Constellation Brands acquires Florida’s Funky Buddha brewery
Florida has a lot going for it. Sun, beaches, thirsty tourists and an as yet underdeveloped craft beer market. With only 195 craft breweries in 2016 it ranks near the bottom in the US in terms of breweries per capita (1.3 per 100,000 adults) according to the Brewers Association.
On 11 August 2017, the number three brewer in the US, Constellation Brands, purchased the Funky Buddha brewery, located in the Fort Lauderdale area.
Financial terms of the deal were not disclosed. But it is understood that the structure is similar to Constellation’s 2015 all-cash purchase of San Diego’s Ballast Point Brewing, which was worth USD one billion. Apparently, the deal is for 100 percent of the company, which was founded by KC Sentz and his brother Ryan in 2010.
After years of exponential growth, Funky Buddha expects to produce as much as 35,000 barrels of beer (41,000 hl) in 2017, having brewed about 27,000 barrels of beer last year.
The company, which has struggled under capacity constraints, is in the midst of planning for an expansion. Like several other fast-expanding craft breweries, the owners found themselves at a crossroads: should they take on new debt or should they find themselves a partner to work with and grow the business together?
With Funky Buddha, Constellation has embarked on an acquisitions spree that resembles AB-InBev’s. Over the past few years, AB-InBev has bought several quickly-growing craft breweries with a strong local presence and a recognized brand. Funky Buddha answers to these criteria too.
Apart from these, it operates in a key market for Constellation. Florida is a popular vacation destination and Constellation should have a better chance of delivering a brand that resonates with customers along the East Coast, should the company look to expand distribution of Funky Buddha beers.
Also Funky Buddha resembles Corona Extra, Constellation’s major beer brand, in one major aspect. Corona is “vacation in a bottle”. Its advertising has long featured beaches. Funky Buddha has to be viewed in that same prism.
Insiders think that Constellation could soon look to grow its craft beer portfolio by acquiring craft breweries in markets such as Illinois, Texas and New York.
In actual fact, Constellation seems to have taken a more “local” focus in its acquisition strategy, after category-wide sales slowed and Ballast Point did not grow as fast as the company originally expected.
Paul Hetterich, Constellation’s Executive Vice President, was quoted as saying: “At the time we acquired Ballast Point, we thought there would be more national brands that broke out.” But, he added, things went more local. “It doesn’t appear that you’re going to be able to build new national brands in the [craft beer] space really quickly. That made us recognize – we need a lot more brands in the portfolio to build up a reasonable presence in the craft space overall.”
