Alert: Constellation Buying Dallas' Four Corners Brewing

FILED JULY 10, 2018

Dear Client:

The next Constellation craft acquisition? Dallas-based craft brewer, Four Corners, who has quintupled sales growth over the last four years and expanded from 8,000 barrels capacity in 2016 to 25,000 last year. You may have heard of their El Chingón IPA, or recognized their rooster logo, if you meander around Texas cooler doors.

Constellation announced the purchase today, touting Four Corners' "Texas roots and heritage," and the "dynamic and bicultural (Hispanic and American) brand" with refreshing "big flavor" that "complements Constellation's existing portfolio."

DALLAS DEMOGRAPHICS TOPS? Apparently, Dallas-based brands are covetable: CANarchy Craft Brewery Collective recently announced they added 45,000-barrel Dallas brand, Deep Ellum, to their portfolio of brands.

Indeed, a Constellation spokesperson told us that "based on recent dollar sales growth in IRI, the craft segment is generating the most growth in the state of Texas, compared to other states."

FOUNDERS STAYING ON. Four Corners was founded by George Esquivel, Greg Leftwich and Steve Porcari back in 2012. They will reportedly stay on as management, as will their employees.

"Four Corners brews an entire portfolio of authentic, delicious and sessionable beers accompanied by one-of-a-kind branding inspired by their Oak Cliff roots," per announcement.

SOME BURNING QUESTIONS: NEW MARKETS? So the name of the game here is to scale this brand up in the Gold Network ASAP, right? For example, Florida's Funky Buddha, which signed on with Constellation last summer, moved into six new markets -- Alabama, Georgia, South Carolina, North Carolina, Virginia, and Washington D.C.-- this January alone.

FOCUSING ON KEY AREAS OF OPPORTUNITY. "Our expansion market strategy is fluid but we are focusing on key areas of opportunity while being thoughtful about capacity and brand integrity," Jamie Stein told CBD.

"MANY" FOUR CORNERS DISTRIBS ALIGNED. "Many of our Four Corners' distributors today are also Gold Network and/or Ballast Point distributors," she added. Indeed, it appears that Constellation houses, Houston's Silver Eagle and Southeast Texas' Del Papa (2 Row division), both took on the brand just this year. Dallas-based Andrews, also a Constellation distributor, has serviced the brand for two years. But we know of at least one mismatch with Glazer's carrying Four Corners in San Antonio.

As for where it could be brewed in the future, they have "no immediate plans to make changes to the brewing process."

HISPANIC ANGLE IMPORTANT. Is this about the Hispanic angle? "Four Corners represents a compelling, high-growth opportunity for us," she said. "Their bicultural inspired flavors and branding capitalize on one the hottest trends in beer - authentic Hispanic influenced products. And their unique and innovative style complements our Mexican and craft beer portfolio." It represents a "really interesting intersection of Mexican brands and domestic/local craft brews."

ETC. They've recently planted new digs in The Cedars District of Dallas, which includes an 18,000-square-foot production facility as well as a 10,000 square-foot taproom with two bars and tens of taps of their own beer, some of it taproom-only.

SUBJECT TO TAPROOM BEER BUYBACKS? But the margins at this new taproom could take a significant hit with this deal. Recall that the "Texas Taproom Bill," aka HB 3287, which was signed into law last summer, holds that breweries producing 225,000 barrels a year or more have to set up a distribution agreement and pay distributors for beer they currently sell in the taproom. And because Four Corners' new parent company surpasses this threshold, it will likely join Oskar Blues and Deep Ellum in the state as brewers who are subjected to this "dock" fee to distributors.

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Until tomorrow,

Harry, Jenn, and Jordan


"Adversity causes some men to break; others to break records."
- William Arthur Ward

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