August 15, 2017

International producer and marketer of beer, wine and spirits – Constellation Brands, which also happens to be the third largest beer company in the U.S. and parent company to mega-popular brands such as Corona and Modelo- announced its acquisition of Florida craft beer brewer Funky Buddha for an undisclosed amount.

Founded in Boca Raton in 2010 by husband and wife team, Ryan and Giani Sentz, Funky Buddha is the largest craft microbrewery by volume and size in South Florida. The company claims a 54,000 square foot site and capacity of 45,000 barrels and is the fastest growing craft brewer in the state.

As U.S. consumer tastes have shifted away from lower-priced and light beers toward more flavorful, unique and meaningful options, the Brewers Association, which represents more than 3,000 U.S. craft brewers, estimates that the U.S. craft brewing segment will grow to account for 20 percent of the country’s $100 billion beer market by 2020.

Furthermore, in the first half of this year, the U.S. craft brewing industry saw an increase in production volume of 5 percent, according to the Brewers Association, and as of June 30, 2017  there are an additional 2,739 craft breweries in the process of coming online, reports Beverage Daily.

Considering projections such as these, Constellation made a big splash when it entered the U.S. craft brewing space in 2015 with the acquisition of California-based Ballast Point Brewing & Spirits for a record breaking $1 billion.

“Adding a fantastic regional brand such as Funky Buddha to our craft beer portfolio, along with Ballast Point, advances our strategy in continuing to lead the high-end beer segment. The Sentz family has created a culture of bold creativity, innovation and entrepreneurship,” said Constellation Brands Executive Vice President and Beer Division President Paul Hetterich.“Those qualities, combined with our beer division’s market reach, distributor partnerships, consumer insights, and our craft expertise within Ballast Point, will help nurture and develop Funky Buddha’s distinctive brand.”

Meanwhile, ABInBev has been working to secure its share of the dynamic craft brew market through a series of acquisitions including two deals within a week’s time in 2015 for Arizona-based Four Peaks Brewing Company and London-based Camden Town Brewery, followed little more than a year later with its acquisition of Belgian craft brewer Bosteels Brewery through a deal valued at $225 million. However, one of the more notable and more recent deals in the sector occurred in April of this year when TSG Consumer Partners acquired a 22.3 percent stake in Scottish craft brewer BrewDog for US$266 million.

Deals March On

In all honesty, craft breweries have seen such success by building up a rapport with consumers established on anti-establishment. Consumers who began seeking out little-known craft beers because of their high quality, traceability, and for lack of a better word – personality, soon came to see their beer choices as a vote against big business and the mainstream.

“Assumptions might be made about BrewDog ‘selling out’, but this couldn’t be further from the truth,” said Watt on the BrewDog blog upon the sale of a minority stake to TSG. “Other great craft brewers like Stone Brewing Co. and Dogfish Head also recently took on minority investment deals, which are very similar to the deal we have just concluded.”

Despite the sentiment on the ground, the saturation of the craft beer space is driving the need for brewers to expand, and so, deals march on. Private equity-backed deals involving U.S. and EU-based beer companies totaled 37 in 2015 and 28 in 2016, according to PitchBook Platform, with the three most active quarters in the past 10 years all happening since the beginning of 2015.

For Funky Buddha, the deal with Constellation represents the ability to grow beyond a regional name.

“We chose to partner with Constellation because we saw an alignment in vision and felt they gave us the greatest opportunity for growth and development,” said Ryan Sentz who together with Funky Buddha’s employees will continue to work with Constellation upon the closing of the deal. “At the end of the day, we just really like the people we have met within the organization, each of whom share our dedication to making outstanding beer.”

-Lynda Kiernan

Lynda Kiernan is Editor with GAI Media and daily contributor to GAI News. If you would like to submit a contribution for consideration, please contact Ms. Kiernan at lkiernan@globalaginvesting.com.