Six packs of beers from Ballast Point Brewing Company, a brand formerly owned by Constellation Brands

Six packs of beers from Ballast Point Brewing Company, a brand formerly owned by Constellation Brands

Constellation Brands Loses $1B Bet on Ballast Point Brewing

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Four years after paying $1 billion for Ballast Point Brewing Company, Constellation Brands threw in the towel on its big craft bet, announcing an agreement to sell the San Diego craft beer brand along with “a number of its associated production facilities and brewpubs” to Kings & Convicts Brewing Co., a little-known Chicagoland craft brewing company.

Collection of tap handles by Ballast Point Brewing Company

Specific financial terms of the deal were not disclosed, however, Constellation said it expected the transaction to close by the end of its 2020 fiscal year.

Constellation Brands Guessed Wrong on Market

“Trends in the U.S. craft beer segment have shifted dramatically since our acquisition of Ballast Point,” Constellation Brands president and CEO Bill Newlands said in a press release.

“Ballast Point remains one of the most iconic craft beer brands in the country and we’re pleased to transition the business to an owner that can devote the resources needed to fuel its future success. At the same time, this decision allows Constellation to focus more fully on maximizing growth for our high-performing import portfolio and upcoming new product introductions, including Corona Hard Seltzer, scheduled to launch this spring.”

Expected to anchor a craft portfolio for Constellation that included the Funky Buddha Brewery and Four Corners brands, the Ballast Point brand had served as an anchor of a different kind. In April, Constellation recorded a $108 million impairment charge to Ballast Point’s trademarks, essentially admitting it overpaid for the brand. Constellation previously recorded an $87 million impairment charge to the Ballast Point trademarks in June 2017.

Earlier this year, Constellation Brands shuttered several brewpubs, including Ballast Point’s “Trade Street” sour beer and barrel-aging facility in San Diego, and a brewpub in Temecula; it also pulled the plug on plans to open a brewpub in San Francisco. The company also closed its taproom at the Daleville production facility.

During the Beer Marketer’s Insights Seminar last month, Constellation Brands CMO Jim Sabia admitted that the company’s “hypothesis was wrong” — instead of a couple of big players existing in craft, the segment turned “really local.”

Over the last two years, that trend turned against Ballast Point: Its production declined 13% in 2017 and 15% in 2018, when it brewed 320,000 barrels of beer. That was more than 100,000 barrels fewer than its 2016 peak of 430,917 barrels.

That put the brand in an orphaned position within its parent company. Constellation Brands — whose beer brands include popular Mexican import labels Modelo, Corona and Pacifico — noted that it could not devote sales and marketing resources to Ballast Point.

Kings & Convicts will acquire Ballast Point’s main production facility in Miramar, along with California-based brewpubs including Anaheim, which is inside Disneyland Resort, Long Beach, and three locations in San Diego, as well as one in Chicago.

Not included in the deal is the $48 million, 260,000 sq. ft. Daleville, Virginia-based production facility Constellation opened in June 2017.

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