One day after the conclusion of San Diego Beer Week, locals Ballast Point Brewing & Spirits announced its acquisition by Constellation Brands. The makers of Corona and Modelo are looking to seal the deal by the end of the year with an approximately $1 billion price tag. Constellation Brands is the third largest brewer/importer in the U.S. by quite a margin.
This comes on the heels of an IPO filing by Ballast Point (BP) last month, with some commenting that this equated to a large “for sale” sign. They are the second San Diego beer producer to be acquired by a larger brewery within the last few months; Saint Archer recently teamed up with MillerCoors. In response, the San Diego Brewers Guild recently revoked Saint Archer’s membership. Calls to guild reps regarding what today’s news means for BP were not immediately returned.
“We’re going to be a stand alone company. The entire team is staying intact,” said Earl Kight, BP’s Chief Commercial Officer, in a phone call to West Coaster Monday morning. “We kept our options open during the IPO process and kept taking meetings. Everything we do is based on relationships, and we really hit it off with the Constellation folks.” Ballast Point’s beer is distributed in many markets by the Reyes Beverage Group, which also distributes Modelo and other Constellation beers. “The distribution lined up really well,” Kight added. BP currently distributes its beer in more than 30 states.
“We started this business nearly 20 years ago with a vision to produce great beer that consumers love and to do it the right way,” said Jack White, founder of Ballast Point Brewing & Spirits, in a press release. “To achieve that vision, we needed to find the right partner. The team at Constellation shares our values, entrepreneurial spirit and passion for beer, and has a proven track record of helping successful premium brands reach the next level of growth and scale.”
No direct mentions were made of the company’s spirits side in that press release. Brewbound confirmed that Constellation “bought access to the Ballast Point spirits trademark,” but that individual brands like Fugu Vodka now fall under the ownership of Yuseff Cherney and Jack White.
As expected, social media reaction has been lively this morning. A comment on the company’s Facebook page said, “Hopefully you are not forced to change recipes…” to which Ballast Point responded, “Never”. Kight elaborated in our phone call: “They [Constellation] are not going to send in new brewers, and we aren’t going to be changing any of the recipes.”
Other consumers on Facebook and Twitter congratulated BP, but worries remain that even larger distribution muscle and supply buying power will negatively affect other local brands. Per Brewers Association definitions, Ballast Point will no longer be a craft brewery once the deal goes through — a strange twist for a company whose tagline is “Dedicated to the Craft”.
Corrected information about Ballast Point Spirits; Constellation Brands did buy access to that trademark. Read the full press release below:
VICTOR, N.Y. and SAN DIEGO, Calif., Nov. 16, 2015 – Constellation Brands (NYSE: STZ and STZ.B), a leading beverage alcohol company, today announced an agreement to acquire San Diego-based Ballast Point Brewing & Spirits. Ballast Point is one of the fastest growing craft beer companies in the U.S. with a beer portfolio that includes more than 40 different styles of beer, led by its popular Sculpin IPA and Grapefruit Sculpin IPA. The partnership with Ballast Point provides a high-growth premium platform that will enable Constellation to compete in the fast-growing craft beer segment, further strengthening its position in the highest end of the U.S. beer market.
Ballast Point started in 1996 as a small group of home brewers and remains dedicated to the art of making better quality craft beer. Ballast Point will continue to operate as a stand-alone company with its existing management team and employees running the day-to-day operations. The company is one of the most successful and respected craft beer companies in the country, with an expertise in brewing the most premium, highest quality award winning products, and a grassroots approach to innovation that engages beer lovers and home brewers in the process. The Ballast Point team will continue to build on its successful expansion across the U.S., and will now have access to Constellation’s strong financial position and willingness to invest in growth.
“We started this business nearly 20 years ago with a vision to produce great beer that consumers love and to do it the right way,” said Jack White, founder of Ballast Point Brewing & Spirits. “To achieve that vision, we needed to find the right partner. The team at Constellation shares our values, entrepreneurial spirit and passion for beer, and has a proven track record of helping successful premium brands reach the next level of growth and scale.”
“We believe in the vision that Jack and his team have created and we’re excited to welcome Ballast Point, one of the most respected craft brewers in the country, to the Constellation Brands family,” said Rob Sands, chief executive officer, Constellation Brands. “Along with imports, craft beer is a key driver of growth and premiumization within the beer industry, with craft doubling its share of the U.S. beer market in the last five years. Ballast Point has certainly been a key driver of that growth. Their business philosophy and entrepreneurial spirit perfectly align with our culture and we look forward to strengthening our position in the high-end beer segment with what is arguably the most premium major brand in the entire craft beer business.”
Ballast Point is on pace to sell nearly 4 million cases in calendar 2015, which would represent growth of more than 100 percent versus calendar 2014. Net sales for calendar 2015 are expected to approximate $115 million. Volume and net sales growth from calendar 2012 to calendar 2014 averaged over 80 percent. Ballast Point employs more than 500 employees, produces beer in four facilities in the San Diego, CA area, and sells its beer in over 30 states.
Constellation Brands plans to purchase Ballast Point Brewing & Spirits for approximately $1 billion. The purchase price values the acquisition multiple of the projected calendar 2016 Ballast Point EBITDA in the mid-to-high teens range. Constellation estimates that on a comparable basis (1), the acquisition is expected to be neutral to diluted earnings per share for fiscal 2016 and $0.05 to $0.06 accretive for fiscal 2017. The transaction will be financed with cash and debt, and is expected to close by the end of calendar year 2015, subject to customary closing conditions.
(1) Comparable basis excludes transaction and other acquisition-related costs.
About Constellation Brands
Constellation Brands (NYSE: STZ and STZ.B) is a leading international producer and marketer of beer, wine and spirits with operations in the U.S., Canada, Mexico, New Zealand and Italy. In 2014, Constellation was one of the top performing stocks in the S&P 500 Consumer Staples Index. Constellation is the number three beer company in the U.S. with high-end, iconic imported brands including Corona Extra, Corona Light, Modelo Especial, Negra Modelo and Pacifico. Constellation is also the world’s leader in premium wine, selling great brands that people love including Robert Mondavi, Clos du Bois, Kim Crawford, Rex Goliath, Mark West, Franciscan Estate, Ruffino and Jackson-Triggs. The company’s premium spirits brands include SVEDKA Vodka and Black Velvet Canadian Whisky.
Based in Victor, N.Y., the company believes that industry leadership involves a commitment to brand-building, our trade partners, the environment, our investors and to consumers around the world who choose our products when celebrating big moments or enjoying quiet ones. Founded in 1945, Constellation has grown to become a significant player in the beverage alcohol industry with more than 100 brands in its portfolio, sales in approximately 100 countries, about 40 facilities and approximately 7,700 talented employees. We express our company vision: to elevate life with every glass raised. To learn more, visit www.cbrands.com.
About Ballast Point
What started in 1996 as a small group of home brewers who simply wanted to make great beer evolved into a team of adventurers known today as Ballast Point. From bringing a hoppy twist to a porter, or adding four types of malt to its amber ale, to creating a breakthrough gold medal winning IPA, the San Diego-based company is known for adding its own touch and asking if there’s a better way. Today as an internationally recognized leader in the craft brewing and spirits industry, the company makes over 40 styles of beer.
Forward-Looking Statements
This news release contains forward-looking statements. All statements other than statements of historical fact are forward-looking statements. The word “expect” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These statements may relate to business strategy, future operations, prospects, plans and objectives of management, as well as information concerning expected actions of third parties. All forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those set forth in, or implied by, such forward-looking statements. The forward-looking statements are based on management’s current expectations should not be construed in any manner as a guarantee that such results will in fact occur or will occur on the timetable contemplated hereby. The transaction between Constellation Brands and Ballast Point Brewing & Spirits is subject to the satisfaction of certain closing conditions, including receipt of any necessary regulatory approvals. There can be no assurance that any transaction between Constellation Brands and Ballast Point Brewing & Spirits will occur or will occur on the timetable contemplated hereby. All forward-looking statements speak only as of the date of this news release and Constellation Brands undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
In addition to the risks and uncertainties of ordinary business operations, the forward-looking statements contained in this news release are subject to other risks and uncertainties, including completion of the announced transaction; the accuracy of all projections; the ability to achieve volume and net sales growth estimates and the benefits of the transaction may vary due to different financial results from those anticipated and the timeframe in which achieved will depend on actual financial performance; and other factors and uncertainties disclosed from time-to-time in Constellation Brands, Inc.’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended February 28, 2015, which could cause future performance to differ from current expectations.
Ron says
Cheers to the entrepreneurs who realized a well-deserved payday after 20 years of quality work. And cheers to one of the companies that inspired a beer revolution in San Diego.
These guys never got into this thinking of a billion dollar pay day down the road. They wanted to make great beer and share it, and work doing what they loved. They were so good at it that they reached the point they are at today. The beer so many of us love will now get to be shared by a lot more people (it would certainly seem).
Want to keep your money local?-there is no shortage of great options. Although plenty of local folks will still benefit from your BP spent dollars. Quality drops after the acquisition?-, bummer, but again, no shortage of other locals vying for your beer bucks with ever growing options.
Most of us turned to craft/micro/indie beer not because we hated big beer companies, but because we disliked BIG BEER and the options (or lack thereof) they provided. Craft brewers met our need and showed us what else was possible. Now the gospel of quality and taste has spread far enough that BIG BEER has had to take notice and respond. This should be celebrated unless we want to keep quality beer to ourselves.
I worry a little about the consolidation of options at the supermarket as Big Beer works to improve their bottom line, but our indie bottle shops, etc. will still have an eager clientele.
Did BP sell out? By definition, yes. But that doesn’t mean that great beer will cease to flow from their taps. Or that the community should disown them.
Personally, I’m hoping for a six-pack of grapefruit Sculpin to come down in price a couple of bucks for my once a month purchase in the warm months. Other than this, its all good.
BTL says
I was initially sad about this, but I’ve had a night to reflect. These guys started as home brewers, but with their current size and growth the actual brewing part of their business has to be totally overshadowed by needs for financing, the opening distribution channels, and ever expanding the plumbing and canning and bottling lines…..all quite far from home brewing and developing a recipe for the next “Sculpin” . How many times in the last 6 months have tractor trailers unloaded more and more stainless steel towers in Miramar. Could their current facility even handle another years growth? I wonder if the cash from the IPO would have lasted very long as they continue to double in size every year.
Constellation takes a lot of the burden off them and potentially could “turn on” the world to San Diego style IPAs, something B.P. would have been hard pressed to do. Constellation distributes high lines of wines and spirits. There is no higher line of beer than Ballast Point. To enable growth, if you are forced to commit the sin of being bought out, these might be the best guys to team up with. At least bottles of Sculpin will not be sharing a delivery truck with a mega-swill (or Goose Island).
Mike V says
I love Ballast Point and their beer. In the big picture, I’m really only concerned with their 500 local employees. We have 100 breweries in the county - there will be no lack of good beer to choose from if for some reason the new company changes the way things are done..
I’ve talked at length with employees of BP in visits to their locations and I have come away with the following -
They love to work there, they have great benefits, like the pay, they like the guy that started the company and are extremely proud and passionate about their product.
I hope to hell that they feel the same way a year from now, but I’m not going to hold my breath. In these kinds of transactions, the buyer first looks for ways to increase revenue and the easiest thing to do is extract it buy cutting costs - via lay offs or cutting benefits, regardless if the company is profitable or not, which clearly it is.
My thoughts are with the folks that actually do the good work there.
Mike V says
Should say “extract it *by* cutting costs”, of course..
Matt says
This breaks my heart a little bit. I used to feel such joy going to Home Brew Mart and coming home with a growler fill.
The good news is that for every one of these there are ten other little breweries made by little brewers who are taking that baton themselves. Support your neighborhood brewer (until they are no longer your neighborhood brewer)!
thelpv says
I admit im wary on giving up on ballast point. they have a solid lineup. That being said, and as the other comment said, as long as they dont change, ill be ok.
At least Bud didnt buy them.
And on that note…
Ill continue to buy golden road’s gingerbread stout but forget the others in their lineup. Better breweries out there, IMHO. I do expect golden road to get worse under bud.
But dont take this as a ringing endorsement for these guys. Corona still SUCKS. Get that chemical tasting crap out of my face.
Beerses says
A legend falls.
Anyone who buys the “everything will stay the same” bit is delusional. Ballast no longer owns the company, they don’t get to make the rules. Constellation paid $1b and has 100% ownership, they have all the say. ROI is all that matters now. Dedicated to the Cash.
Ballast Point 1996-2015
Next up, Green Flash (dragging Alpine down with them).
VeRn says
I refuse to give up on Grapefruit Sculpin! I will take them at their word, they insist that the products will maintain their quality! I will continue to buy Ballast Point, Saint Archer and Golden Road as long as the quality remains the same. But if they lose the quality, they will lose us all!!!
Raz says
Podcast says Abev owns Constelation. I thought the same until I looked up Inbev on Wikipedia. In one of their mergers Inbev had anti-trust problems in the U.S. They weren’t allowed to sell Modelo products in the U.S. and were forced to sell all US rights (and a Mexican brewery) to Constelation.