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With craft beer’s once double-digit growth now slowing, investment analysts like the Motley Fool are asking if Constellation Brand’s $1billion acquisition of Ballast Point in 2015 was the right play for the drinks giant.
Here’s the deal…
In the same week that Constellation Brands announced its massive $4 billion investment in Canadian marijuana grower Canopy Growth, the Beer Street Journal reported that the drinks giant had fired as much as 60% of its craft beer sales team and folded those who remained into its imported beer division.
And that speaks volumes as to where the company sees future growth…and it’s not in craft beer.
With more than 6,500 craft breweries currently operating in the US, the business has never been more competitive, with certain segments suffering more than others. Many of the biggest craft brewers are experiencing sales declines while the uber-local upstarts are seeing tremendous growth.
And Ballast Point is one of the nation’s biggest brewers, but it wasn’t always that way…
When Constellation Brands purchased the San Diego-based brewery in 2015, the industry was still showing double-digit growth. And fueled by popular beers like Sculpin IPA, Ballast Point was one of the fastest growing craft breweries in the country.
And, oh yeah, there were 2000 fewer breweries operating at that time.
Motley Fool is reporting that after Constellation acquired Ballast Point and took its distribution national, ”the parent company began identifying negative beer trends in the brand’s portfolio, leading Constellation management to write down $87 million related to Ballast Point’s trademark asset.”
Which basically was an acknowledgement on the part of the Victor, NY company that they had overvalued the West Coast brewery.
The future?
The fact that those who survived the Constellation’s craft beer sales team purge were transferred to the Import division (home to Corona, a cash cow for the company) looks like a major retrenchment move on the company’s part aimed at bolstering the organization’s strength.
And it’s not like Constellation is giving up on craft beer entirely, but clearly the company’s strategy has shifted.
In July they announced the purchase of Texas’ Four Corners, which like their other craft property Florida-based Funky Buddha, they intend to keep regional in scope and scale rather than growing the brand nationally and suffering the potential consequences that are now plaguing Ballast Point.
