Constellation closes two Ballast Point locations, abandons plans for another

USA | Constellation has confirmed that it will close two newish Ballast Point brewpubs and abandon plans for a San Francisco brewpub – which was announced only nine months ago.

With Big Brewers it is often chop and change. Constellation Brands, the number three brewer in the US, its no exception here. In April 2019, it confirmed reports that it will close two Ballast Point locations – San Diego’s Trade Street brewery and Temecula’s brewpub (both in California). Moreover, it has axed plans for its upcoming San Francisco brewpub. The restructuring will mean that Ballast Point will operate eight locations in the US, including Chicago and Disneyland (Anaheim).

What has made Constellation change its mind over Ballast Point? Well, the craft brewer’s performance has not lived up to its parent’s sales expectations since the San Diego-based company was purchased by Constellation in 2015 for the staggering sum of USD 1 billion. As Bill Hackett, ex-President of Constellation’s beer division, pointed out at the Beverage Forum in Chicago (30 April to 1 May 2019), Ballast Point has kind of lost its way, not least after the sudden departure of four of its leaders in 2016. Although he had hoped that the four would continue to run the front of the house, he could not fault them for taking all the money and run.

Besides, four years ago, Constellation thought it could take Ballast Point national, much like other major craft brewers had done. However, this strategy had to be binned, in view of the new trend in craft beer towards local and regional leadership. This led Constellation to retrench about 60 of its 100 or so craft and specialty sales people in August 2018. Constellation’s other craft brewery purchases – Funky Buddha in Florida and Four Corners in Texas – which have embraced a regional strategy, were doing well, Mr Hackett said.

Constellation Brands posted a 7 percent increase in net sales in its recent full-year results, boosted by its Corona and Modelo beer brands. During the 12 months to 28 February 2019, net sales stood at USD 8.12 billion. Operating income was up 6 percent to USD 2.41 billion.

Net beer sales – which also include Funky Buddha, Four Corners and Ballast Point – increased 11.6 percent to USD 5.2 billion, with the beer division’s operating income rising 11 percent to USD 2.04 billion. This means beer is Constellation’s major earner, far ahead of wines and spirits. Nevertheless, Constellation expects cannabis to contribute significantly to its profits in the future, after Constellation spent about USD 4 billion to buy into the Canadian cannabis firm Canopy Growth.

In 2018, Constellation’s US beer market share was 10.5 percent, behind AB-InBev’s 40.6 percent and MillerCoors’ 23.5 percent, and ahead of Heineken’s 3.7 percent, according to data by the Beverage Marketing Corporation, New York.