Alcohol beverage giant Constellation Brands today announced it has acquired Funky Buddha, a fast-growing regional brewery in Boca Raton, Florida renowned for its flavored porters.
In a statement, Constellation, most known for its portfolio of imports including Corona, Modelo, and Pacifico, says the deal helps bolster its “strategy to lead the high end beer segment in the United States.” Funky Buddha is Constellation’s second craft buy, as it comes two years after the company acquired Ballast Point in San Diego, CA for $1 billion.
Constellation’s stated strategy amidst a decline in the overall beer beer market is to stay 100% “high-end” while others chase value and volume. “That volume’s probably not coming back,” a representative from the company said at the Beer Marketer's Insights conference earlier this year. They went on to highlight pricing as a major concern. “Even as beer is commodity-exposed, it's still mix-shifting-up. But lack of discipline in pricing in craft is a problem because the respect you have for your brands is directly impacted by how you price it. Mixing price too much squeezes margin out for all. Those reacting by trying to utilize capacity and lower prices to increase volume are making a mistake. That's the last bullet in the gun. I don't see volumes coming back in the next 7-10 years. That's why we're 100% high end across all three categories.”
Constellation is diversified across wine, spirits, and beer, which stands in stark contrast to AB InBev’s recent warnings about competition from those categories.
Ryan Sentz, president and head brewer at Funky Buddha, meanwhile, says in the same statement the company partnered with Constellation “because we saw an alignment in vision and felt they gave us the greatest opportunity for growth and development.”
“Constellation and Funky Buddha share a lot of the same ideals and passion for philanthropy, entrepreneurship and the art of craft beer,” Sentz adds. “At the end of the day, we just really like the people we have met within the organization, each of whom share our dedication to making outstanding beer.”
Terms of the deal were not disclosed.
Though founded just seven years ago, Funky Buddha is now the second largest craft brewery in Florida, having produced 27,000 barrels in 2016, representative of 40% growth, according to Beer Marketers Insights. Cigar City, which itself sold to private equity-backed Oskar Blues last year, is the largest in the state.
The company’s rapid ascension is noteworthy also, as Florida has emerged in recent years as, both literally and figuratively, one of the hottest markets in the country.
Bart Watson, staff economist with the Brewers Association, addressed this last year while speaking with the Jacksonville Business Journal in light of the Cigar City acquisition. At the time, he said craft has “really accelerated in recent years, particularly in Florida.”
In 2016, Florida’s beer industry contributed $21.6 billion to the state’s economy and employed more than 160,000 people, according to the National Beer Wholesalers Association, an advocacy group for beer distributors nationwide.
And as Florida has emerged, the big guys have taken notice. In Miami alone, as we covered earlier this year, there's Concrete Beach Brewery (a project from Alchemy & Science, a subsidiary of the Boston Beer Company), Wynwood Brewing (which sold a minority stake to Craft Brew Alliance in 2016), and Veza Sur Brewing (which will be built by AB InBev from the ground up, a slight departure from its typical habit of acquiring its innovation and growth within craft).
As for Funky Buddha, even before today’s news, the company had been the subject of a number of sale rumors percolating on message boards, rumors that were persistent enough to merit a response from the company when pressed by local media. The most vocal of these rumors, however, centered around a team-up with AB InBev (similar rumors followed Cigar City, too, before it went). It’s clear now, those rumors had a kernel of truth to them, even if the gossip corner got the buyer wrong.
Constellation and Funky Buddha were not immediately available for additional comment. This story is developing.
Update: Shortly after our story published, Funky Buddha Brand Director John Linn responded to our request for comment via email:
"So in short, the team is beyond excited for the transition," he writes. "The leadership, management, and all employees are intact and we're eager to keep growing in Florida and beyond in the years to come. Although nothing has been posted, there will almost certainly be new jobs created in Oakland Park. I'm sure some fans feel trepidation that we've done this, but from the bottom up we're all eager to get our beer to more people. Constellation is the perfect partner to do that without compromising anything—they are as high end as the alcohol and beverage space gets and they love what we do. They have a deep respect for the art of brewing and craft beer and certainly have an approach to it that's unique in the large brewer space. We wouldn't have gone into this unless we knew wholeheartedly that we could continue to make outstanding beers and even improve on them with the new resources at our disposal. We're stoked!"