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Little Creatures founders gulp down $256 million deal in brewing takeover: Seven secrets of their success

Little Creatures founders gulp down $256 million deal

By Cara Waters
Tuesday, 19 June 2012

Independent brewery Little Creatures, which was started only 12 years ago by three beer enthusiasts who dreamt of creating the perfect ale, has now backed a foreign takeover offer that values the company at more than $380 million.


Last year, the Perth-based brewer reported revenue of $70 million and net profits of $9.2 million.


Little World Beverages, the owner of Little Creatures, said Japanese-owned brewing giant Lion had offered $5.30 each for all outstanding shares in LWB, a 40% premium on Little World Beverage's pre-announcement trading price of $3.79.


Lion already holds a stake of more than 36% in Little World Beverages and would need to put up $256.3 million to buy up the outstanding capital under the terms of the bid.


Little World Beverages director Howard Cearns, one of the original founders of the brewer, told SmartCompany the deal was "a great reward for shareholders".


Cearns himself is set to pocket $30.2 million from the deal while fellow founders Adrian Fini and Nic Trimboli will take home $56 million and $31.3 million each.


"This has gone further than we ever dreamed," Cearns says.


"I am not sure we even had a scale in mind when we started other than we just wanted to make a particular type of beer."


Cearns says the founders and directors are "very focused" on making the deal work for Little Creatures.


"It is just getting through this transition period. We are very keen to see Little Creatures continue to be a success and take it to another level on a national and international stage, something we couldn't do ourselves," he says.


He shared five secrets to Little Creatures' success with SmartCompany:


1. Believe in your product


The founders of Little Creatures had an unwavering belief in their product from when they started and Cearns says this has underpinned the brewer's success.


"At the start we were unsure whether it would work in Australia but we liked it, we wanted to drink it and backed it on instinct," says Cearns.


"We got out and hand sold it and it was polarising at first and probably a bit scary, but over time we flayed the hounds and it started to grow."


Cearns says it was a tough start to Little Creatures because the Australian beer market was dominated by the big brewers at the time.


"There was not a lot of diversity in what people had to drink, so it was as much an education process as a sales process," he says.


"We had one in 10 loving the beer and nine out of 10 not sure. It was something new and different and took a while to get there."


2. Experience in the industry helps


The three founders all had experience in the brewing industry before starting up Little Creatures.


"The three of us met at Matilda Bray brewing in the 80s and so we had been on that journey and then a couple of us had worked for the big brewers post that period," says Cearns.


"In 1997, we kind of got the band back together with the idea of making this particular beer and put a lot of effort into making it, then it was launched in 2000."


3. Focus on the product


Cearns attributes Little Creatures' success in part to the brewer's unwavering focus on the quality of its product.


"It has largely been about a commitment to product quality and a commitment to the style of beer we were making and then, surrounding that, there was a culture in the organisation that was down to earth, substance over style – very honest and pretty humble, I think," says Cearns.


"The difference with Little Creatures was that it did not get carried away with image or a fat marketing plan. It really tried to put all its effort into the product and hoped people would connect with that product and the values that our people had.


"It very much operated as a small business not a corporate one."


4. Take a different approach to marketing


Cearns says Little Creatures took a different approach to marketing by focusing on its product, culture and community.


"That's the irony of it – it's about managing a culture, approach and behaviour as much as using traditional marketing tools," he says.


"I won't say we didn't market the product, because we did, but we did it in ways that engaged the community. We got involved with events and contributed to the arts, cultural events; we did lots of little things."


5. Don't grow distribution too quickly


Little Creatures managed to achieve national success after starting off as a boutique Fremantle-based brewer, but Cearns cautions it is best to build distribution slowly.


"It was step-by-step and it was very measured, but there were times that we probably ran too fast," says Cearns.


"Once we got a bit of momentum we had people in remote places wanting to sell the beer, but that did not translate into consumers wanting it.


"It was quite organic, we learnt over time to put our beer in place where it would be consumed quickly so the beer was fresh and presented well. Beer as a product ages quickly."


6. People are key


Although product is important, Cearns says people are also key.


"The success of this sort of thing is a lot about the people we have had," says Cearns.


"What we have here is new ownership. But the business has really been run by a brilliant group of people without a lot of input from the founders and directors for quite some time, so the fact that we are not around every day, I don't think it is going to affect the business."


7. Build long-term relationships


Lion's move to takeover Little Creatures did not happen overnight and the relationship between Lion and the brewer has been a long time in the making.


"Lion have been on our register as a minority shareholder with one director since the early days. They were not a partner in the sense of distributing our beer or making it but they were a passive investor," says Cearns.


"So we have always had a relationship with Lion and recently they have taken that to another level."


This story first appeared on SmartCompany.


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