The Magic Hat “Summer Scene:” Local ownership versus business succession.

As the Magic Hat story continues to brew with an “Un-Natural Thirst” in the local Burlington scene (“Reports brew on possible sale of Magic Hat“), there are always a few lessons to keep in mind in regards to local ownership versus ownership succession.

Magic Hat

Magic Hat is yet another iconic Vermont brand that many of us have come to love and identify with. They join Ben & Jerry’s, Burton, Simon Pearce and Green Mountain Coffee, among many others, as the proud banner wavers of the “Chaotic Chemistry” of quirky, progressive and respected Vermont brands.  As with your own child, there comes a moment when they tend to grow up and make decisions that we may not fully support or understand. Only time bears out the wisdom of those choices or perhaps exposes them as the “Feast of Fools.”

While I have no knowledge of the Magic Hat deal, nor am I a “Braggot,” there is much being batted about on discussion boards and blogs this week, and it remains likely we’ll know more soon.  This much is fact; in 2008 Independent Brewers United was the parent company formed after the purchase of Seattle based Pyramid Brewers.  There was investment money involved from a “Fat Angel” in that deal, most likely supplied by Basso Capital Management. As with any investment, the partners begin to hold more sway, if not total control, over the decision making process, and thus, the company may often shift focus or direction in response to market trends and industry dynamics. Often, brand loyalists are left to believe the company has gone “Wacko” and all decisions made are being made by the “Mother Lager.”

Seventh Generation founder Jeffery Hollander once said “hell would freeze over before Seventh Generation would ever do business with Wal-Mart.” (Fast Company story by @arielhs). Business owners often need to make these statements to keep consumers on board and to insure integrity with the brand. Mr. Hollander now sits on the Wal-Mart Board of Directors and Seventh Gen is teaming up with Wal-Mart in a strategic partnership to distribute its products. In a similar vein, Alan Newman has spoken passionately about his love of the business and his desire to stay on at Magic Hat; “I could tinker with Magic Hat until I die maybe I will. I’m a good tinkerer.” (original story)  The Chief “Circus Boy” has created a distinctive craft beer brand that is also unique in the fact that it is not tied to a geographic location as many of his competitors tend to be.

At some point, all owners must answer the question, “Where is this going and how WILL I leave the business?” Some refuse to admit their mortality and remain in the business, leaving the next generation in a constant state of “Humble Patience.” If a business has experienced rapid growth, as Magic Hat has, and finds themselves in  the position of answering to investors and a Board of Directors,  the decision is not always the original owner’s or current company President.

Many other Vermont companies have already faced this ownership transition and taken a “Roxy Rolles” of the dice with new ownership. Otter Creek Brewing was sold in January to Long Trail, who is ultimately owned by a family owned private investment company. Other most notable sales include Ben & Jerry’s and their acquisition by Unilever. IDX was purchased by G.E. Healthcare, Autumn Harp remained in private ownership after a sale, and Twincraft recently left family ownership and became a publicly held company under the PC Group. While it is often difficult to “Ravell” in the sale of one of our local companies, the infusion of capital and new ideas often spells new life for the company. While the culture may often change, parent companies are aware it could be “Hocus Pocus” to mess with the products or people that attracted them to the purchase in the first place.

Understanding the motives of ownership versus the requirements of business succession often requires a prodigious degree of “Blind Faith.” Owners need to weigh their own self-interests against the long term needs of the business. As businesses experience rapid growth and face competition on a national scale, finding strategic partnerships is critical to remain viable and even be able to consider a transition of ownership. In the void of reliable information, would-be experts speculate on what is happening and make grim predictions with a “Heart of Darkness.”  Ownership is always local; it just depends on how broad your definition of local tends to be.  We continue to “Howl” for Ben & Jerry’s, much as we will for Magic Hat regardless of the outcome of this sale (or non-sale). Vermont will remain a hot bed for innovation and creative brands (see Lake Champlain Chocolates, Dealer.com or Flashbags).  Let’s not “Hex” the decision makers and instead appreciate the opportunities that await Magic Hat and other companies that face strategic challenges and succession events.

Story as covered on WCAX: http://www.wcax.com/global/video.asp?clipId=4986266&autostart=true

Story as covered on WPTZ: http://www.wptz.com/news/24443825/detail.html

10 thoughts on “The Magic Hat “Summer Scene:” Local ownership versus business succession.

  1. Interesting article (linked from Beernews.org), but wanted to let you know that Long Trail has nothing to do with Harpoon other than they both brew beer in the fine state of VT.

    Cheers!

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