Ballast Point and The New Era of Craft Beer
I was at Dock Street Brewing last weekend with some friends, enjoying a local Philadelphia, small batch Rye IPA. The topic came up of craft brew mergers and acquisitions, more specifically, the giants of the beer world gobbling up revered craft brew brands like peanuts at a baseball game.
The big news in the last few weeks was Anheuser-Busch InBev, the world’s largest brewer, offering over $100 billion for the purchase of SABMiller Plc, the world’s second largest brewer. Pending a regulatory approval of the deal, it would leave us with one massive beer company controlling essentially a third of the world beer market.
Adding to the fear and confusion, this past week we learned that Constellation Brands Inc., the owner of Mexico’s Corona and Modelo brands, is set to buy San Diego-based craft beer titan Ballast Point Brewing & Spirits for nearly $1 billion!
Where does it end? What does it all mean? It's simpler than you might think.
Consumers, in general, care about the quality, consistency, and availability of the products we love. Ballast Point drinkers are worried that with this acquisition, these three consumer comforts might go away. But I’m here to tell you that it’s probably not going to happen.
Constellation Brands Inc. is a publicly traded company. And yes, above all else, they’re in the business of making money. Their brands have been performing well above industry norms over the past few years, and they're set to fortify their position in the market with anything in their toolkit, including corporate M&A activity. But guess what makes them money -- people drinking their beers. That sounds cold (and it is), but as the craft beer market expands like never before, larger beer makers are looking for any way possible to get some skin in the game. Easier, and perhaps cheaper, than building a quality, respected beer brand from the ground up, Constellation Brands did what countless-a-corporation has done before to enter into an established market -- purchase a major player with solid market position and a similar growth strategy, both for mindshare and geographic location. As Matt Allyn at Men's Journal points out, while the $20 billion craft beer market keeps attracting major corporate players, this is probably not the last of these giant craft acquisitions we'll see in the near future, which still represent less than 1% of the total number of craft breweries in the U.S right now.
That said, it’s in Constellation’s (and any other craft beer acquirer's) best interest to keep things as they are. If they don’t, and quality suffers, consumers will notice. It's a simple formula really. When consumer’s notice that their favorite beer now sucks, they’ll stop drinking it, and the brewer will lose money. Shareholders don’t like losing money. Capitalism at it's finest, and while it doesn't paint the passionate and local picture of craft beer that we love so much at The Brew Enthusiast, it highlights what happens in the real world, with real companies that have real quarterly statements, and a big vision of what it means to conquer the craft universe.