That is the question circulating through the industry after it was announced this week that Ballast Point Brewing had been acquired from Constellation Brands by a small 600 bbl annual production brewery in Chicagoland. It seemed, on the surface, to be the most unlikely of all of the acquisitions and mergers that have been rampant in the craft brewing industry for 10 years now.
The answer to the question is not about the tiny Kings and Convict, but about the people and the money behind Kings and Convict.
It starts with Kings and Convict founder and co-owner Brendan Watters. Watters, originally from Australia, came to the U.S. and worked for Accenture before starting his own hotel company, which he grew from one location to a franchise. That company went public and was sold in 2015. He started K&C two years ago in 2017 as a launch pad to get into the craft brewing industry.
Next up is wine industry moneyman Richard Mahoney. Mahoney is a longtime friend and business supporter of Watters who invested in Waters’ hotel business. When Watters made contact with high-level Constellation executives and the idea of buying Ballast Point surfaced, Mahoney said he was “in.” Mahoney is chairman of the board of The Wine Group which owns wine brands that include Cupcake, flipflop and Benziger. “He’s backed me and I’ve made him money,” K&C CEO Brendan Watters told the Chicago Tribune.
We’ll see where that leads this time. The details of the acquisition have not been announced but several industry insiders pegged it at around $1.0 million, and probably less. A far cry from the $1 billion Constellation paid for it four years ago.
For that price tag, Kings & Convicts will get the Ballast Point main production facility in San Diego, along with BP brewpubs which include Anaheim, Long Beach, three locations in San Diego and one in Chicago. Not included in the deal is the Daleville, Virginia production facility Constellation opened in June 2017.
Now the question is, can a business person from the hotel industry, along with a partner from the wine industry, turn around a brewery that has tanked in just four short years since the Constellation purchase? My guess would be no. This is the worst time in the 40-year craft brewing industry to enter the market. The competition, at wholesale and at retail is tighter than ever before. Craft is still groovy, but hard seltzers are the new king. And a 200,000 bbl; brand distributed in 47 states is probably the hardest thing to grow when ‘local’ is what the consumer thrives on. On top of that, you have a brand with little brand loyalty that was being propped up by wholesalers who were selling it mainly to satisfy Constellation in order to stay in good graces to keep Corona (also owned by Constellation). It’s as if almost everything is against them.
This will be a fun one to watch. Stay tuned!