Ballast Point sale and other things to make you go “hmmmm”

In case you haven’t heard the news about San Diego’s Ballast Point Brewing today—and I don’t know how you could have missed it, if you’re even marginally interested in beer—they have sold to beverage company Constellation Brands for the staggering, Dr. Evil-worthy sum of $1 billion. Yes, that is billion with a B. There are news stories all over about it, but you can read the press release on All About Beer if you don’t feel like searching.

Let’s be honest, $1,000,000,000 is a ridiculous amount of money for a craft brewery! My initial reaction this morning on Twitter was:

Forget posts about selling out etc. I’m more curious if ANY brewery is worth $1B…

And:

If there are any doubts about whether there’s a craft beer bubble, $1 billion should settle it

Yep, I said the “B” word. Any investor dropping that much money on a craft brewery purchase—depending on how you define “craft” (if you even buy into the Brewers Association’s definition) of course—send up a big red flag to me.

And my wife pointed out that this Ballast Point news broke immediately after San Diego Beer Week was over. Interesting timing, that; it would have been interesting to see the reaction had this come out during SDBW.

I’ve been telling people for awhile now that mergers and buyouts and consolidation is the future of this beer industry. Even so, it’s been a weird year for this whole acquisition business; what with AB InBev buying (since last October) 10 Barrel, Elysian, and Golden Road, to Firestone Walker selling to Duvel Moortgat, Lagunitas “spreading craft beer to the world” via Heineken, and made-to-sell Saint Archer getting picked up by MillerCoors, the landscape is changing faster than we can process. (And I didn’t even mention Full Sail and its investor group, Logsdon sold to Uptown Market, Green Flash buying Alpine beer, and, and, and—there’s a good roundup here. Hell, even Dogfish Head sold 15% to a private equity firm!)

If I was going to get any Lagunitas draft business with our pale ale, I would have to fight with Sierra Nevada, and even if it was possible to do (which it probably wasn’t), you don’t do that to a company you respect. In any case, I only wanted to compete with imported beers and never with other craft brewers. That is still true today.

— Tony Magee, So You Want to Start a Brewery?

Doing some quick math on the billion dollar deal, it’s a valuation of Ballast Point at $8695.65 per barrel (at 115,000 barrels) for 2014, and about $3636.36 per barrel at 2015 cooperage projections. Of course that’s not an actual way to calculate valuation but just for fun it would be interesting to come up with some sort of formula, based on their numbers—500 employees, distributed in 30 states, four brewpubs as well as the number of barrels of beer brewed and sold. Then we could plug in the numbers from other breweries and see where that takes us…

Something more fun to finish the night: Even Kermit the Frog has an opinion on craft beer!

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