Given the totality of its overall business, Constellation Brands Inc.’s two craft breweries, Oakland Park, Florida-based Funky Buddha Brewery and Dallas-based Four Corners Brewing Company are essentially a rounding error on the balance sheet. The parent company touted ambitious plans for the two breweries when it bought them in 2017 (Funky Buddha) and 2018 (Four Corners). But those huge projections have yet to materialize, and the parent company rarely acknowledges the pair publicly.
Constellation’s quarterly earnings reports contained no mention of Funky Buddha or Four Corners for all of fiscal year 2021. In its 90-page Fiscal Year 2020 Summary Annual Report, Constellation mentioned each craft brewery by name just once, and only to convey the fact of their acquisitions. A chart contained in that report shows “high-end beer” marked as Constellation’s “beer business focus,” while the craft beer segment is pictured without such emphasis.
It was just a few years ago the company considered its craft breweries as part of its “high-end” collection, but just this month CEO Bill Newlands intimated that may solely represent Constellation’s brand families of imports like Modelo, Corona, and Pacifico. In a transcript of a quarterly review from April 8, Newlands never mentioned Funky Buddha or Four Corners, and the only “craft” product he referenced was “craft spirits.”
Whatever plans may have been on the table a few years ago are now inscrutable, and Constellation continues to be mum about the breweries’ future. When asked about priorities and long-term goals for Four Corners and Funky Buddha, Constellation did not respond to GBH’s request before our stated deadline. Questions directed to PR contacts for Funky Buddha and Four Corners were either not returned or were redirected to Constellation’s communications team.
Ballast Point Brewing Co.’s shadow falls hauntingly across discussions of Four Corners and Funky Buddha. A rising national star when it was acquired by Constellation in 2015, the San Diego brewery nosedived and was eventually sold for pennies on the dollar a mere four years later. Funky Buddha and Four Corners must hope history doesn’t repeat.
It’s perhaps understandable that Constellation is reluctant to talk about either craft brewery.
Funky Buddha, which enjoyed a strong following in Florida for its flavored beers like Maple Bacon Coffee Porter and More Moro Blood Orange IPA, seemed poised in 2017 to become a dominant regional player with Constellation’s financial backing. But with a stated goal of doubling production from 2017 to 2018, Funky Buddha in fact grew production just 1% that year, according to BA data. Current sales figures show a company treading water at best.
In 2017, just before its sale to Constellation, Four Corners moved into a 18,000-square-foot brewing facility that it said had the capacity to brew 25,000 barrels annually, with expansion possible to 75,000 barrels. Brewers Association (BA) data shows Four Corners would go on to brew 11,982 BBLs in 2018 and 17,035 BBLs in 2019.
Even with positive sales growth, Four Corners apparently lags behind what was expected: Brewbound reported on April 23 that Constellation noted a $6 million impairment charge on Four Corners in a filing with the Securities and Exchange Commission, essentially admitting it overpaid in acquiring the brewery.
“Certain negative trends within our Four Corners craft beer portfolio, including slower growth rates and increased competition, resulted in updated long-term financial forecasts indicating lower revenue and cash flow generation for the related portfolio,” Constellation wrote in its filing.
Among the missed opportunities with Four Corners was its connection with Latinx drinkers. At the time of the brewery’s acquisition, Constellation executives touted the brewery’s “bicultural inspired flavors” and praised it as a company that “embraces and reflects the diversity of its people.”
Despite—or perhaps because—Constellation has the U.S.’s top-selling Mexican import beer brands in its portfolio, Four Corners hasn’t nationally connected with these drinkers. Instead, it’s launching a new line of hybrid hard kombucha-seltzers.
Both Funky Buddha and Four Corners saw dollar sales in chain retail stores tracked by market research firm IRI increase in the first full year following their acquisitions. Four Corners’ sales have continued to grow modestly after that, though in line with the craft beer category generally; in 2020, its dollar growth of 13.5% matched that of overall craft beer. while Funky Buddha actually ended 2020 down -6.8%, despite the pandemic’s general boost to regional breweries’ chain retail sales.
As recently as five years ago, Funky Buddha was a popular craft brewery beloved by enthusiasts for its (perhaps ahead of the curve) boldly food-flavored Porters and Stouts. In 2017, its Maple Bacon Coffee Porter was named one of the 50 best beers by Mental Floss; it was name-checked as a “ballyhooed brewery” in a 2016 VinePair article about beer ratings. Funky Buddha was a leader of the pack—and then the pack passed it by. Today, Funky Buddha retains a respectable 3.9 rating on Untappd, but no longer seems a part of the “best beers in the country” discussion.
Again, it calls Ballast Point to mind. Constellation’s track record with that brewery doesn’t inspire confidence in its ability to fast-track Funky Buddha or Four Corners. After purchasing Ballast Point for $1 billion in 2015, Constellation oversaw Ballast Point as it shed 110,00 BBLs of production from 2016 to 2018 before selling the brewery for a rumored $68 million in 2019. As it’s doing with Four Corners, Constellation noted impairments on Ballast Point for two fiscal years, 2019 and 2020: reducing its valuation by $108 million in fiscal year 2019 and $11 million in fiscal year 2020.
Under Constellation ownership, key Ballast Point employees were laid off or left the company—including Ballast Point cofounders—with several citing an identity and strategy disconnect between Constellation and the acquired craft brewery. A former Ballast Point employee told GBH in 2019 that Constellation expected executives with wine, spirits, and imported beer experience to be able to successfully run a craft beer brand—which they clearly couldn’t.
In 2021, a similar disconnect may explain what’s hampering Four Corners and Funky Buddha’s growth as major regional players. While Ballast Point’s dedicated sales team is what helped propel that brewery to national success in the first half of the 2010s, former employees describe Constellation as having anything but a craft mindset. Instead, its beer division is run by executives who see the company as the behemoth it is: IRI and Boston Consulting Group named Constellation the fastest-growing large consumer packaged goods (CPG) company three years in a row, from 2016 to 2019, based on roughly $500 million growth for Corona and Modelo. Behind the scenes in business and in practice, craft beer doesn’t register for the company and in turn, matters less to potential consumers.
It’s now debatable whether Constellation is equipped to manage craft breweries. Ballast Point had the wind at its back, but in a few short years became synonymous with failure on a massive scale. Now, Funky Buddha and Four Corners aren’t living up to the regional potential many saw in them just five years ago. And against that backdrop, the parent company says little about them publicly.
Instead, Constellation’s beer division continues to focus on those stars: Mexican imports, plus Corona Hard Seltzer. Its imported beer portfolio added almost $2 billion in just IRI-tracked chain retail sales since 2017—and stole what appears to be all of Constellation’s beer division’s attention. Modelo Especial is now the third best-selling beer in America, with Corona not far behind at number six. Combined, those two brands generated nearly $5 billion in chain retail sales in 2020.
Those huge sales explain why Constellation flagged “high-end beer”—including imports—as its business focus. But the company seems unsure how its craft breweries fit into its beer portfolio; quarterly earnings reports mention that Constellation’s portfolio contains craft beer, but without naming the breweries specifically. Whatever grand plans the parent company might have had for Four Corners and Funky Buddha at the outset, they’re not providing public updates on them.
Both Four Corners and Funky Buddha have been relatively quiet in the headlines this year. Four Corners went two years without a press release or news story on industry trade publication Brewbound despite the fact the company can submit press releases at any time. This year’s only news from Funky Buddha has been a marketing and distribution push behind Funky Buddha’s line of hard seltzers.
In mid-February, Funky Buddha announced it would expand distribution of those hard seltzers from one state, Florida, to nine others along the East Coast. The marketing behind it is borrowed from the Corona playbook: Funky Buddha hard seltzers got their own 30-second Super Bowl ad to run in Florida this February, for a reported cost of $5.8 million. (Funky Buddha also recently completed a can redesign, which was reportedly in the works since last summer.)
Despite its hard seltzer being the largest push for Funky Buddha in a year, it sounded like an afterthought in comments Constellation’s chief financial officer Garth Hankinson made during a conference for financial services firm Morgan Stanley just two months prior.
As reported in Beer Business Daily, Hankinson described Constellation as "toying around with testing what [Funky Buddha hard seltzer] could look like on a regional basis" or even nationally, but "that's probably not going to be where we have the great opportunity.” He called Funky Buddha hard seltzers “one of the irons in the fire,” alongside Corona Hard Seltzers.
For its part, Four Corners’ only press release issued this year was to announce the launch of its new hybrid hard kombucha-seltzer line, BuchaLada. Someone seeking answers on what’s ahead for Four Corners and Funky Buddha can’t glean much from these press releases or from investor material: Two new flavored malt beverage (FMB) lines, and a lot of radio silence otherwise.
This week, the impairment charge on Four Corners provides a stark financial admission that the honeymoon period for Constellation and its acquired brewery has, again, lapsed. Ballast Point is no doubt the elephant in that room; even the language in SEC filings announcing impairment charges on Four Corners is nearly identical to the language announcing impairment charges on Ballast Point. Both cited “certain negative trends” and “increased competitions” to explain the devaluations. If Constellation seeks to improve its track record with acquired craft brands, it will have to learn from past mistakes, quickly.
Words by Kate Bernot