Constellation Brands’ sale of Ballast Point to an investor group fronted by little-known Chicago upstart beer company Kings & Convicts Brewing Co. officially closed on Monday.
The acquisition of Ballast Point Brewing Company marks the iconic San Diego craft brewery’s return to independence and ownership by a craft brewing group that didn’t produce 1,000 barrels of beer last year blindsided and confounded industry professionals and media when it was announced in early December.
According to Kings & Convicts Brewing Co. CEO Brendan Watters, those industry insiders only had an outsider’s perspective of the Ballast Point business.
“If you’ve got a brand, if you’ve got a company that has very profitable locations that still produces north of 200,000 barrels of beer a year, that’s pretty bloody solid,” he said. “You gotta peel back and look at what’s real.”
In 2015, Constellation Brands paid $1 billion for the brand in 2015. Industry sources have pegged the sale to Kings and Convicts at around $68 million, plus several years of hop contracts.
Bad Hop Contracts
Although Watters has declined to discuss the sale price, he provided insight into the five years of hop contracts that Kings and Convicts inherited.
“Constellation signed up for these years ago, and they were absolutely what Ballast Point didn’t need,” he said. “But they’ve been renegotiated over the course of the last six months and realigned and what to what Ballast Point needs.”
As such, Watters classified Ballast Point’s hop contracts as “in good shape now.”
“It is [five years], but they are five years at the best prices that you can get,” he said. “These hop contracts are at prices that are half of what the market on a spot price would be. And so the volumes are the things that would have worried us, because we didn’t need them all. Well, the hops partners have been really good to work with because they know that we’re an independent company again, and we’re not some big company.”
Changes in Sales and Marketing
Moving forward, Ballast Point’s turnaround starts with adding a sales team, something the brand didn’t have after Constellation reorganized its sales structure in 2018. The company is about a third of its way to hiring 45 salespeople, including national chain accounts and on- and off-premise reps in San Diego.
“These are Ballast Point sales people now selling Ballast Point beer,” he said. “That hasn’t happened for years.”
Much of the new Ballast Point’s focus will be on California, which accounts for 65% of the brewery’s business, Watters said. The goal is to re-engage in its home state and home market, along with about a dozen major markets, including Chicago, New York, Boston, Philadelphia and Texas, among others.
Watters added the company will also make investments in marketing — digital, print or other mediums — to tell the Ballast Point story. A big part of that story is Ballast Point’s beer, namely flagship Sculpin IPA, which will once again be a featured brand after taking a backseat under Constellation to the overall beer brand and innovations such as Fathom IPA and BP Lager.
“Sculpin is a brand name in itself,” Watters said. “For us, it’s sales support, feet on the ground, making sure that we get Sculpin back on draft and back top of mind. But again, we still sell a lot of Sculpin. And so it’s more about making sure that it’s highlighted and really reinforced.”
Quality Over Quantity
The focus will also be on new draft releases through a new “Brewers Series.” The first beer under the new ownership group, Grinner IPA, was released on draft earlier this week.
“We will be bringing out a new beer on draft only every month to key accounts,” Watters said. “We’ve got to create that culture of being that craft brewer again. These people have already done it for so long. They just haven’t been led to flourish. So part of this is just giving them a little bit of that and then getting out of the way.”
Innovation for Ballast Point will remain in the beer space and not on alternative alcohol offerings, such as hard seltzers, Watters said.
“That’s just not us,” he added. “We’re going to focus on what Ballast Point does well.”
Watters’ projections for Year One of the new Ballast Point are modest. He believes the craft brand will produce a little less than the 200,000 barrels that the company produced under Constellation’s ownership in 2019.
“You don’t just turn this thing around,” he explained. “I would hope that after a couple years, we’re back to what they did last year, and we can start a steady growth.”
Those efforts also include re-energizing Ballast Point’s 560 employees. The key to reengaging the staff is being present, “being transparent and open” and asking questions, said Watters, who is also in the process of a permanent move to San Diego.
“You have to set the direction of the company, and you have to create that culture of being open with open communication and let them know what’s good, what’s not,” he said. “It’s not as difficult as it sounds. Being visible, being here, being engaged is exactly the only way you can do it.”
Ballast Point’s Taproom Business
As for Ballast Point’s taproom business, Watters described it as “incredibly healthy.” Watters added. As such, the company will maintain all six existing locations — five in California and one in Chicago — and the announcement of an additional yet-to-be-revealed California location is forthcoming.
“People still turn up and drink this beer, even with the negativity that came around it, and I get why they do because it’s bloody good beer,” he said.
Nevertheless, Ballast Point’s Chicago brewpub started a temporary closure earlier this week in order to refresh the look, giving it less of a West Coast vibe and more of a “Kings and Convicts rough” feel, Watters said.
“Chicago makes money,” he added. “But we want it to make more.”
The Chicago pub is expected to reopen by early April.