Middle-Tier Moves: Reyes to Acquire Another California Constellation Brands Wholesaler

One of the biggest beer wholesalers in the country is growing once again.

Reyes Beverage Group subsidiary Harbor Distributing LLC last week announced an agreement to acquire the assets of Central Coast Distributing LLC in Santa Maria, California. Terms of the deal were not disclosed, however, the transaction is expected to close on April 12.

The proposed deal would add 2.6 million cases of product and 1,000 accounts across San Luis Obispo County and Northern Santa Barbara to Reyes’ beer business. Central Coast’s list of suppliers includes Constellation Brands, MillerCoors and Pabst Brewing, as well as craft beer offerings from Boston Beer Company, Sierra Nevada, Lagunitas, New Belgium, Deschutes, Dogfish Head, Oskar Blues and Cigar City, among others.

“Central Coast Distributing has been an independent family distributor for 54 years and they have run a very strong business,” Reyes Beer Division West president Tom Reyes said in a press release. “We are honored to have this opportunity to continue to grow its operations.”

Central Coast president and CEO Michael Larrabee added that the “business is in good hands.”

The addition of Central Coast comes after Constellations Brands — which makes Corona, Modelo, Pacifico and Ballast Point beers, among others — forced four Southern California beer wholesalers to sell its distribution rights to Reyes last year. In separate deals, Reyes acquired the rights to sell Constellation’s offerings from Ace Beverage in Los Angeles; Triangle Beverage in Santa Fe Springs; Beauchamp Distributing Company in Compton; and Markstein Beverage Co. in northern San Diego County.

To accommodate its Southern California business expansion, Harbor opened a new 355,000 sq. ft. Santa Fe Springs distribution center in late October.

Outside of California, Reyes subsidiary Premium Distributors of Virginia acquired the assets of Richmond-based Loveland Distributing Company. That move has led to a dispute before the Virginia Alcoholic Beverage Control Authority (ABC) over Loveland’s attempted sale of the distribution rights to Michigan’s Bell’s Brewery, which has since ceased shipments to Virginia.

Through the first two months of 2019, at least four other U.S. beer distributors have also consolidated.

In early February, Fresno, California-based Anheuser-Busch wholesaler Donaghy Sales LLC announced an agreement to acquire another A-B wholesaler, Delta Sierra Beverage LLC in Modesto. According to a press release, the deal “will significantly increase the size, strength and distribution footprint for Donaghy in central California.”

The deal is expected to close in the spring, pending supplier approval, according to the release. The two family-owned wholesalers distribute many of the same brands, including Boston Beer, Heineken USA and Firestone Walker, among others.

Last year, Donaghy sold more than 7 million cases of product to 3,000 retail accounts in Fresno, Madera, Mariposa, Kings and Tulare counties, and the company will now take over Delta Sierra’s Modesto warehouse to distribute beer in Alpine, Amador, Calaveras, Merced, Sacramento, San Joaquin, Stanislaus and Tuolumne counties as well as Yosemite National Park.

Meanwhile, three other distributor deals were struck in January. Johnstown, Pennsylvania-based MillerCoors wholesaler Inco Beverage acquired Greensburg Beverage, according to the Pittsburgh Tribune-Review. Inco has since renamed the business “Inco Greensburg” and has begun delivering offerings in Westmoreland, Allegheny, Washington and Fayette counties.

Another MillerCoors wholesaler, Waite Park, Minnesota-based Bernick’s, acquired 48-year-old Northwest Beverages in Superior, Wisconsin, according to a press release. Included in the deal was Northwest Beverages’ portfolio of brands, such as products from MillerCoors, Heineken USA, Constellation Brands, Boston Beer, and Summit Brewing, among others.

Finally, Portland, Oregon-headquartered Columbia Distributing, also one of the largest wholesalers in the U.S., struck a deal to acquire 1.2 million cases of product from Eastern Oregon-based Graybeal Distributing in early January.

The pace of M&A activity within the middle tier has remained “pretty steady” in recent years, according to Susan Massey, a senior financial advisor for Ippolito Christon & Co., who spoke at Beer Business Daily’s annual Beer Summit last month. Her firm counted 27 distributor deals in 2018, compared to 23 the prior year. She added that many of those companies sold to other wholesaler operations because the owners were unable to execute a generational transfer, a popular succession plan within the middle tier.

Massey predicted more deals on the horizon as “mega distributors” grow even larger and family-owned wholesalers “commit to the beer business and expand” beyond their regions “to connect the dots.” Additionally, she expects private equity and family offices seeking “stable, steady cash flow” to invest invest in the space.

As those different groups look to expand, buyers can expect “stable” brand multiples, Massey said. Over the last five years, large national brands have sold for three-to-four-times gross profits, while imports have commanded five-to-eight-times and “very high growth craft” brands have garnered eight-to-10-times gross profits, she said.