October 9, 2014

Stocks Over Perks: How Stone Brewing’s Crowdfunding Campaign Points to a Future of Equity

It will soon be commonplace to purchase stock of your favorite food and beverage companies online. Stone Brewing’s recent record breaking Indiegogo campaign—and the debate it spurred—points to this future.

The pioneering brewer wrapped up a massive campaign where nearly 14,000 contributors preordered over $2.5M in beer.  The number of contributors set a new record for Indiegogo, one the leading rewards crowdfunding sites.  The wildly successful campaign has caused many to wonder whether this might become more of a trend for bigger brewers.  It won’t for two reasons: 

       1. Stone’s rewards campaign will be tough to replicate

Stone’s campaign will likely be an exception, not the rule.  The whole premise of the campaign (after an initial pivot explained below) was to provide fans with an opportunity to preorder unique collaborative beers.  Sounds amazing but the devil is in the details. As Stone made very clear upfront, U.S. contributors had very limited options of how to get their hands on the beer ordered due to the “web of scary state-by-state regulations” governing shipment of beer.  Therefore, contributors in U.S. must pick up the beer at a Stone location. This obviously makes it more challenging for a contributor from New York even with an impending Stone expansion to East Coast. This fact alone will make it difficult to replicate Stone’s Indiegogo campaign.

       2. Brewers will start responding to untapped consumer demand for stock

Stone initially framed the campaign as “crowd-participation” and an alternative means for raising capital necessary to open its new Berlin facility:

Could we have fetched more money by selling stakes of Stone to some rich suits? Sure, but then our grand vision of remaining fiercely independent would collapse.”

By preordering unique beers, Stone fans could feel as if they were participating in the opening of the Berlin facility.  This makes sense given the strong emotional connection consumers have with their food and drink. The fact remains though that rewards crowdfunding only allows for limited participation, a fact demonstrated by the criticism of Stone’s campaign as panhandling. Indeed, the panhandling criticism has been made of other established breweries using rewards crowdfunding. No matter how cool the experiences or perks offered, at the end of the day a gap still exists between producer and consumer. Only stock can completely bridge this gap.  As one commenter on BeerAdvocate noted: “If I’m going to ‘invest’ in Stone, as Koch says, I don’t want a shirt — I want shares.”

Hence Stone’s shift in focus to presales, which proved extremely popular. Imagine though the response to a Stone stock offering that turned its passionate customers into owners and advocates. All of the rewards of the Indiegogo campaign but attached to underlying equity ownership.  Not just feeling like a part of the brewery for a day but actually becoming the brewery. Ultimate participation minus the panhandling.

Regulations are slowly changing on state and federal levels to finally make it possible for Stone and other brewers to create a mini IPO experience for their fans and thereby expand in organic way that reflects their brands. Here at CraftFund, we are piloting this new democratic and participatory source of capital in Wisconsin (one of the first states to pass a state investment crowdfunding law) to show what we believe will soon become the future of investing throughout the country in response to current pent up consumer demand for stocks over perks.

 

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