Last Tuesday we got hit with the big news that an ownership group consisting of the owners of Kings and Convicts Brewing acquired Ballast Point Brewing Co. from Constellation Brands for pennies on the dollar. This was big in a number of ways.
One, it was Constellation Brands throwing in the towel on their big craft beer acquisition that they purchased in 2015 for $1 billion (which Constellation Brands admittedly overpaid for). An executive for Constellation Brands noted that they missed truly understanding the craft beer industry when making the acquisition, noting that the hyper-localization of the industry proved tough for Ballast Point to make sustained inroads.
The second being further proof of the continuing trend of mergers and acquisitions as the industry matures. Regional breweries and even some microbreweries are getting stuck in a rock and hard place as distribution has gotten harder with distributor consolidation and not having the proper scale to continue their growth trajectory. For regionals, that means needing to sell in order to grow or sustain the brand. For microbreweries, that means either retreating to a taproom focused model or needing to buy or sell in order to get the scale to make distribution a strong profit center in the business.
I don’t expect these types of deals to slow (and rumor has it that a few other breweries that Constellation Brands had acquired are on the selling block) and I expect to see more micro breweries acquire each other as well.
Time to Register for Unfiltered
Sign ups are open for our annual brewery conference, Unfiltered, on January 28, 2020 at Skeleton Key Brewery. You can sign up here. During the conference, we will be presenting our annual Benchmarking report and have guest speakers talking over taproom operations and marketing. Please reach out if you have any questions.
Market share cannot always be bought. A good analysis from the investor perspective on this deal and the markets view of the craft brewing industry, particularly highlighting the hyper-localization trend.
This is a great investigative account of how the deal came together (some clues came out about this in September) and the moves made by the Kings and Convicts owners that made this deal close.
At Lance CPA Group, we partner with craft brewery owners who embrace unconventional risk and strive for creativity. Those who lend themselves to change, remain transparent and without pretense are the breweries that thrive.