Constellation Brands outlines plans for Ballast Point and overall beer business

What's brewing for Constellation Brands - and its newly acquired craft brewery Ballast Point? Pic: iStock

Constellation Brands made headlines last year when it purchased craft brewer Ballast Point Brewing for $1bn. The focus this year will be on expanding distribution of the craft brews nationwide, while an east coast brewery is also on the cards. 

The beer, wine and spirits giant purchased the San Diego based craft brewer in November to give it a ‘high-growth premium platform” and enable it to compete in the fast-growing craft beer segment.

Rob Sands, Constellation Brands president and CEO, said yesterday the purchase is further strengthening Constellation Brands’ position in the high end of the US beer market.

“Ballast Point [is] a brewer known for unbridled innovation and outstanding quality, and one that gives our beer portfolio a leading position in the craft space that can be built upon in several ways,” he said, speaking in the earnings call for the company’s fiscal 2016 results.

“In calendar 2015, Ballast Point posted depletion growth of more than 130% and sold nearly 4m cases. This phenomenal level of growth is approximately three times that of any major competitor.”

Figures released by The Brewers Association this week rank Ballast Point as number 11 on its list of top 50 US craft brewing companies (based on 2015 beer sales volumes).

This year Constellation Brand’s focus will be on expanding distribution of Ballast Point nationally, making it available in all 50 states.

Asked how much capacity there is for Ballast Point, Constellation Sands’ CFO David Klein pointed to potential for the brewer to grow in its west coast brewery as well as look at expanding with a new facility on the east coast.

“Miramar has capacity for about 10m to 12m cases,” said Klein.  “And then beyond that I think we've said in the past that - and Ballast Point has said this -  Jim Buechler and his team have discussed looking for a location for an east coast brewery at some point in the future.

‘Clear heavyweights’: Corona Extra and Modelo Especial

In its fiscal 2016 results, Constellation Brands reported organic net sales for beer increased 13% primarily due to volume growth and favorable pricing.

For fiscal 2017, the beer business is targeting net sales and operating income growth in the range of 14 - 17% that includes an estimated incremental benefit from the Ballast Point acquisition.

Constellation Brands continues to champion the growth of its beer business, which it says “delivered industry-leading market results as the #1 growth contributor in the US beer category, achieving stellar growth across the portfolio.”

It is investing in a new 10m hectoliter brewery in Mexicali, Mexico, to support the ongoing momentum of its Mexican beer brands. Costing around $1.5bn to build over four to five years, an additional investment in land and infrastructure of $500m will accommodate scalability to 20m hectoliters.

This year has also seen the completion of the first 5m hectoliter capacity expansion at its Nava brewery, and is progressing with further expansions plans eventually reaching a total of 27.5m hectoliters by 2018.

“Now these investments in Mexicali and Nava will ensure that we have the capacity, quality, control and flexibility to meet expected demand for our iconic beer brands well into the future, and position us to capture the continued momentum and growth opportunities we see in the high end of the US beer market,” said Sands.

The ‘clear heavyweights’ of Constellation Brands’ portfolio are Corona Extra and Modelo Especial, he continued. Corona Extra has been the number one imported beer brand for almost 20 years, he said, and today is the number five beer brand overall in the US industry. The brand sold more than 117m cases in fiscal 2016. 

In fiscal 2017, Constellation Brands plans to increase media investment in Corona Extra, focusing on key time periods such as the NBA Finals.

“Overall, I am excited about the growth prospects for our beer business in fiscal 2017,” concluded Sands. “We have tremendous opportunity to grow the business organically through enhanced distribution and execution opportunities across the portfolio.

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