Note: We’ve published a follow-up story with more information.
This one is a head-scratcher, for sure. It was just announced that Kings & Convicts Brewing of Illinois acquired Ballast Point Brewing, formerly a beloved craft brewery in San Diego. Why is this something of a puzzler? You might recall that in 2015 Constellation Brands, the mega-huge beer company that produces Modelo, Corona, and many other brands, purchased Ballast Point for a reported $1 billion.
Back then, nobody was entirely sure about the terms of the Ballast Point/Constellation deal. Obviously, we are talking about fuzzy numbers based on many undisclosed factors. Sure, Constellation Brands showed up in San Diego with a dump truck full of money, but no reasonable observer believed that there was a $1 billion payout.
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Whatever the case, Ballast Point Brewing was a wildly successful operation in 2015 when the deal went down. The company’s flagship IPA, Sculpin IPA, was everywhere. Here in Seattle, it seemed you couldn’t navigate the beer aisle at the grocery store without bumping your nose into a Sculpin endcap display. The $1 billion price tag may have been nothing but smoke and mirrors, but Ballast Point was still a formidable player in the craft beer industry at the time.
So if Constellation Brands paid $1 billion for Ballast Point in 2015, what did Kings & Convicts pay for it in 2019? Obviously, not nearly so much. We aren’t talking about a multinational corporation, a nationally distributed craft brewery, or anything close. Kings & Convicts is a small brewery in Highwood, IL. How small? Reportedly, in 2018 the brewery produced about 1,600 barrels of beer. While that might sound like a lot of beer, it really isn’t. Ballast Point Brewing is expected to produce more than 200,000 barrels this year.
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By comparison, and to put it into perspective for Washington beer lovers, Black Raven Brewing produced just over 10,000 barrels in 2018, ranking as the 11th largest of Washington’s 400-plus breweries. Even by Washington standards, where the landscape is bespeckled with hundreds of small breweries, Kings & Convicts would be considered pretty small. In the simplest of terms, Kings & Convicts just bought a brewery that is exponentially larger than itself. That is actually something of an understatement. Thus, bewilderment.
“We’re excited to welcome the team at Ballast Point into the Kings & Convicts family,” said Brendan Watters, chief executive officer at King’s & Convicts Brewing. “We have long admired the quality and spirit of Ballast Point’s brands and team. Ballast Point’s best-in-class brewing standards will remain unchanged, delivering the same high-quality, award-winning products the company has become known for over the years. Our goal is to leverage Ballast Point’s deep know-how, talented and passionate employee base, and outstanding operating team to grow both Ballast Point and Kings & Convicts together.”
The agreement sees Kings & Convicts acquiring the Ballast Point brand and most of its production facilities and brewpubs. Kings & Convicts is slated to acquire four brewpubs in California (Anaheim, Long Beach, Miramar, and Little Italy) as well as the newest Ballast Point brewpub located in Chicago’s Fulton Market District, which opened last spring. On top of that, Ballast Point’s original homebrewing supply and tasting room in San Diego’s Linda Vista neighborhood. Not included in the agreement, Constellation Brand’s Craft and Specialty operations in Daleville, Virginia. The deal is expected to close by the end of 2020. Other terms were not disclosed.
Kings & Convicts Brewing, based in Highwood, IL, is a privately owned company that was founded in 2017 by Brendan Watters and Chris Bradley, the head brewer. The company currently operates out of a 5,000 square foot brewery and taproom in the North Shore of Chicago. (The North Shore is a collection of affluent suburbs north of the city.)
Earlier this year Kings & Convicts announced its plans to open a second location, a destination brewery in Pleasant Prairie, Wisconsin. The new location will consist of a production brewery, a taproom, a restaurant, and an event space. Combined, it will cover 48,000 square feet.
And now news of this deal. Quite a year for Kings & Convicts Brewing.
Although this is a big deal for Kings & Convicts, it sounds like business as usual for a humongous operation like Constellation Brands.
“Trends in the U.S. craft beer segment have shifted dramatically since our acquisition of Ballast Point,” said Bill Newlands, Constellation Brands president and chief executive officer. “Ballast Point remains one of the most iconic craft beer brands in the country and we’re pleased to transition the business to an owner that can devote the resources needed to fuel its future success. At the same time, this decision allows Constellation to focus more fully on maximizing growth for our high-performing import portfolio and upcoming new product introductions, including Corona Hard Seltzer, scheduled to launch this spring.”
Although they are a huge company that can absorb a lot of punches, I think it’s reasonable to categorize the Ballast Point experiment as a huge failure for Constellation Brands. I am not an expert, and I don’t know what the real terms of the deal were, but when they showed up in San Diego four years ago with a dump truck full of money, I doubt that this is the way they imagined things ending.
Time will tell how this deal works out for Kings & Convicts Brewing.
