Constellation Brands this week made its third purchase of a U.S. craft brewery, acquiring Dallas’ Four Corners Brewing for an undisclosed amount.
The business was founded in 2012 and has grown fast. Production estimates from the Brewers Association show that between 2014 and 2017, the brewery nearly tripled in size from 4,000 to 11,560 barrels. According to a press release announcing the deal, the brewery has enough capacity to make as much as 25,000 BBLs a year. Four Corners is led by its El Chingon IPA, which accounted for almost 45% of the company’s off-premise sales volume tracked by IRI in grocery, convenience, and other stores.
While financial terms weren’t shared through the purchase announcement, using popular, back-of-the-napkin estimates that value U.S breweries between $1,000 and $1,200 a barrel (sometimes more), the purchase price could have been as much as about $14 million.
In the brewery’s press release, co-founder George Esquivel made clear the company’s grander vision, saying that “we’ve always had intent of sharing our brews and our story with as many people as possible.” That’s about to become a hell of a lot easier by joining Constellation, who had already purchased California’s Ballast Point in 2015 and Florida’s Funky Buddha in 2017.
WHY IT MATTERS
Go ahead and ask. It’s OK. You’re not the only one.
“Who is Four Corners?”
According to DataQuencher, a marketing research firm focused on craft brewery analytics, brand awareness for the brewery was just 5% in a January 2018 survey of 321 drinking-age Texas beer consumers.
According to Brewers Association estimates, the 11,560 BBLs the Texas brewery made last year placed it around the 530th largest BA-defined craft brewer in the country for 2017, sandwiched by Von Trapp Brewing and Lazy Magnolia Brewing. As far as beer raters are concerned, Four Corners' brands aren't setting the world on fire. On Untappd, the the brewery has a collective average of 3.6 “bottle caps” across 122 rated beers. El Chingón, a 7.8% IPA, is scored with an average of 3.65 and its Local Buzz Golden Ale holds down a 3.53.
So why, exactly, is Constellation spending what is likely millions of dollars on a brewery that sells nearly all its beer in Texas alone? In the release, references to “culture” or its various synonyms were used eight times, clearly pointing toward the brewery’s embrace of its owners’ “bicultural brand” of both Hispanic and American backgrounds.
“It’s a compelling opportunity for Constellation because Four Corners’ bicultural inspired flavors and branding capitalize on one of the hottest trends in beer—Hispanic influenced products,” Constellation president and COO Bill Newlands says in the release, adding that Four Corners “embraces and reflects the diversity of its people.”
This isn’t just lip service. According to the Brewers Association, from 2015-2018, just one in five new craft beer drinkers was a person of color, and Hispanic consumers have often been cited as a demographic with plenty of room to grow. A focus on Four Corners and what it brings to underserved craft beer consumers is ideal in a state where the Hispanic population is set to outpace white Texans by 2022 and has grown by about 15% in Four Corners’ own-premise market of Dallas County since 2010. Texas has long been the second-largest U.S. market for beer, behind only California.
The move comes at a time when Four Corners is likely primed for growth, too. Through six months of 2018 alone, the brewery has already sold about 82% of the volume it sent to off-premise stores in 2017. IRI-tracked sales are set to essentially double for the third consecutive year. When compared to other recently-purchased Texas breweries Deep Ellum, Karbach, and Revolver, Four Corners has arguably been the fastest-growing in terms of IRI volume sales by percentage growth—all without having the benefit of investment and new distribution networks.
Helping in that matter will be Constellation’s rapidly evolving “Gold Network” of distribution. Like Anheuser-Busch InBev’s “red” and MillerCoors “blue” houses, Constellation has worked in recent years to consolidate its own collection of preferred wholesalers where the company can align its growing portfolio of craft and import products.
This has taken such a steep turn that in a recent Beer Business Daily post, publisher Harry Schuhmacher wrote that distributors told him Constellation is getting "big brewer-itus" because the termination and re-assignment of rights has become "almost a daily occurrence for them." In Atlanta, for example, Georgia's oldest beer maker, Red Brick Brewing Company, was recently traded from its longtime distributor, General Wholesale Company, to the Miller house, United Distributors. While distribution deals are often based on a wealth of factors, one of primary forces of this one was that Ballast Point in turn left United for General Wholesale, the latter of which distributes other Constellation brands like Corona and Modelo.
As first noted by Brewbound, Four Corners and Constellation already have a headstart in this regard. In February, the brewery signed with 2-Row Distributing, part of the larger Del Papa Distributing, which handles Constellation. Dallas' Andrews Distributing already acts as wholesaler for Four Corners and Constellation Brands and, just a dozen miles outside the city, Constellation opened space last year in a 450,000-square-foot warehouse facility.
Needless to say, it all points toward continued alignment among Constellation’s growing portfolio and a chance to meet exactly what Four Corners’ founders say they wanted to do all along—get their beer to as many people as possible.