If somebody told you that you could do everything you’re doing now, gave you massive financial backing to do it, and paid you ONE BILLION DOLLARS to do it, would you do it?
Sorry, that’s not the question I meant to ask. I meant to ask “How long would it take you to force the words “bloody yes” out of your mouth among all the choking and spluttering?
The latest brewery to apparently “fall” to the macro-brewing corporations is Ballast Point of San Diego. It is quite a fall from grace, in as much as every $1 billion windfall is.
That’s about 15x the company’s earnings.
So what changes?
Hopefully, nothing at all. Best case scenario, the new owners recognise that the business is already profitable and growing and they can simply sit back and relax. Maybe they provide some opportunities that will help the company grow further – access to cheaper materials through the economy of scale, a larger distribution network (the area new owner Constellation Brands specialises in). The best of both worlds.
At worst, Ballast Point could suffer from a drop in quality, which is what they have built their reputation on. Streamlining and corner cutting are very close together – where the decision falls could prove make or break.
However, like most of these corporate “if-you-can’t-beat-them-buy-them” deals, the same structure – brewing and management – will stay in place. They should retain a big say in operations, so it looks as though the former is the most accurate. How long that remains true is yet to be seen.
Why does it matter?
On it’s own, it doesn’t really matter all that much. Constellation Brands (who made their fortune selling Robert Mondavi Wines and Corona and Modelo in the US), will get all the profits, which they will no doubt reinvest in the business with the aim of growing it to be their key player in the Second Beer Wars – the battle to gain a slice of the only segment of the beer industry that is still growing: craft.
The Ballast Point acquisition shows that the trend of large corporations buying regional craft breweries is not slowing down. The value of these companies is extraordinarily high and those with the cash are very eager to pay huge sums of money to get a slice of the action.
Just a final thought though: Constellation Brands shares close ties with AB InBev. What could that mean in the future, with the brewing giant gobbling up its closest rival this month?