Constellation is the third biggest beer producer in America, and its Mexican import brands continue to kill it. In fact, constellation’s beer portfolio continues to be the No. 1 growth contributor to the U.S. beer market with all of its import brand families achieving record volume levels in 2019, according to its recent financial statements. Corona shipment volumes reached the 150 million case milestone and the Modelo brand family crossed the 125 million case mark, driving depletion growth of 7 and 12 percent, respectively. The company expects net sales and operating income growth for its beer brands in the 7 to 9 percent range in 2020.
But Constellation’s Ballast Point Brewing Co. brand is not achieving such illustrious numbers, so things need to change.
A big part of the problem is declining sales and increased competition, and another big part of the problem is that Constellation Brands bought Ballast Point in 2015 for $1 billion at the incredible height of the craft brewery acquisition craze. No other North American craft brewery was bought for more by my knowledge — except for maybe Lagunitas Brewing Co. — which Heineken bought in two different purchases (only one of which is known[ish], estimated to be about $500 million). That phase of global companies buying American craft brands has slowed down dramatically — noting Constellation did purchase Four Corners Brewing out of Dallas last year, so it hasn’t totally stopped — but price tags of hundreds of millions of dollars seem pretty ludicrous now. Consider Anheuser-Busch bought Goose Island for $38.8 million in 2011.
We are now seeing the ripple effects of the billion-dollar expenditure on the books.
Reports have been confirmed that Constellation and Ballast Point are closing two newish satellite locations — San Diego’s Trade Street brewery and Temecula, Calif.’s brewpub — while plans for its upcoming San Francisco brewpub have been shuttered. That takes Ballast Point to five locations in California and seven total in the United States, counting new locations in Chicago and the opening of its recent Disney property in Anaheim, which looks pretty lavish.
Last August, Constellation announced it would be opening a tasting room and kitchen in San Francisco’s Mission Bay neighborhood in early 2019. We reached out in January for an exact date, while doing this story on the Disney property, and we received no answer. The location was supposed to mark Ballast Point’s first northern California brewing location, and it had plans to house a restaurant and on-site R&D brewery. According to the always informed Brewbound:
The decision comes two weeks after Constellation recorded a $108 million impairment charge to Ballast Point’s trademarks, essentially admitting it overpaid when it bought the business for $1 billion in late 2015. Constellation previously recorded an $87 million impairment charge to the Ballast Point trademarks in June 2017.
Obviously, some folks will be losing their jobs. It should be noted that last August Constellation laid off sales staff that covered its craft products. Now, it continues to “right size” its beer brands and continues to invest in other social lubricants such as cannabis and spirits. I reached out to Constellation for some insights.
“I can confirm that the closure of the Temecula Brewpub and Trade Street brewing facility are a result of right-sizing our cost structure based on recent craft trends,” said Stephanie McGuane, communications and brand PR with Constellation Brands Beer Division, via email.
“The Anaheim location at Downtown Disney remains business as usual, as do all others. While we’re not providing specifics as it relates to personnel, I can tell you that we’re working with impacted employees to help them transition to opportunities either within or outside the company. Ballast Point will continue to have a robust presence in southern California, and we remain committed to providing consumers with great tasting, quality products they have come to enjoy. “
According to a Chicago Tribune storycovering the opening of the Chicago location last year:
After more than doubling sales in 2014 and 2015, the brewery’s growth slowed in 2016. Then last year, retail sales for Ballast Point beers dropped to about $57.8 million, a decline of about 7.8 percent from $62.7 million the previous year, according to figures from Chicago market research firm IRI, which do not include sales at Costco or at liquor stores.
The number of barrels of Ballast Point beer shipped to wholesalers last year  declined more than 14 percent — from about 370,000 barrels in 2016 to about 316,000, according to data from Beer Marketer’s Insights, a trade publication. Ballast Point has experienced further decline this year , said David Steinman, senior editor with Craft Brew News, which is affiliated with Beer Marketer’s Insights.