Private Investors (with a Brewpub) Buy Ballast Point from Constellation

Backed by a group led by a former hotelier, little-known Kings & Convicts buys the home of Sculpin from a global drinks firm.

Brewing Industry Guide Staff Dec 4, 2019 - 5 min read

Private Investors (with a Brewpub) Buy Ballast Point from Constellation Primary Image

Just when you thought the year in beer couldn’t get any weirder, a small brewpub in suburban Chicago buys one of the country’s biggest and best-known brands—from the company that bought it for $1 billion just four years ago.

The announcement that heretofore unknown Kings & Convicts Brewing Co. (Highwood, Illinois) would buy Ballast Point from Constellation Brands is, on the face of it, the year’s most bizarre piece of industry news. On closer inspection, once the situation is better understood, the news is … still pretty weird. Let’s take a look.

Kings & Convicts is so small that most beer geeks in Chicago hadn’t heard of it until now. Last year it made 550 barrels of beer, according to data from the Brewer Association. Ballast Point, meanwhile, is on pace to sell a bit more than 200,000 barrels—down from its peak of about 430,000 barrels in 2016. It looks like a minnow swallowing a whale.

So, the realist asks: Who’s really buying Ballast Point? Because, surely, it’s not just some tiny brewpub. Right?

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Kings & Convicts opened in May 2017, cofounded by Australian-born hotelier Brendan Watters and Englishman Chris Bradley, its name a reference to Australia’s history as a British penal colony. Besides the Highwood brewpub, Kings & Convicts broke ground in August on a much larger brewery in Pleasant Prairie, Wisconsin—despite, it would appear, any evidence of great demand for its beer.

Watters is the former president and CEO of Settle Inn hotels. That company started in 1992; its founder, Dave Graf, turned to Watters in 2005 to take over and rehabilitate the chain. Settle Inn bought GuestHouse International the following year. Watters oversaw the sale of both hotel groups to Red Lion in 2015 in a deal worth up to $10 million.

That background, inevitably, will lead to speculation that Watters aims to rehabilitate Ballast Point, bring its value back up, and sell it again. That brewery in Wisconsin also will be brewing Ballast Point beers.

Watters told the Chicago Tribune that his group bought Ballast Point for less than the $1 billion Constellation paid for it but declined to be more specific.

“This has been about the conglomerates buying up the independent breweries, but we’re doing the opposite,” he told the Tribune. “We’re saying, ‘Let’s bring it back to independence and innovation and see what happens.” Watters also told the Tribune that he recruited two new investors to help make the Ballast Point deal happen, but he declined to name them, saying they wanted anonymity.

Meanwhile, Watters says they will keep all 560 of Ballast Point’s employees—and it plans to grow. “We’re excited to welcome the team at Ballast Point into the Kings & Convicts family.”

Ballast Point began modestly at the Home Brew Mart in Linda Vista, California, in 1996, started by a few homebrewers. The Home Brew Mart and its tasting room are still there and were included with the deal, along with four Ballast Point brewpubs in California and one in Chicago. Constellation keeps the production brewery in Daleville, Virginia, for its own purposes.

Before it bought (and sold) Ballast Point, Chicago-based Constellation was best known for distributing Mexican brands such as Corona, Modelo and Pacifico. For Constellation, is this sale about pivoting away from IPA and toward surging hard seltzer? In October, the company announced plans to release Corona Hard Seltzer—a move that combines one of the world’s most iconic beer brands with one of America’s hottest beverage trends.

In a statement, Constellation President and CEO Bill Newlands noted shifting trends in the market and said the company was “pleased” to sell Ballast Point to a company “that can devote the resources needed to fuel its future success. At the same time, this decision allows Constellation to focus more fully on maximizing growth for our high-performing import portfolio and upcoming new product introductions, including Corona Hard Seltzer, scheduled to launch this spring.”

Constellation also bought Florida’s Funky Buddha Brewing in 2017.

The arrival of Ballast Point Sculpin in 2005 was arguably a turning point in the history of American IPA. It helped to steer tastes away from bracing bitterness and toward more balanced IPAs with bigger hop flavor and aroma. Later, in 2013, its Grapefruit Sculpin was at the vanguard of a fruited IPA trend that briefly flourished before fading into the hazier styles to come.

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