Interview, Part 2: Constellation Beer’s Paul Hetterich On The Ballast Point Acquisition

EDITOR’S NOTE: With its Mexican portfolio thriving, last year Constellation Brands’ beer division jumped into the craft segment with the $1 billion acquisition of Ballast Point, the San Diego-based craft brewer. Since that deal closed, long-time Constellation executive Marty Birkel has been named president of Ballast Point, while the craft brewer’s founder Jack White and former top executives Yuseff Cherney, Jim Buechler and Earl Kight have all departed. (They’re now involved in a new venture, Cutwater Spirits, which owns former Ballast Point spirits brands Three Sheets Rum, Devil’s Share Whiskey, Fugu Vodka and others.) In this second part of SND contributing editor Terri Allan’s interview, Constellation Beer president Paul Hetterich explores how the Ballast Point deal has impacted Constellation—and whether new moves in the craft segment lie ahead.

SND: How has Ballast Point been merged into your brand family, with the appointment of Marty Birkel as the craft brewer’s president?

Hetterich: Marty Birkel has a lot of experience in the beer business, and he’s also a former chief sales officer for Constellation Brands’ wine and spirits division. That makes him a perfect fit. In all other respects, we’re leaving Ballast Point as an independent platform. Craft beer is very different (from imports) in the way it’s sold and marketed. In many ways, it’s like premium wine—a segment where we have a lot of experience. So far, Ballast Point’s sales are right on track with our expectations. In 2014, Ballast Point was the No.-31 craft brand. It moved to No. 11 last year, and it’s poised to finish even further up in the charts in 2016—while still in fairly limited distribution.

SND: What’s the progress report on the new Ballast Point brewery project in Virginia?

Hetterich: We’re retrofitting the building where the facility will be placed, and it’s set to come on line next year. We’ll have plenty of production capacity as we look to build out distribution. And in terms of our distribution plans, we expect to be in nearly all 50 states by the end of this year.

SND: Will you be making additional craft beer acquisitions?

Hetterich: We’ll do more in the segment over time. We expect craft beer to grow dynamically, even though it has slowed a bit recently. Right now, we’re very focused on driving Ballast Point and tapping into its potential. Ballast Point certainly will be the centerpiece of our craft beer strategy, but it will take more than that to achieve a 10%-15% share of the craft category, which is our goal.

SND: As the U.S. market’s largest beer importer, are you concerned with consumer gravitation toward local beers?

Hetterich: No. The high-end segment, which represents nearly half of all consumer beer spending, is growing. It will continue to capture more consumer dollars, but there’s no way all of it will be weighted to local beers. The routes to market simply aren’t available. So local beers will be important, but national and regional brands will continue carrying most of the weight.

News Briefs:

•Heaven Hill Brands’ Deep Eddy Vodka is expanding operations with the purchase of a second distillery located outside of Austin, Texas. The new 194,000-square-foot facility in Buda, Texas, will join the brand’s current distillery in Dripping Springs (also located outside Austin), and will bring Deep Eddy’s production capacity to more than 5 million cases a year. The original Dripping Springs distillery will continue to produce the vodka range—which includes Deep Eddy Straight Vodka, Sweet Tea Vodka, Ruby Red, Cranberry, Lemon and Peach—and operate a tasting room and event space. Deep Eddy is on pace to ship 1 million cases this year.

•Sazerac has extended its Fireball cinnamon whisky with a new 3.5-liter bag-in-box format. Reminiscent of bag-in-box wine packaging, the brand’s new “Firebox” contains two 1.75-liter bags, each with its own tap, and retails at around $60. Impact Databank projects Fireball to reach 4.7 million nine-liter cases in the U.S. this year on 6% growth, a marked slowdown from the torrid pace that saw the brand nearly double off an already large base from 2013-2015.

Craft Brewing and Distilling News:

•Texas-based Treaty Oak Brewing & Distilling has opened a new craft brewery at its Dripping Springs location. The new facility, which has a 30-barrel brew system, is expected to brew 2,000 barrels annually. To mark the opening, the company is releasing three year-round beers: Fitzhugh Ale British mild (3.5% abv), Lil’ Hop session IPA (5% abv) and Bright Side blonde ale (4.5% abv). They will debut at select accounts in Texas beginning in December, with Brown Distributing carrying them across the state in cans next March. Treaty Oak’s craft spirits range includes Treaty Oak Rum, Treaty Oak Barrel Reserve Rum, Waterloo Gin, Waterloo Antique Gin, Starlite Vodka, Graham’s Sweet Tea Vodka, and Red Handed Bourbon.

•Kentucky’s Goodwood Brewing will add a new Spruce Tip IPA to its year-round lineup beginning next March. The spruce tip-infused India Pale Ale will debut on draft and in six-packs of 12-ounce cans across Kentucky, Indiana, Alabama, Virginia, Illinois, Ohio, Tennessee, North Carolina, South Carolina, West Virginia and Missouri. Goodwood’s year-round range also includes Bourbon Barrel Ale, Bourbon Barrel Stout, Walnut Brown Ale and Goodwood Pale Ale.

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