Hand Family Companies (HFC) made a splash Monday with a deal to enter the Southern California market through the acquisitions of Stone Distributing and Classic Beverage, creating a new subsidiary, Sunset Distributing.
When the transaction closes in 60 days, Sunset will be an instant player in the California market, with around 15 million cases of craft beer and non-alcoholic (NA) beverages. Sunset’s portfolio is expected to include Sapporo-Stone, Coronado Brewing, Pizza Port, Societe, JuneShine, AriZona, Russian River, Maui Brewing, Modern Times, Prime, Poppi, Essentia, Alani Nu and several others.
Speaking to Brewbound Monday afternoon, HFC president and CEO JR Hand said he expects Sunset to “be the dominant wholesaler in the craft space in Southern California.”
“When it comes to craft, especially regional, local craft in California, we’re the guy,” he said. “So I think we’re gonna be speaking from a different pulpit. The people that worked for Stone Friday, and the people that worked for Classic Friday, are walking into a completely different world starting [Tuesday] on what they can offer to retail and customers. Retailers hopefully have a choice again.
“Most suppliers are going to be excited about this because it gives them a chance to retrench themselves and fight with a bigger partner.”
Hand explained that Sunset’s creation, covering the Los Angeles and San Diego markets, may help fix some of the network footprint issues for recruiting brands in California. He added that he hopes Sunset will “bring a little balance” to the California market.
“LA County is bigger than 37 U.S. states, or some crazy number like that,” Hand said. “The opportunity to touch that many consumers and retailers is a big deal for us. Taking two businesses that honestly needed a little more scale and to be able to put them together is a big accretive opportunity for us as a buyer, and also long term for our stakeholders, employees.
“And then when you look at the national scale, for us now, to be able to compete on a national level against Reyes Beverage Group and Breakthru [Beverage] and Southern [Glazers’] and RNDC for brands, that’s a huge step forward for us, especially with our Chicago market, which is vulnerable from time to time, to lose brands to Reyes or something because of national partnerships. We now can offer that right back.”
Hand expects Sunset Distributing will join the California Beverage Solution alliance of A-B wholesalers – Advance Beverage Company, Donaghy Sales, Heimark Distributing, Markstein Sales Company, Matagrano Beverage, and Pacific Beverage – that Stone Distributing was also a part of, creating a statewide distribution network to compete with Reyes, Breakthru and RNDC.
“Our intention is to fold in,” Hand said. “We want to get as many brands as we can in our footprint, and really the best way to do that is to have a full footprint to present to a supplier.”
Hand expects conversations to follow the integration of Stone and Classic as Sunset, which are already beginning with suppliers in those portfolios.
“We’re really excited to have the luxury depth of a local book and a state book, like Stone and Classic do combined,” Hand said. “We literally have the top brands in the San Diego and Los Angeles County areas, some of the top breweries in California.
“Obviously, they’re top rated in the world as well. But to be able to sell them in their own backyard is a gift that keeps on giving.”
Hand is also open to future deals for Sunset. As an independent Anheuser-Busch InBev (A-B) distributor in its other markets – Tennessee, Kentucky and Illinois – HFC could be a landing spot for A-B’s ready-to-drink canned cocktail brand Cutwater, which A-B-owned branches are prohibited from selling in the state. RNDC currently distributes Cutwater in California, but recent departures from the distributor by Sazerac, Tito’s and Brown-Forman show the door is open.
Hand told Brewbound that his company is “highly interested in any opportunities that present themselves.”
“We are very, very apt and in tune to do it as much and as early as possible,” he added.
How the Deal Came Together
HFC had been working on a deal to purchase Stone Distributing from investment firm VMG Partners “for a couple of years,” Hand said.
As those talks cooled, Classic explored a potential merger with Stone Distributing over the last year, Classic Beverage CEO CJ Sanchez told Brewbound.
Following the 2021 sale of Classic’s 6.8 million case business – including Molson Coors, Mark Anthony Brands, Boston Beer, Heineken USA, Lagunitas, Firestone Walker, Pabst Brewing and Sierra Nevada – to Reyes’ Harbor Distributing, Sanchez was left with a craft portfolio in San Diego and Los Angeles.
In 2022, Classic merged its LA craft portfolio with Scout Distribution to create Scout Distribution LA. As part of that deal, Sanchez rolled his equity into Scout Distribution and Harland Brewing, making him the largest shareholder in Scout, he told Brewbound.
A year later, Classic acquired 1 million cases from Scout Distribution in San Diego.
Those moves left Classic with a non-alc business in Los Angeles and a predominantly craft beer business in San Diego, which Sanchez sold to HFC on Monday.
Sanchez said he was looking for ways to scale his remaining business as macroeconomic issues – rising interest rates, spiking costs, an inability to raise price for NA products and supplier terminations – began to stack up.
That led to talks with Hand about a year ago, which culminated in Monday’s sale. HFC financed the transaction through Overland Advantage, a partnership with Wells Fargo and private investment firm Centerbridge Partners. Hand said the deal allows HFC to own 100% of the stock and remain a fully family-owned business.
“The deal has different parts of it that are very intriguing for an acquirer to allow you to grow scale and get better at what you do in greater LA, and then double down on what you already do well in San Diego,” Sanchez said.
Post-deal, Sanchez sees an opportunity for craft brands in Sunset’s portfolio to excel in grocery chains.
“The untapped resource will be c-store,” Sanchez added. He pointed to Classic servicing around 1,100 c-stores a week with NA brands Essentia, Prime, Poppi and others as an opportunity for craft suppliers to get in those doors and on shelves.
“It’s going to help these guys that maybe struggle to get beyond the 50,000 to 60,000 cases, where you just need that chain business taking the next level to get you to 100,000, 200,000 maybe the ones in the 200,000, 300,000 cases get you in the 400,000 or 500,000,” he explained. “That’s really the big, big win is just the infrastructure and getting to those [chains] where, quite frankly, the higher volumes sit.”