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Wednesday, November 18, 2015

Let's Make a Deal

Many of the recent craft-brewery buyouts have been like shiny objects to attract our gaze, but lacking in any real value. One buyout is mostly like the next. When Constellation purchased Ballast Point on Monday for a billion dollars, though, it was more than just clickbait. It makes us consider what things are worth, and that made us consider seriously where the beer market is headed. Constellation wasn't a pundit talking about where the market was headed--they pontificated with their dollars. All of which brings me to a question.

Constellation paid a massive premium on the assumption they can build it into a formidable national brand and get a share of the growing craft pie. So, if you had been one of the C-level executives at Constellation (CEO, CFO), would you have recommended this deal?

The way you answer the question depends on how you weight several variables: 1) where the market is headed; 2) how strong Ballast Point's brand and beers are compared to other craft breweries you'd consider buying; 3) how much the market actually favors local ownership (which is to say: will locals abandon it because it's a national brand; will non-locals embrace it in an environment of localism?); and 4) whether the Ballast Point brand can translate easily into a national brand, and 5) whether Constellation has the infrastructure to support a national brand. There may be other factors as well, some unknowable (like the way the deal was structured), but these give you an idea of the calculation.

If you think Ballast Point's brand can become one of the small number of successful craft brands, that the craft market will be much larger than it is now, and that the focus on localism is overblown, a billion dollars doesn't look like a bad bet. Well?

A spirited discussion has been going on at Facebook for a couple hours, so you might prefer to comment over there.

1 comment:

  1. I really think people are missing the point. Constellation, the keeper of Corona and Modelo, believes they can turn Ballast Point into a dominant national brand. They have no interest in buying up and building regional brands, the Anheuser-Bush template. Constellation intends to turn Ballast Point into the Corona of craft beer. If they succeed, and I am not betting against them, they will demonstrate that local is less important than the image a brand conveys. Ballast Point seems perfectly suited to Constellation's vision, but time will tell.