Constellation Brands has succeeded in forcing two more Southern California beer wholesalers to sell the rights to distribute the company’s beer offerings to the Reyes Beverage Group.
In separate deals, Reyes acquired the rights to sell Constellation’s offerings — including popular imported Mexican beer labels Corona, Modelo and Pacifico as well as craft offerings from Ballast Point — from Triangle Beverage in Santa Fe Springs and Beauchamp Distributing Company in Compton.
The long-rumored deals officially closed on Friday, October 19, according to Constellation spokeswoman Jamie Stein.
A spokesperson for the Reyes Beverage Group declined to comment on the acquisitions.
Constellation is also reportedly attempting to force Ace Beverage to sell its distribution rights to Reyes. It’s unclear whether Ace will also make a deal or challenge Constellation’s attempts to terminate.
Ace owner John Anderson did not return a call for comment.
As part of Friday’s deals, Reyes acquired 3.4 million cases of Constellation beer products from Triangle, Triangle president Peter Heimark told Brewbound. An additional 700,000 cases from Beauchamp was also acquired, according to Beer Business Daily, an industry newsletter (subscription required).
According to Beer industry consultant Mike Mazzoni, who has previously worked deals involving the Constellation portfolio, a wholesaler would pay a multiple of 6x to 7x gross profits with an average case price of between $5.50 and $6 to acquire the portfolio, with California running on the higher end of the spectrum.
“In California, it’s [the average case price is] slightly less than that because Modelo Especial is sold at a little lower price,” he explained. “I generally use $5.50 per case in California.”
Mazzoni’s figures would indicate that Reyes paid Triangle between $130.9 million and $142.8 million for the Constellation portfolio. It could have also paid Beauchamp as much as $29.4 million.
Reached by phone, Heimark declined to discuss financial terms of the deal.
Triangle made its final deliveries of Constellation beer on Friday, October 19, Heimark said. Friday was also the last day of work for about half of Triangle’s workforce.
Due to the loss of about half of the company’s case volume, Triangle — which also sells offerings from Anheuser-Busch as well as craft brands such as Firestone Walker, New Belgium and Karl Strauss, among others — offered a voluntary severance package (a week of pay for every year of service) to 100 employees in its sales, merchandising and warehousing departments.
According to Heimark, Constellation chief commercial officer Bruce Jacobson and beer division president Paul Hetterich informed Triangle of their plans to terminate the two parties’ distribution contract in early September. Heimark said he was told Triangle was “too small” for Constellation, which wanted to work with a larger wholesaler who could focus on efficiency. The company also “wanted a single point of contact.”
“I thought being a 7-million case wholesaler with 50 percent of our volume in Constellation was pretty big, but I guess it’s not what their definition of big is,” Heimark said.
Heimark added that he believed Triangle had a “decent case against” Constellation to stave off the termination through the California court system, but ultimately decided to accept “a pretty good offer” from Reyes.
Heimark noted that Reyes had already started construction of a new warehouse within a half mile of Triangle’s warehouse weeks before it was notified of the termination.
“Whether or not Constellation guaranteed that they would get the business, I guess that remains to be debated,” he said. “But they were certainly notified by Constellation ahead of time that we would be terminated. I can’t imagine they would have built a warehouse two blocks from me otherwise.”
That 355,000 sq. ft. warehouse, which is being operated by Reyes subsidiary Harbor Distributing LLC, opened today in San Fe Springs to handle “the recent expansion of its Southern California operations,” according to a press release.
“We are pleased that our Southern California business continues to grow,” Tome Reyes, president of Reyes Beer Division West, said via a press release. “This new facility will create greater flexibility, productivity and efficiency for both our customers and our business operations.”
Constellation’s wholesaler realignment began in June when Markstein Beverage Co. sold the Constellation portfolio in northern San Diego County to Reyes subsidiary Crest Beverage. In that deal, Reyes picked up about 2 million cases of Constellation beer products from Markstein.
That move along with rumors of more to come provoked leaders of the National Beer Wholesalers Association (NBWA) to call for stricter enforcement of franchise laws during the trade association’s annual convention last month in San Diego. Without naming Constellation Brands, NBWA president and CEO Craig Purser said beer companies that terminate “highly performing distributors without cause” lead to “distrust and hurt the entire beer category.”“These type of supplier actions take focus away from building beer brands and investing in the category,” he said.
Nevertheless, Constellation, the third largest beer company in the United States, was undeterred in its desire to be aligned with Reyes in California.
Reyes, one of the largest beer wholesalers in the U.S., operates beer distributors in California, Florida, Illinois, Maryland, South Carolina, Virginia and Washington, D.C.
Earlier this month, Reyes subsidiary Premium Distributors of Virginia struck a deal to acquire the assets of Richmond-based Loveland Distributing Company. The deal, which is slated to close in early December, included 4.6 million cases of brands, including offerings from MillerCoors, Constellation Brands, Pabst Brewing, Boston Beer Company, and others.