Reyes Beverage Group, one of the biggest distribution companies in the country, has made yet another sizable move to expand its reach across its California footprint.
Beer Marketer’s Insights first reported Monday that Reyes Holdings, whose beer division already oversees 60 million cases of product in the Golden State, would add another 28 million by buying DBI Beverage Inc. The outlet reported a purchase price in the "range" of $425 million, while Brewbound separately reported the figure at "more than $400 million." In addition to growing alcoholic and non-alcoholic beverages by 47%, Beer Marketer's Insights noted the move would push Reyes over 200 million cases of beer annually.
DBI is a MillerCoors-focused distributor, also known as a “blue network” company, but it also carries beers from Constellation Brands’ import portfolio (which includes powerhouses like Corona and Modelo, the top-two foreign brands in the U.S.).
Perhaps most important, DBI’s nine-location footprint is based in Northern California, from Chico down to Sacramento, San Francisco, and San Jose. This swath essentially completes Reyes' network from north to south along the entire state, adding a fifth wholesale company to the Reyes Beer Division that includes locations almost directly along Interstate 5. When the deal for DBI closes this fall, Reyes will have the most complete collection of distribution companies in the country's biggest beer-drinking state.
This final fact cannot be overstated. In recent years, consolidation across beer’s middle tier has been fast and furious. Many companies are left with choices that are similar to ones faced by the breweries they serve: innovate and stay nimble, or get as big as you can. Reyes has enthusiastically chosen the latter option.
It was just this spring that the company hired Tom Day, a former executive of multinational company Diageo, to guide a growing collection of wholesalers increasingly focused on the Constellation Brands portfolio of beers. The expansion of this “gold network” is key for Constellation and Reyes to compete against declining volume sales for leading brands in red (Anheuser-Busch InBev) and blue (MillerCoors) houses.
Longtime industry and distribution vet Kimberly Clements, co-founder of beer consultancy firm Pints LLC, says that this latest move accomplishes two things. For MillerCoors/Constellation wholesalers in California, it's a signal that Reyes will continue to be a buyer, perhaps uplifting spirits in a tightening market. However, she says this integrated network will also put additional pressure on AB InBev houses.
"I imagine this will put more pressure on indie ABI distributors in NorCal who continue to sell Constellation," she adds.
The shared collection of companies comes with a host of synergistic benefits, from logistical coordination at a time when shipping beer is becoming more challenging to additional help building a Mexican import portfolio with lots of room to grow in California. About 40% of the state’s population identifies as Hispanic or Latino, a demographic that has helped Corona and Modelo expand rapidly. The latter has grown so much that it is on pace to be the top-selling beer in California out of all beers in the state.
What's exciting for these already wildly successful brands is the immense room for improvement within DBI's shipping area.
From 2017–2018, Corona Extra lost about 2% of volume in IRI grocery, convenience, and other stores nationally, but the losses were much worse in California (-10.2%), and specifically in grocery stores in San Francisco (-13.2%) and Sacramento (-10.4%). Modelo Negra, which added 11.7% nationwide last year, showed better growth across the state (17.7%), but grew only modestly in San Francisco (2.7%) and Sacramento (5.6%) grocery stores.
Additionally, there should be a lot of excitement for Corona Premier, which debuted in 2018, as well as Constellation's other two major Mexican brands, Pacifico and Victoria. The latter two had solid gains nationwide (Pacifico was up 6.5%, Victoria up 10.5%), but were flat or negative in California.
All this opportunity comes at a time when Constellation is clearly seeing a need to boost sales of Corona, after setting discounts for the first half of summer. The purchase of DBI also falls just months after Tom Day’s hire signaled Reyes’ intention to get bigger and better at pushing those products alongside (and against) mainstays from MillerCoors and AB InBev.
For most wholesalers in this time of consolidation, a key way to find growth is through acquisition, and Reyes has not been shy about pursuing that strategy. DBI’s added footprint in a pivotal state like California will play a key role in locking down what, where, and how beer gets to market. The purchase is also a sign of the power Constellation continues to wield through its import brands, despite troubles for at least one of its craft acquisitions, Ballast Point.
Reyes is filling out its map in the Golden State, and there may still be plenty of pins to drop as it continues to grow.
Words by Bryan Roth