TTB Slaps Constellation Brands with $420,000 Fine

They bought Ballast Point for what, $1B? A mere drop in the bucket, for now.

 

getting on the TTB's shit list is just as bad as the fine. They'll continue to be scrutinized, and many states require that federal alcohol law violations be disclosed when they seek permits and licenses in those states.

 

They paid to play and still failed? Haven't seen BP on tap since an initial tap takeover years ago.

I do wonder how some beers remain on tap while others are obviously better. Then again, I do see some places replace taps within 2-3 weeks with or without the beer being empty. So some places do care about rotation and price/oz.

 

"Failed" ? Constellation is the #3 beer marketing company in the US - over 19M bbl., approaching a 10% share of the market (2017 stats - and they were up over 10% for '18). And, unlike the other majors, they've been up every year since 2009, when they sold under 11M bbl.

 

I wonder if they were having problems securing enough tap handles, as per their projections, for Corona Premier (possibly also Corona Extra?)? One could imagine there being problems with selling Corona without the bottle and label.

 

Interesting denomination for the fine, considering Constellation's entry into the cannabis marketplace

 

That's true. It is also true about Heineken.

 

Plenty of Corona Extra tap handles in Casper, dammit.

 

I've never actually witnessed someone order a Corona draft, though I suppose it happens.

 

@Bitterbill there's more to come on Ballast Point. I have no doubt there are spirits under that brand coming soon, as well as RTDs (ready to drink/ pre-mixed cocktails) that they will expand on nationally, eventually.

They probably did overpay, by a lot, but they are playing with house money from the Corona deal. I think the mistake was thinking BP was as high-margin as it is/was. They were at the very top of their price point, which makes it look very profitable, but when it stops selling, you're at the top of the pricepoint and it's hard to make headway when you're not 'cool' anymore.

 

Yes. Some Ballast Point flavors sold well, but the brand was not totally embraced. BP did wither on the vine, and yes, the alternative beverages seem to make sense.Early on, they made a great Bloody Mary mix and then some distillates. Getting anywhere close to that investment returned is doubtful.

 

I think that guy meant they failed at trying to pay to play, because they ended up getting caught paying.

 

Others can probably weigh in more accurately, but the BP Spirits line and branding was excluded from the Constellation purchase, as it was technically a separate company from the Brewing side (I believe that a similar situation was described in their pre-IPO filings). So, I'm not sure if Constellation trying to launch something like that is feasible from a trademark perspective. Interestingly, right after the Constellation deal the BP leadership team rebranded their spirits line as Cutwater and just a couple of months ago got acquired by AB-Inbev:

https://www.courant.com/sd-fi-san-diego-cutwater-sold-anheuser-busch-20190220-story.html

 

That's the physical distillery assets, I meant canning a 'Bloody Mary with Ballast Point (tm) Vodka'

 

Although the fine is really not going to cause any pain over there it is good to see TTB cracking down. Now the IRS needs to follow up.

I can tell you of one BA who sometimes loses a draft system installation due to wholesaler dirty tricks. How the hell is my company supposed to compete with free? And how much tax is paid on that "free" installation? Not to mention, it's not a gift. There is an implied understanding that they now own a piece of your business. Nobody really believes they give shit away because they like you. Oh yeah, it's not legal either.

Doing business with the mob never ends well.
Cheers.

 

Interesting point. I suppose they just need to be alerted to events.

Cheers!

 

Illegal is illegal, but I've never really understood the "you can't buy/give someone a draft system if there is implied favoritism on the pours" laws. I realize it's not really "fair" for the little guys, but if you decide to invest your money, to give someone a slushee machine/ keg box/ whatever, that they couldn't buy otherwise, why shouldn't you get preference on what goes through it?

I get you're buying the business so to speak, but from a tax standpoint, it's more revenue from the sales via the widget than they would have gotten with no widget on the premises.

We aren't talking about withholding prescriptions from seniors, or poisoning children with lead... if 'they' pay thousands of dollars to takeover a 6 draft lines at bar x, if it's THAT bad, customers will either demand a vastly superior product if it exists, or go to bar y. It just seems unnecessary, and hurts small bars who are getting started and don't have the capital for expensive gear. The origins of a lot of wonky alcohol laws, all seem to stem from wholesalers who lobbied heavily, 60yrs ago.

 

The three tier system is not terribly complex but it is highly regulated. Nobody has a great solution and it is the best we have. The set up can be debated in a few more threads at least. A few things to consider about the three tier system...

• 50 States have 50 individual laws and regulations. What is ok in your state is not necessarily cool across the border. (Plus DC).
• Wholesalers, even with carefully regulated control, maintain incredible power over the market. It is a tight market so throw out any Free Market notions.
• Prices are fixed. Generally. The retailer (grocery, bar, C Store etc.) is responsible for the retail price but every commercial buyer pays the same published price, generally.

Now considering the above, that there is exactly one seller of your desired product in the market . Ponder a simple concept. Who is benefiting when a multi billion dollar corporation provides a "free" service? Provides $8,000 in material and labor perhaps. Is the "donation" really helping Ma and Pa? Wal Mart? Who does it really serve? If the tavern across the street did not get the same deal, and the tavern across the street has no other choice for a product other than the wholesaler who is giving stuff away to your competition, who benefits? And if Ma and Pa are short of cash to establish their operations is "free" financing from the wholesaler in anyone's interest? What if Ma and Pa accepted the $8,000 "free" system but does not want a keg of crappy summer beer in the winter or a left over pumpkin beer in January?

That $8,000 system installed for free was it really free? Because if your credit is good the wholesaler, generally, must treat every customer as an equal. Same fees. Same service. And if they do provide a gift or incentive they must provide the same, if needed, for all of their clients.

There are strict strict rules. And then there are the rules for the multi billion dollar corporations.
Cheers.