THE GIST
In the near future, the sun may never set on the Reyes empire. Since Sept. 7, Reyes Beer Division—the country’s largest beer wholesaler and the sixth-largest privately held company in the U.S.—has acquired three more distributors, bringing its total territory to a dozen markets. As of Oct. 5, it operates in states as far east as Tennessee and as far west as Hawaii, having added five new states into its territory since 2020.
These recent moves include:
Entry into Texas by acquiring Capitol Wright Distributing, adding 16 million cases of beer, roughly equivalent to the total volume of Miller High Life sold in the U.S. in the first nine months of this year. The deal is set to close in December.
Reyes has also said it will acquire Paradise Beverages (Hawaii) and DET Distributing (Tennessee).
By 2020, Reyes already controlled 43% of all beer sold in the U.S.’s largest beer market, California. With the Capitol Wright deal, Reyes now has a strong foothold in the U.S.’s second-largest beer market, setting it up to dominate the country’s top two most lucrative beer-drinking territories.
This rapid growth in scale and reach comes as the Mexican beer portfolio of one of Reyes’ core suppliers, Constellation Brands, is experiencing sales that well outpace overall beer. But it also comes as the federal government and California regulators are tasked with scrutinizing alcohol wholesalers for potential anti-competitive practices. In California, a complaint by an anti-alcohol watchdog group to the state’s attorney general singles out acquisitions by Reyes and Anheuser-Busch InBev (ABI) as creating a duopoly in the state.
Reyes’ ties to arguably the most important beer company in the country—and the wholesaler’s ability to buy into markets where it also gets to influence how beer is ordered, moved, and placed on shelves—isn’t just consolidating beer’s distribution tier, but power across the industry. As goes Reyes, so goes U.S. beer.
WHY IT MATTERS
There’s no reason to think Texas couldn’t be another California for Reyes. The Lone Star State is an especially strong beer territory, with sales performing better than the rest of the U.S. For the rolling 52-week period ending Sept. 11, the beer category in Texas declined -2.5% while that category declined -5.6% nationally. Year-to-date, 13% of all beer sold in chain retail nationally was sold in Texas stores and is led in growth by the imports category, where Constellation (and now Reyes) has the chance to deepen ties.
Franchise laws in Texas do make it more difficult for beer brands to sever ties with wholesalers in favor of another (as brands including Sierra Nevada Brewing Co. have done in order to move to Reyes’ distributors in California). Still, Reyes sees white space in the state.
“Texas and Tennessee, in particular, have been on our radar due to the growth both markets have experienced over the last several years,” a Reyes spokesperson said via email.
It doesn’t appear that regulatory scrutiny will cool the pace of Reyes’ acquisitions, either.
“Whenever we are provided the opportunity to engage in a transaction, including with Capitol Wright Distributing, Paradise Beverages and DET Distributing Company, we work with the applicable state and federal regulators to ensure the transaction is reviewed and approved according to the letter of the law,” the spokesperson said via email.
Through its purchase of Capitol Wright, Reyes will gain 16 million cases of beer and flavored malt beverages from some of the most popular brands in the state. Those include Constellation Brands (Modelo, Corona, Pacifico), Gambrinus (Shiner), Boston Beer Co. (Twisted Tea, Truly), Mark Anthony Brands (Mike’s Hard Lemonade, White Claw), Diageo (Lone River Ranch Water), Yuengling (which entered Texas last year to great fanfare), and Texas craft brands including Saint Arnold Brewing Company. Last month, Sierra Nevada announced it would terminate three Anheuser-Busch InBev (ABI)-aligned distributor contracts in California in favor of Reyes; whether it will attempt to make similar moves in Texas following the Reyes/Capitol Wright deal remains to be seen.
As in California, Constellation’s Mexican imports will be Reyes’ lead horse in Texas. Sales of imported beer—80% of which comes from Mexico in national data—have been on an upward trajectory in Texas. Imports have increased their share of overall beer sales in that state from 15.6% in 2018 to 20% of sales year-to-date in 2022. The vast majority of those beers are nested within the Constellation portfolio, with which Reyes is aligned.
Both California and Texas are also border states with significant Latinx populations:
40.2% of Texas residents identified as Hispanic/Latino per the U.S. Census Bureau’s 2021 estimates; California has the same percentage.
It’s not only significant that Latinx drinkers are consumers of Mexican imports, but that they are beer consumers broadly.
According to the National Institutes of Health’s National Institute on Alcohol Abuse and Alcoholism, beer is the preferred beverage across all Hispanic groups.
[Good Beer Hunting typically uses the term Latinx in place of Hispanic, but will retain the word Hispanic when it is the terminology used by a data-collecting body in order to preserve the integrity of that data.]
The entry into Texas furthers Reyes’ rivalry with ABI-aligned wholesalers, a conflict that began in the Golden State. It adds fuel to the fire as imports increase sales and premium light beers like Bud Light continue to decline (-9% last year). Reyes’ distributor buy-ups in Tennessee and Texas were both Molson Coors (MC)-aligned wholesalers, creating a scenario in which the primetime battle in the coming years isn’t between so-called “red (ABI) and blue (MC)” houses, but between “red and gold (Constellation)” houses. Given its Constellation-aligned portfolio, Reyes has a strong wind at its back.
Words by Kate Bernot