US beer, wine, and spirits producer Constellation Brands has reportedly cut its billion-dollar craft beer business after falling short of its initial expectations. The Corona Beer owner let go Ballast Point Brewing, a business it had acquired for $1 billion just four years ago.
Constellation Brands sold Ballast Point Brewing to a company called Chicago Land Brewing Kings & Convicts. The exact amount of the deal has not been disclosed by either company. Following its acquisition of Ballast Point Brewing, Constellation Brands had a hard time growing the company due to stiff competition from more established local brands and breweries.
Over the last two years, Constellation Brands was forced to shut down a number of its brewing houses. The company even wrote down the value of its acquired business by more than $200 million to just $17 million. Analysts have stated that Ballast Point was simply proving to be too much of a drag on the company's overall business. The company likely tried everything it can think of to grow the business, but it ultimately decided to let it go following its failed attempts.
The shedding of its failing craft beer business was likely a part of the company's efforts to review and reallocate its beverage holdings. The decision to shake up the company's portfolio was likely made easier with the hiring of its new chief executive, Bill Newlands. The new CEO replaced Robert Sands in March of this year.
To offset its massive loss, Constellation Brands is reportedly planning to make heftier investments in the cannabis industry. A company the spokesperson did clarify that the company will need to properly review and study its next move given how its previous acquisition hadn't worked out as expected.
Prior to selling Ballast Point, Constellation Brands did make a hefty $4 billion investment to acquire a 38 percent stake in Canadian cannabis company Canopy Growth (CGC). The investment was made due to positive sentiments towards the growth of Canada's recreational programs and its cannabis market.
Constellation Brands' investment in Canopy Growth has proven to be yet another big gamble for the company given that Canopy reported significant losses this year. For its first three quarters of this year ending on November 30, Constellation Brands reported $544 million in earnings losses attributable to its investment in Canopy. The non-equity earnings loss is equal to around $125.4 million in net losses.
In its attempt to rectify Canopy's losses, the company's board of directors led by Constellation appointees forced its founder and former co-CEO Bruce Linton to leave his position.
