Lone River Ranch Water hit the market on April 17, 2020, a month into the COVID-19 pandemic.
Less than a year later, spirits giant Diageo acquired the hard seltzer brand’s parent company, Far West Spirits LLC, in a transaction announced on Monday.
In the 11 months between launch and acquisition, Lone River has posted nearly $4.3 million in off-premise sales last year (via NielsenIQ) and is already the 14th largest hard seltzer brand family year-to-date. Such fast first-year growth would be impressive on its own, but add in the supply chain challenges presented by a pandemic and it’s even more eyebrow raising.
“We obviously had grown so quickly that I just knew there was going to be an extent at how much we could realistically scale the business on our own, just due to our existing infrastructure, our own resources, and, quite frankly, even our kind of experience,” Far West Spirits founder Katie Beal Brown told Brewbound.
Discussions between Far West Spirits and Diageo started last fall. The timing couldn’t have been better for Far West, as large beer manufacturers such as Anheuser-Busch through its Karbach craft brewery and Heineken USA via its Dos Equis brand are preparing to enter the ranch water hard seltzer sub-segment. Beal Brown knew that competing with those larger companies would require more resources and scale than Far West had on its own.
“So that was definitely a big motivating factor in addition to when you think about Diageo as a whole, I would argue that you’re not going to find a more credentialed company in the tequila space,” she said. “And so the fact that we have been really a first mover in the agave tequila-inspired hard seltzer category, it made a lot of sense in that regard, as well just knowing that their business has been very successful to date.”
The initial focus for Far West under the Diageo banner will be expanding Lone River’s geographic footprint and providing the support to ensure the product is successful in markets outside of its home market of Texas, where the products are distributed by Ben E. Keith statewide.
“I think our ambition is absolutely the same: We think this is a brand that has national potential,” Beal Brown said. “And the way that we get there is still to be announced. But we’re absolutely gunning for that.”
Prior to the deal, Far West had taken the Lone River brand into four other states — Arizona, Alabama, Tennessee and Florida — through Diageo wholesalers. More expansion in the south is likely up first.
“I think those are very high priority, natural expansion partners and likely ones that we will execute very quickly,” Beal Brown said.
As for Ben E. Keith, Beal Brown called the A-B wholesaler “a really important partner” and added that “they will continue to be.”
Beal Brown will remain in the CEO role overseeing the Lone River brand, which will be a part of Diageo Beer Company. And while she will work closely with Diageo Beer Company and Diageo North America, Beal Brown said the deal is structured to allow Lone River to maintain the “entrepreneurial spirit that we’ve built into our foundation.” That includes maintaining the team that Beal Brown has built, as well as its co-packing relationships with Abita Beer and F.X. Matt Brewing Company and “other supply and creative partners.”
“They wanted things to feel as entrepreneurial as they have been for us while providing a little bit more support in terms of infrastructure, more support for sales and marketing,” she said.
Diageo will also help shore up a supply chain that has givenFar West numerous issues, from procuring raw materials to can supply, since launching at the start of the pandemic in the U.S.
Beal Brown, whose background is in marketing having previously worked at Anomaly and JWT, believes she’ll be able to focus on brand building and reaching a much broader audience for the brand with a lifestyle product from West Texas. To help spread that message, Diageo has planned a “meaningful investment behind the brand,” she said.
“We’ve been a little bit limited in how much we can tell our story because of the resources that we have, and a lot of our marketing has been focused on social media,” she said. “While we’ve been able to do a lot with that, I think there’s a lot of other platforms where we can reach a broad audience but also do a little more heavy lifting in telling our own brand story and the story behind our product that I think is really interesting to consumers and helps deepen that connection with them.”
For Beal Brown, telling the story of where ranch water comes from and the legend behind it will help the brand resonate with new consumers and differentiate it from larger players.
“I’m really excited about preserving that culture around ranch water and sharing that with a much bigger audience and really realizing the full potential of the brand,” she said. “As an entrepreneur, you have a ton of moonshot ideas but you don’t always get the chance or don’t always have the resources to bring them into reality. And I think the beauty of this for me is just being able to bring that vision to life to the fullest extent, and really realize a lot of those moonshot marketing ideas that may have just sat on a shelf for years if we were in a different situation.”
Far West Spirits worked with Arlington Capital Advisors, while there was no buyer-side banker.