Why couldn't Constellation Brands have waited to buy Ballast Point after the IPO? Ugh!

Shucks! I really wanted to buy some Ballast Point stock at the Initial Public Offering!

Imagine owning the stock and, then, having Constellation Brands make the buyout offer. What’s that again? Eight times sales! Let me repeat, “8 times sales!”

Last year my son-in-law, Brian, and I went visiting breweries in San Diego. Ballast Point, Stone, Modern Times and a few others were right at the top of our tour list. We sat down and had lunch in the Ballast Point $20 million brewing and dining facility. It was a first-class experience. Brian ordered a flight of beers to sample the selections while I engaged in a conversation with the marketing and brewing staff. They boasted that growth year-to-year was up 85%. Ballast Point distillery liquors and brews are really hot stuff!

The craft brewing industry is testing the incumbents. The big brewers are being punched on all sides by artisans that will soon number around 5,000 nationwide. Last year alone in San Diego forty (40) new crafters were expected to start pumping suds. If I am not mistaken, San Diego has more breweries per capita than any city on the planet. Other cities are seeing similar growth patterns. Asheville, North Carolina, for one, is home to New Belgium’s $140 million East Coast brewery and a growing pocket of microbreweries and brew pubs.

Let’s go back to the 8 times sales. This hasn’t really sunk in. I am used to 8-10 times earnings. This would have made Ballast Point a sensible purchase right around $100 million. Are markets always sensible? Hell, no!

But, know this: The big breweries are losing ground and they will spend money to shore up their dominance by making more purchases and choking off the supply chain of ingredients to the crafters.