How Does Harvesting through Strategic Sales Impact Local Business

A great investor founder relationship is like the environment creating perfect conditions for a harvest. Without a balance of sun and rain, a harvest will suffer but when the energy is balances all around, the harvest will prosper. A Founder and Investor’s relationships require a similar balance during the early growth of the business.

Quoted by David Amis and Howard Stevenson in Winning Angels: The 7 Fundamentals of Early Stage Investments, “Harvesting is the endgame of early-stage investments, the financial score by which you will measure your success.”

There are several different types of harvest associated with business, and some are positive while others are seen as negative. As a founder getting ready to startup a meadery in Asheviille, North Carolina, I have researched some local wineries and breweries to learn more about their startup phase and operations. During this process, one of the successful breweries in Asheville, Wicked Weed, harvested the company through a Strategic Sale.

Many regular Wicked Weed customers felt betrayed by the harvest. These regular patrons were concerned about organizational and production changes that might occur as a result of the sale to a major corporation – Anheuser Bush.  Wicked Weed patrons viewed their exit strategy as a departure from Asheviile’s “local” brewery scene.

Wicked Weed, based in the popular craft beer-soaked mecca of Asheville, North Carolina, is the 10th U.S. craft brewery to sell to Anheuser-Busch InBev since 2011. 

A Strategic Sale can include maintaining the current management team, which I believe was part of the negotiated terms between Wicked Weed and Anheuser-Bush InBev. In fact, InBev’s approach has been to partner with local craft breweries to increase the corporations high-end production of craft brews. Maintaining a local feel, by keeping the current management team in place, seems to be their strategy for succeeding in the craft brewery industry.

A strategic sale is a positive exit strategy, and the buyer is “typically and industry player that will pay value beyond what the cash flows might suggest,” as Amis and Stevenson point out on page 297. However, the customers don’t always agree with these types of strategic sales as mentioned above. In fact a Business Insider article related to the sale of Wicked Weed to InBev quotes one customer as saying, “What a bunch of sell outs. For shame,” one Instagram user commented. “Just had to go after the money and not give a damn about anything else didn’t you?”

This same article suggests that some of the local distributors might refuse to sell the beverage becasue it’s no longer seen as a local company.

However, this may impact the company on a small scale, Anheuser-Bush InBev understands the benefits of this type of purchase on future the growth of Wicked Weed.

It’s interesting to think about harvest from a corporate standpoint; especially, when many communities are focusing on supporting local companies including food grown and harvested locally. However, just as Wicked Weed’s hops are most likely purchased from other states, and its operations are supporting companies outside of the state, the company will most likely now be expanded to production and distribution worldwide.

As founders with sustainability being at the forefront of our mission, my co-founders and I have talked about how this type of strategic sale would be a difficult choice. A sale to an industry exert might help foster a balanced relationship all round, but for us there would be conflicting goals & objectives.

I think, I would prefer to sell to another company or investor that shares my passion for supporting local businesses rather than sell to a corporate conglomerate. I guess that’s why my blog is called sustainable startup.

5 Replies to “How Does Harvesting through Strategic Sales Impact Local Business”

  1. Hey Jill,

    I thought the opening of your post was great in that you got me interested from the first sentence to read further. I believe the things you said were really well said regarding harvesting. I especially likes the way that you were able to go through and identify the exit strategies and how they play a role in harvesting. Amis and Stevenson offered some great advice, you took that advice and harnessed it to deliver a strong message to your readers.

    I look forward to checking back in with your blogs and learning more!

  2. Great post Jill! I like how you highlighted the experience of Wicked Weed and their strategic sale. What may have been a great harvest for them seems to have struct a nerve with long-term supporters. I wonder what are the other terms of the deal. What if the mass production for Wicked Weed doesn’t increase the sales for Anheuser Bush like they thought it would? Can they drop Wicked Weed from production, but keep their rights to lessen competition? That would suck, but that’s what I would do if I was Anheuser. Similar to you Jill, I think I would work with an investor who has similar passions and interests. Even if I were to walk away completely, in most cases I would have to consider my loyal customer base.

  3. You made it to the last blog of the course! I enjoyed your introductory metaphor on growth and harvesting and also that you used the Wicked Weed/Anheuser case study to really demonstrate how it all looks in the real world! Great work.

  4. Jill,
    I thoroughly enjoyed your harvesting analogy pertaining to a perfect balance while explaining our final topic. Many will find that composing a team who balances one another out is very challenging. It can become very frustrating and lead some to jump the gun and add someone to the team who hurts the business more than they benefit it and its’ successes. However, patience and consistency is very important for early entrepreneurs to understand if they want to see long-term progress. I also think its great that you discussed coming up with a positive exit strategy. While one must always prepare for the worst, that must not be the only mindset of a business person. Perspective plays a big role in helping a business to succeed. Great post!

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