In a tectonic shift to the beer distribution network in one of the largest markets in the country, the Reyes Beverage Group has closed the deal on acquiring Constellation Brands beer portfolio from two more Southern California beer wholesalers.
Reyes picked up Corona, Modelo, Pacifico and Ballast Point from Beauchamp Distributing Company in Compton and Triangle Beverage in Santa Fe Springs. That makes three southern California wholesalers who have sold off their rights to Reyes to distribute Constellation brands after Markstein Beverage in San Diego sold in June. A fourth wholesaler, Ace Beverage in the Los Angeles area is also reportedly being forced to sell their Constellation brands to Reyes as well.
Various industry sources have pegged the deals at a 7x gross margin multiplier. At a roughly $5.00 per case gross margin, that equates to $35 per case or about $200 million for the brands in a footprint that covers much of southern California.
California does not have strict franchise laws, allowing Constellation to broker these deals against their distributors wishes. Current “fair market value” is generally considered to be between 5-7x gross. Although the buyout of 7x gross was on the high end of that range, it was probably not a deal that the selling wholesalers were thrilled to do. The Constellation brands account for an estimated 30-45% of each of the selling wholesaler’s business.