Anheuser-Busch to buy Craft Brew Alliance in $321 million deal

Discussion in 'Beer News & Releases' started by Wolvmar, Nov 11, 2019.

  1. Wolvmar

    Wolvmar Disciple (397) Jul 2, 2014 Michigan

    Source: https://www.reuters.com/article/craft-brew-alice-ma-anheuser-busch-idUSL4N27R45L

    Source: https://www.brewbound.com/news/anhe...ining-stake-in-kona-maker-craft-brew-alliance

    https://www.craftbrew.com
     
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  2. distantmantra

    distantmantra Meyvn (1,065) May 23, 2011 Washington
    Trader

    As expected. Add Redhook, Widmer and Kona to their portfolio of local breweries used to push locally owned breweries off store shelves. I mean, they were already doing that but expect it even more now.
     
  3. mambossa

    mambossa Disciple (394) Jun 30, 2015 Ohio
    Society

    Damn...and Ballast Point alone got bought for $1 billion...

    seems like a modest price tag to acquire so many labels.
     
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  4. SFACRKnight

    SFACRKnight Meyvn (1,361) Jan 20, 2012 Colorado
    Trader

    I'm pretty sure that was the deal of the millenium.
     
  5. distantmantra

    distantmantra Meyvn (1,065) May 23, 2011 Washington
    Trader

    Kona is really the only part of the package worth buying. Widmer and Redhook aren't doing very well.
     
  6. OakvilleKGB

    OakvilleKGB Initiate (95) Dec 3, 2015 Missouri
    Trader

    I have to say I saw this coming and ABI just waited for the stock price to fall to get a discount
     
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  7. Crusherone

    Crusherone Initiate (33) Oct 16, 2019 New Jersey

    I have to say that I agree with you. I don't think anybody should be shocked by this. I feel I have heard about them wanting to them for a while now for Kona who has been doing very well lately.
     
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  8. BayAreaJoe

    BayAreaJoe Meyvn (1,029) Nov 23, 2017 California
    Society Trader

    Looks like they saved just over $150 million by waiting 2 and 1/2 months.
     
  9. Prince_Casual

    Prince_Casual Disciple (337) Nov 3, 2012 District of Columbia
    Trader

    ***Worst deal of the millennium

    Nothing about that deal made any sense except Constellation's beer division is playing with Monopoly money after the windfall profits of the Corona deal. The amount of profit they make on Corona, even with the massive marketing budget, is insane.
     
  10. OakvilleKGB

    OakvilleKGB Initiate (95) Dec 3, 2015 Missouri
    Trader

    Better or worse than Lagunitas for $1 Billion?
     
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  11. rgordon

    rgordon Savant (994) Apr 26, 2012 North Carolina

    Ballast Point and Wicked Weed not only had great brands, but they had even better timing and negotiating skills. There is now likely a host of brands holding their breath. Now it is like the wine world with beer: there is more great beer available than there are people to drink it.
     
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  12. NWer

    NWer Crusader (784) Mar 10, 2009 Washington

    I didn't mind buying those brands once and a while for old times sake - not anymore.
     
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  13. Alexmc2

    Alexmc2 Zealot (536) Jul 29, 2006 Massachusetts
    Society

    I wonder what happens now to the fractionally owned CBA brands (like Cisco) that they acquired?
     
  14. unlikelyspiderperson

    unlikelyspiderperson Meyvn (1,097) Mar 12, 2013 California
    Society Trader

    I would guess that lagunitas is doing better today, but I would also guess that constellation didn't lose on the BP buy.
     
  15. Todd

    Todd Founder (5,893) Aug 23, 1996 California
    Staff Moderator Fest Crew Society

  16. oldbean

    oldbean Disciple (350) Jun 30, 2005 Massachusetts

    I know they have the power to push these brands really hard, but at least as far as the local scene around here goes, I can't say any name on that list seems like much of a threat.
     
  17. Dandrewjohn

    Dandrewjohn Disciple (386) Apr 13, 2013 Texas
    Society

    The fact that they paid a premium of 125% of the share price doesn't seem like much of a discount to me. More like they're paying big bucks again to go deeper into the craft market.
     
  18. Dandrewjohn

    Dandrewjohn Disciple (386) Apr 13, 2013 Texas
    Society

    For me personally, this has very little ramifications since, with the exception of Omission, exactly zero of these brands are distributed in my geographic area. I guess the bigger picture is that the Borg continues to assimilate.
     
  19. islay

    islay Aspirant (299) Jan 6, 2008 Minnesota
    Trader

    Agreed. This is a deal for Kona with a bunch of other brands fortunate enough to be along for the ride. Omission is a moderately successful brand in the gluten-reduced space, but that's nothing AB InBev couldn't replicate and surpass in house. pH quietly is doing some interesting R&D work but nothing that I know of radically different from what AB InBev already is doing elsewhere in its portfolio. The rest of those names have very little value in the beer market in 2019.
    Yeah, that's a bad guess. Constellation Brands is getting hammered on that deal by all accounts, including its own in the form of taking hundreds of millions of dollars in impairment charges (officially admitting that it overpaid), quite possibly with a lot more to come. That deal in fact is a laughing stock in the industry.
    That's a pretty typical acquisition premium in a deal of this sort (done to ward off competing offers and seal the deal). AB InBev declined its contractual option to purchase Craft Brew Alliance at a much higher price a few months ago, hence the "discount."
     
  20. officerbill

    officerbill Disciple (393) Feb 9, 2019 New York
    Society

    From the Reuters follow-up article (my emphasis)
    https://reut.rs/2NDG8Ty

    I guess it depends on your definition of “craft”
     
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  21. spicoli00

    spicoli00 Defender (616) Jul 6, 2005 Indiana

    Well, Constellation has written off almost $200M of the BP purchase price just related to the BP trademark alone. Writing off 20% of your initial investment is usually not a good thing. That said, I can't remember if Constellation used cash or stock for the BP transaction. If it was stock, that's not real money anyways:rolling_eyes:

    Constellation 2019 10-K (Feb 28 fiscal year end)
    For the fourth quarter of fiscal 2019, the Beer segment’s Ballast Point business recognized a trademark impairment loss of $108.0 million in connection with certain continuing negative trends within its craft beer portfolio and a change in strategy for this portfolio focused on improving profitability by rationalizing the number of product offerings while targeting distribution growth in select strategic markets. In the first quarter of fiscal 2018, the Beer segment’s Ballast Point business recognized a trademark impairment loss of $86.8 million in connection with certain negative trends within its craft beer portfolio.
     
  22. SFACRKnight

    SFACRKnight Meyvn (1,361) Jan 20, 2012 Colorado
    Trader

    I'm not too sure. I mean $1B for a company that sells $14 six packs vs one that sells $9 six packs. Either way I think the brewery owners made out. I'm not sure we will ever see deals like those again.
     
  23. islay

    islay Aspirant (299) Jan 6, 2008 Minnesota
    Trader

    From what I'm seeing in some quick internet research, Lagunitas is doing about one million barrels per year of volume versus about 300,000 (and declining) for Ballast Point. Volume doesn't equal revenue, and revenue doesn't equal profit, but I think it's safe to say that Lagunitas is a considerably larger operation that sold for about the same price.
     
  24. distantmantra

    distantmantra Meyvn (1,065) May 23, 2011 Washington
    Trader

    For sure, but that is their MO when it comes to grocery store shelf space (Elysian has been a stupid crazy success in this regard), not necessarily bottle shops and to people that are part of the local scene.
     
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  25. OakvilleKGB

    OakvilleKGB Initiate (95) Dec 3, 2015 Missouri
    Trader

    They paid a $20 incentive out in late August to pass on the option of purchasing the rest of the stock at $24.50 and then was able to offer $16.50 so I would call 67.3% a discount personally.
     
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  26. JackHorzempa

    JackHorzempa Poo-Bah (4,251) Dec 15, 2005 Pennsylvania
    Society

    Yeah, the whole notion of what defines a craft brewery is commonly debated.

    I watched a TV interview of Stephan Beaumont, a beer writer, and during the interview he stated that with this latest acquisition that AB InBev produces more 'craft' beer than Boston Beer Company.

    Cheers!
     
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  27. jesskidden

    jesskidden Poo-Bah (1,882) Aug 10, 2005 New Jersey
    Society Trader

    "Wow, is that true?" I just thought as I read that. Not based on the B.A.'s totals for 2018.

    AB "Regional Brewing Co./Brands" - 550,000 bbl.*
    CBA - 756,959 bbl.
    AB TOTAL - 1.3 Million barrels

    BBC - 4.286M bbl. total alcoholic beverages (beer, tea, cider, seltzer)
    Boston Beer - 1.9 Million Barrels of "Beer" (B.A.'s total)
    Dogfish Head - 275,784 bbl.
    BBC "BEER" TOTAL - 2.2 Million barrels

    * more than 3/4 of that is the 420k bbl. of "Shock Top" - which isn't really either a former "regional" craft brewery or craft brand.
     
  28. JackHorzempa

    JackHorzempa Poo-Bah (4,251) Dec 15, 2005 Pennsylvania
    Society

    You got me here JK.

    Maybe your accounting is more accurate?

    Cheers!

    P.S. The ever vexing issue is what defines 'craft' beer. Maybe Stephen is considering other AB InBev beer brands as being 'craft' which you do not?
     
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  29. jesskidden

    jesskidden Poo-Bah (1,882) Aug 10, 2005 New Jersey
    Society Trader

    Yeah, hard to say. And I guess they've bought a few more in 2019 besides CBA? The one in Texas---- I mean, Ohio? But that ain't gonna contribute enough to add up to more that BBC.

    I wonder when they're going to run into problems with the US DoJ, since they were ordered to get pre-approval to buy any brewery over a certain size. I guess CBA was either under the limit or doesn't fall under the clause since AB already owned about a third. That could be why some article use the expression "attempting to purchase":
    I guess that could refer to having to buy some of the shares on the open market? (Hey, I worked on Wall Street but I don't know all the jargon. Because I worked ON Wall Street (and in the loading docks and freight elevators). Drove a truck making corporate records deliveries.)
     
    #29 jesskidden, Nov 12, 2019
    Last edited: Nov 12, 2019
  30. OakvilleKGB

    OakvilleKGB Initiate (95) Dec 3, 2015 Missouri
    Trader

    I remember there being a mistake in the printed magazine and just went back to double check the digital copy and downloadable Excel spreadsheet and both show the correction.
    The 550,000 bbl you referenced was Goose Island alone (I assume a copy and paste error?). ABI production of "Regional Brewing Co./Brands" was 1,990,000 bbl for 2018.
    This does not include Platform Beer Co. out of OH that ABI purchased in early August which produced 27,000 in 2018.
    Assuming similar numbers for 2019, the new "Brewer's Collective" will be producing more beer than Boston Beer Company.
     
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  31. jesskidden

    jesskidden Poo-Bah (1,882) Aug 10, 2005 New Jersey
    Society Trader

    Wow, thanks. Yeah, there were a few typos/errors I noted (all the brewery's home states were listed wrong and Wicked Weed was the same barrelage as Shock Top) but didn't think they'd get the entire company total wrong.

    @JackHorzempa - "Nevermind". :grimacing:
     
  32. Alexmc2

    Alexmc2 Zealot (536) Jul 29, 2006 Massachusetts
    Society

    I'm shooting from the hip here, but I swear I remember something about CBA being in that DOJ agreement. Either an exception or a special case. I had to take a whole training on it and I remember exactly zero.
     
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  33. Oktoberfiesta

    Oktoberfiesta Aspirant (278) Nov 16, 2013 New Mexico
    Trader

    Yikes. Other than Kona, this is a sinking ship

    Why spend that type of money.

    I've been following their quarterly reports for a few years now. I don't think redhook and Widmer stand a chance as a resurrection brand.
     
    #33 Oktoberfiesta, Nov 12, 2019
    Last edited: Nov 12, 2019
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  34. distantmantra

    distantmantra Meyvn (1,065) May 23, 2011 Washington
    Trader

    Redhook opened up a really fancy spot in Seattle called the Brew Lab. They only have unique brewed-on-site Red Hook beers (nothing you'll see on store shelves) on tap and they do a lot of collabs with other local breweries. I still could never force myself to check it out.
     
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  35. justmebro

    justmebro Initiate (132) Mar 9, 2015 Massachusetts

    So more crap beer to avoid. Luckily I choose local (to me) brewers. Everything in my cooler is brewed within 60 miles of my home
     
  36. MJGBG500

    MJGBG500 Initiate (72) Jan 8, 2009 Georgia

    I miss Widmer Bros Drifter but brew an inspired clone every now and then. The acquired brands may disappear but the talented brewers will reappear, reinvent and reestablish. Its all part of the craft beer cycle of life. There will always be plenty of talent in this industry and plenty of risk takers with money to back it up. Hats off to everyone who has the dream, takes the leap and makes it happen. If you cash out for personal or financial reasons, good for you - that's the great
    American Dream. I always enjoy seeing the little guy pocket some of that AB equity. Hope to see you back soon.
     
  37. Steve-S

    Steve-S Initiate (7) Oct 12, 2019

    Wasn't RedHook already an AB craft beer?

    Way back, in the late '90's, I worked at a tiny
    micro, in Honolulu. Ali'i Brewing Co. I worked
    in the actual brewery, second to the BrewMaster,
    the late Scott Spicola. One of the investors tried
    to get AB to buy out the company. Scott and I
    were SICK for weeks! Back then, that investor
    had the idea, that Ali'i could be the island "Red
    Hook."

    That is where I really learned the homebrew
    business. (Our 5 gallon batches, were 500
    gallons, and done exactly the same way.)
    But, our bottling system, was 1960 (or earlier)
    state of the art. We had a CCS 28-6 retired
    Pepsi soda bottling line. I had a repair manual,
    that had an address in "the territory of Hawaii"
    for parts. (That machine was older than President
    #44, who was born in the same city.)

    steve
     
  38. IPA-god

    IPA-god Initiate (34) Nov 20, 2018 Florida

    My perfect world keeps getting smaller. Still not over Wicked Weed and Lagunitas joining the dark side. I’m not particularly fond of the ones just acquired, but it underlines the push by the dark side to keep munching. I’m staying with my locals (Cigar City in Tampa) and with Sierra Nevada who openly supports small breweries to keep them away from this evil.
     
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  39. jesskidden

    jesskidden Poo-Bah (1,882) Aug 10, 2005 New Jersey
    Society Trader

    Anheuser-Busch bought minority shares of both Redhook and Widmer in the 1990s ('94 and '97, respectively), deals which included agreements by AB to distribute the beers through their national distribution network. Those previous deals are how AB-InBev currently owns that 31.2% of CBA, which was formed in 2008 when the two PNW breweries merged.
     
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  40. Newport_beerguy

    Newport_beerguy Zealot (554) Feb 24, 2011 Rhode Island
    Trader

    Cisco was just bought in 2018 by CBA for $23 million, which when factoring in equipment and real estate on Nantucket island seems like a deal. But in researching further Cisco had had a distribution partnership with CBA well before that, in 2015. That is not a good sign that with this advantage Cisco has not grown much in visibility my short distance from the brewery. I have to think they make bank being one of the only games in town on an island teeming with tourists, so this asset seems more gearing towards taproom revenue and real estate than anything else.