Beer Man

Brooklyn Brewery Takes Minority Stake in Funkwerks, Will Team Up on Distribution

Funkwerks, Brooklyn Brewery and 21st Amendment form a partnership.
Funkwerks, Brooklyn Brewery and 21st Amendment form a partnership. The Brooklyn Brewery
As pressure builds on craft breweries across the country, some are taking unusual steps to keep themselves competitive and avoid selling out to large beverage companies like Anheuser-Busch InBev and Heineken.

On Tuesday, July 25, the Brooklyn Brewery, the nation's eleventh largest independent beer maker, announced that it had taken a minority financial stake in both Funkwerks Brewing in Fort Collins and 21st Amendment Brewery in northern California's Bay Area and would begin sharing sales and distribution operations with the two breweries beginning January 1, 2018.

"This is a way for us to stay independent and continue to grow," says Brad Lincoln, who founded Funkwerks in 2011 with Gordon Schuck. "It's a unique platform."

Lincoln wouldn't disclose the terms of Brooklyn Brewery's investment, but says it is less than 50 percent. "Gordon and I still maintain control," he says, adding "It really feels right to me."

The combined sales group will now include seventy sales staffers and ninety brand ambassadors in the 38 states where the three breweries currently distribute (Funkwerks currently covers seven states) and it will enable the breweries to offer beers from all three companies to bars, liquor stores and restaurants as a package — something that AB InBev does on a regular basis with the eleven formerly independent breweries that it now owns.

"The idea is that it makes it a lot easier to talk to distributors and to get attention, so we can offer the same kind of thing as AB InBev, but from an independent point of view," Lincoln says. And that's just the beginning: the group will look to add more brewers to the mix in the near future, Brooklyn Brewery writes on its web site.

"We have been approached by other players" about selling out, Lincoln says. "I can't say who they are. But being approached was one of the things that made Gordon and I say, 'If they don't buy us, then they might buy our competitor, and then they will control control the relationship with the distributors and we will lose.'"

And AB InBev isn't the only large corporation that is putting pressure on craft breweries. MolsonCoors also owns several formerly independent breweries, while Heineken, which bought California craft brewing powerhouse, Lagunitas, in 2015, announced a twenty percent ownership stake in Michigan's Short's Brewing just today.

click to enlarge Funkwerks primarily makes saisons. - FUNKWERKS
Funkwerks primarily makes saisons.
“American craft brewers need to stick together and find new ways to meet the challenges of the 21st century marketplace,” Brooklyn Brewery founder Steve Hindy said in that same blog post on the company's web site. “We are excited to work with 21st Amendment and Funkwerks to ensure the spirit of independence that built the craft beer revolution continues to lead that revolution.”

While Brooklyn is one of the largest craft brewers in the nation, at eleventh on the list, and 21st Amendment is the 31st largest, Funkwerks is tiny in comparison, having brewed just 5,700 barrels of beer last year. But Lincoln and Dave Duffy, the vice president of business development for Brooklyn, have known each other for years.

"We talked with him a lot. That is certainly a big part of how this came personal relationship with him," Lincoln says. Duffy will lead the new sales group and said in the Brooklyn announcement that “The three breweries and sales teams really fit together well. We’re aligned where we need to be, complementary where we need to be, and have a lot of domestic and international territory to grow into together."

But Funkwerks doesn't plan to significantly ramp up production. "This is not a situation where we need to be changing tomorrow. We are not going to cover all 38 states, that is not the plan," Lincoln says. "We grew 100 percent two year ago and 70 percent last year and I want to avoid doing that again if I can. Will we add fermenters? Probably, but we were already planning that. We are not looking to build a shiny new facility."

Rather, Funkwerks will be looking to learn from Brooklyn and pick up some sales while offering the other two breweries its niche beers, primarily Belgian-style saisons that don't overlap much with the other brands.

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Jonathan Shikes is a Denver native who writes about business and beer for Westword.
Contact: Jonathan Shikes