facility to match the growth of Little Creatures, and even to use it to grow the other craft brands.

As the headline says, it’s early days and everything bar the takeover itself is speculation. The optimist will see this as a positive milestone in the growth of craft beer in Australia, with recognition by the largest brewers that craft beer has a bright future, one that they need to be involved in and one that they can use their financial muscle to further develop. The pessimist will just see it as another case of big brewers buying their competition rather than competing.

Me, I think that it is a great endorsement that craft beer has a future, one that I hope Little Creatures will continue to be a major part of while keeping its personality and style.

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