Constellation Brands Sells Ballast Point to Kings & Convicts Brewing

Homebrew Talk - Beer, Wine, Mead, & Cider Brewing Discussion Forum

Help Support Homebrew Talk - Beer, Wine, Mead, & Cider Brewing Discussion Forum:

TwistedGray

El Jefe Brewing Company
HBT Supporter
Joined
Sep 18, 2015
Messages
8,614
Reaction score
18,098
Location
Monterey Bay, California
Here's a copy and paste of what I just read...don't recall seeing this on the forum. Ignore if it's otherwise been posted; I can't imagine it hasn't but...?



Constellation Unloads $1 Billion Craft-Beer Acquisition Ballast Point -- Barrons.com
1:22 pm ET December 4, 2019 (Dow Jones) Print

By Mike Murphy, MarketWatch

This article originally appeared on MarketWatch, a sister publication of Barron's. We publish articles from other Dow Jones sites when we think our readers will enjoy them.

In a stunning deal that shows how much the craft-beer industry has changed in recent years, Constellation Brands (ticker: STZ) on Tuesday unloaded the Ballast Point beer brand -- which it bought for a record price in 2015 -- to a little-known Chicago-area brewer for an undisclosed sum.

Highwood, Ill.-based Kings & Convicts Brewing announced it has reached a deal with Constellation to acquire the Ballast Point brand, as well as its production facilities and brewpubs -- five in California and one in Chicago -- with the exception of a facility in Virginia that Constellation will keep. A price was not announced, though it is likely to be a significant discount from the $1 billion that Constellation spent when it acquired Ballast Point in 2015, the largest single amount ever paid for a craft-beer company.

Ballast Point was founded in San Diego in 1996 and grew to become one of the nation's largest and most respected independent brewers before its sale to Constellation, charging a premium price for its beer when few thought that craft beer could sell for that much more than mass-produced rivals.

It rapidly expanded under Constellation, but became overextended, closing three facilities in the past year, laying off workers, and canceling plans to open a brewpub in San Francisco. Ballast Point has sharply cut back production since its peak of 430,000 barrels a year in 2016, but is still expected to produce 200,000 barrels in 2019, and is distributed in 50 states and 17 countries, according to a statement.

Read more: Marijuana Drinks Are Finally Brewing at Canopy Growth

Kings & Convicts is a privately held brewer that launched in 2017 and operates a single 5,000-square-foot brewery and taproom on Chicago's North Shore, and is expected to produce just 660 barrels of beer this year, according to the Chicago Tribune. It is not well-known nationally, with only 200 Twitter followers before of the announcement, and its six beers are available only in the Chicago area and southern Wisconsin. In a statement, the brewer said it would take on all of Ballast Point's workforce -- which totals more than 500 -- and plans to use Ballast Point's distribution network to expand.

"As craft brewers, we have long admired the quality and spirit of the Ballast Point brand and team," Kings & Convicts CEO Brendan Watters said in a statement. "Our goal is to leverage Ballast Point's deep know-how, talented and passionate employee base, and outstanding operating team to grow both Ballast Point and Kings & Convicts together."

Watters, a former hotel executive, told the Chicago Tribune that the deal swims against the tide of consolidation that has swept up the craft-beer industry. "We're saying, 'Let's bring it back to independence and innovation and see what happens,' " he said.

For much of the past decade, giant brewing companies have been acquiring smaller craft brewers to capitalize on that segment's rapid growth. But craft-beer growth has slowed in recent years, and the Ballast Point deal is likely among the industry's biggest misses.

Read more: Marijuana Stock Acreage Holdings Has Slumped This Year. Why an Analyst Thinks It's Time to Buy

"Trends in the U.S. craft beer segment have shifted dramatically since our acquisition of Ballast Point," Constellation CEO Bill Newlands said in a statement. "Ballast Point remains one of the most iconic craft beer brands in the country and we're pleased to transition the business to an owner that can devote the resources needed to fuel its future success. At the same time, this decision allows Constellation to focus more fully on maximizing growth for our high-performing import portfolio and upcoming new product introductions."

Constellation has since shifted its attention to a different intoxicating substance that has provided questionable valuations to some companies: Cannabis. The company invested $4 billion in licensed Canadian cannabis producer Canopy Growth (CGC) last year and has established a majority of directors on that company's board, which dismissed co-CEO Bruce Linton in June amid unhappiness from Constellation with the company's direction.

Constellation also owns the Corona and Modello beer brands, as well as numerous wine and spirits labels. The Ballast Point deal is expected to close before the end of Constellation's 2020 fiscal year.

Constellation shares are down 1% in recent trading, at $182.71. They are up 13.6% year to date, compared with the S&P 500's 24.2% gain in 2019.

Related

Bullish on Altria, Salesforce, and a Look at Tesla's CyberTruck

Comments? Email us at [email protected]



(END) Dow Jones Newswires

December 04, 2019 13:22 ET (18:22 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.
 

Kickass

Well-Known Member
Joined
Jan 25, 2009
Messages
1,123
Reaction score
775
Location
Tehachapi
Sounds like K&C’s is diving into the deep end despite having passed on swim lessons.

They’ll likely need the expertise of the 500+ employees of BP. It’ll be interesting to watch the direction and whether or not they can retain the talent they’ve acquired in the deal.

A savvy businessman with the right approach can operate across different sectors but hotels to beer seems like a stretch.
 

bleme

Well-Known Member
Joined
Jan 24, 2012
Messages
4,936
Reaction score
3,274
Location
Visalia
That is a crazy story! You didn't get it off something like The Onion did you? I'm just trying to wrap my head around how a guy with a 2 year old 5000sf brewery comes up with that kind of capital...
 

triethylborane

Well-Known Member
Joined
Jul 1, 2010
Messages
1,124
Reaction score
500
Location
CO-HI
Sounds like K&C’s is diving into the deep end despite having passed on swim lessons.

They’ll likely need the expertise of the 500+ employees of BP. It’ll be interesting to watch the direction and whether or not they can retain the talent they’ve acquired in the deal.

A savvy businessman with the right approach can operate across different sectors but hotels to beer seems like a stretch.


To me what sticks out:

1. Constellation bought BP for a bil, which then went through decreased output/income(?), then offloaded it at a discount (aka a ****ing loss). Maybe more of the conglomerates will be offloading poorly performing assets like BP?

2. A relatively small brewery is able to make the purchase of the asset . . . so just how much was the loss to Constellation and/or how did this brewery secure BP? Either there is a staggering loss here or a huge debt being taken on in an economy that is being pumped full of notes of ever decreasing value. These craft brewing buyouts for high sums are drops in the bucket compared to the correction that is on the horizon.

3. Retain the talent? I dont think that is a huge issue. I bet most people in the craft brewing industry arent going to jump ship because their (possibly failing) business was bought by another brewery.
 

bucketnative

Well-Known Member
Joined
Apr 23, 2015
Messages
1,095
Reaction score
534
Location
Toledo
That is a crazy story! You didn't get it off something like The Onion did you? I'm just trying to wrap my head around how a guy with a 2 year old 5000sf brewery comes up with that kind of capital...
Because he's an MBA from the London Business School and Founder of Boomerang Hotels, which he sold (80+ properties in US and China). It's not like every "craft brewery" is run by a former homebrewer who is scraping pennies together to make a go of a nanobrewery.
 
Last edited:

Kickass

Well-Known Member
Joined
Jan 25, 2009
Messages
1,123
Reaction score
775
Location
Tehachapi
3. Retain the talent? I dont think that is a huge issue. I bet most people in the craft brewing industry arent going to jump ship because their (possibly failing) business was bought by another brewery.

“Jump ship”, I like it.

Sure, but at least they were being led by execs and leaders with an understanding of the environment. If the business continues to regress and there’s a loss of confidence in leadership it’s only natural that employees will pursue comfort and security if another opportunity is presented.
 

Northern_Brewer

British - apparently some US company stole my name
Joined
Aug 16, 2017
Messages
3,672
Reaction score
3,306
Location
UK
Oh it's happening alright - but the way to look at it is a group of investors who've already made one fortune in hospitality and who already have one investment in brewing/"experience" bars (K&C have virtual golf simulators in their place), have taken advantage of a conglomerate who completely misread the craft beer market and as a result overpaid, and now just want to get rid of an asset that still has some legs. Good luck to them.
 

bleme

Well-Known Member
Joined
Jan 24, 2012
Messages
4,936
Reaction score
3,274
Location
Visalia
Because he's an MBA from the London Business School and Founder of Boomerang Hotels, which he sold (80+ properties in US and China). It's not like every "craft brewery" is run by a former homebrewer who is scraping pennies together to make a go of a nanobrewery.

That's a little different than the story's "Watters, a former hotel executive". I wonder why they chose to spin it that way...
 

shetc

Well-Known Member
Joined
Jul 28, 2013
Messages
2,535
Reaction score
3,087
.
image_from_ios.jpeg
 

madscientist451

Well-Known Member
Joined
May 10, 2014
Messages
5,567
Reaction score
3,371
Location
Bedford
There's probably a recession coming soon, the economy always goes up and down. The small brewery taking over Ballast Point is most likely a front for deep pocket investors to get started in the beverage sector.
Investors are looking for places to put their money far way from the oversold stock market and beer/booze always does well in a recession.
The new investors will be looking for ways to cut costs and increase sales in a very competitive beer marketplace. My hope is we will start seeing some price competition, all the economics are pointing in that direction, but as long as consumers keep buying $12-16 six packs, I doubt that is going to happen.
I've had Ballast Point Sculpin and liked it, but around here it costs $16 a 6 pack (plus tax) and I just refuse to pay that much for beer.
 

Robert65

Major Obvious (recently promoted)
Joined
Jul 15, 2019
Messages
1,891
Reaction score
2,387
Location
Akron, Ohio
But the real question for @TwistedGray: why all of the marijuana drink ClickBait adds in the middle of the article? What have you been researching?
I assume those ads are linked to the article itself, not targeting the reader, as they refer to the venture Constellation are now pursuing in place of BP. In fact, that's a sector being eagerly expanded into by all holders of interests in the oversaturated craft beer and alcopops market, which means it will be bursting a bubble or two down the line.
 

bucketnative

Well-Known Member
Joined
Apr 23, 2015
Messages
1,095
Reaction score
534
Location
Toledo
That's a little different than the story's "Watters, a former hotel executive". I wonder why they chose to spin it that way...
I don't think Barron's spun it in any certain way. Former hotel executive is accurate. The Barron's story also didn't have a lot of the other details. This isn't a small brewery buying Ballast Point, this is a six-person investor group, which includes the chairman of The Wine Group out of CA, Richard Mahoney. The Wine Group owns Cupcake and Benziger wineries, not exactly small player.

So while the narrative of small brewery fights back against Big Beverage is charming, it's not exactly accurate:

https://www.chicagotribune.com/dini...v7biguztjam-story.html#nt=interstitial-manual
 

bleme

Well-Known Member
Joined
Jan 24, 2012
Messages
4,936
Reaction score
3,274
Location
Visalia
I don't think Barron's spun it in any certain way. Former hotel executive is accurate.
'Former hotel executive' is a lot different than 'Former owner/Founder of an 80 hotel chain'. The best spin is always still technically accurate. I think you are right that they chose to spin it as a 'David vs Goliath' story, which gives the impression that the craft beer market is crashing. It wouldn't surprise me at all if the author has some side bets on the stock market...
 

S-Met

Department of Redundancy Department.
HBT Supporter
Joined
Jan 15, 2018
Messages
4,991
Reaction score
4,994
Location
Nor Cal
OP
OP
T

TwistedGray

El Jefe Brewing Company
HBT Supporter
Joined
Sep 18, 2015
Messages
8,614
Reaction score
18,098
Location
Monterey Bay, California
My hope is we will start seeing some price competition, all the economics are pointing in that direction, but as long as consumers keep buying $12-16 six packs, I doubt that is going to happen.

Agreed! I mean look at all the people plunking down $20+ for a 4-pack of pint cans!! It's crazy, and it's one of the primary drivers that got me into homebrewing. I'm old enough to have been used to $20 buying at least two (sometimes three) six packs of craft beer (12oz bottles), but I'm also young enough to enjoy some of those over priced $6-10 16oz cans of whateveritscallednowadays.

But the real question for @TwistedGray: why all of the marijuana drink ClickBait adds in the middle of the article? What have you been researching?

My online gambling of cannabis stocks has bit me hard on the butt, so I've been sitting on Canopy Growth Corporation (a Constellation Brands company) for a while now. This popped up in that stock's news feed because they're owned by Constellation Brands.

ps: If you want to buy stock in cannabis companies, I am pretty sure for those that are going to last, it's nearly rock bottom right now (if not already there). There is money to be made now (not when I bought in), but it's a long-term gamble. If you asked me a year ago I would have told you that cannabis will never be federally legal in the US; however, I have come to the realization that it will. If Mexico continues down the path of making it recreationally legal, it will force our hand. We'd be the last major country in North America that's criminalizing it, but we really need to get a handle on this tax bullsh1t! Without cannabis tax reform, nothing will change. $70 for an 8th of cannabis is worse than $6-10 for a 160z can of beer...to-go. Meanwhile, the Federal Government's search and seizure process to continue rolling along netting them properties and essentially free access to $$$.

I assume those ads are linked to the article itself, not targeting the reader, as they refer to the venture Constellation are now pursuing in place of BP. In fact, that's a sector being eagerly expanded into by all holders of interests in the oversaturated craft beer and alcopops market, which means it will be bursting a bubble or two down the line.

They are targeting the reader...look at Constellation Brands' portfolio. Many speculated that their intention was to be able to sell cannabis-infused adult beverages in the distant future; however, for whatever reason they have given up their stake in the adult beverage market.
 

Northern_Brewer

British - apparently some US company stole my name
Joined
Aug 16, 2017
Messages
3,672
Reaction score
3,306
Location
UK
Today is the anniversary of the repeal of Prohibition...
 
Top