Constellation Brands buys Florida's Funky Buddha Brewing

Corona-importer Constellation Brands said today it is buying South Florida’s Funky Buddha Brewery, the Sunshine State’s second-largest brewery. Terms were not disclosed.

It’s the second major U.S. craft beer purchase by Victor, N.Y.-based Constellation, which laid down $1 billion for San Diego brewery Ballast Point in 2015.

Seven-year-old Funky Buddha, maker of Hop Gun IPA and Floridian Hefeweizen, began as a Boca Raton tap room in 2010 and three years later built a 54,000-square-foot, 45,000-barrel-capacity production brewery in nearby Oakland Park that also has a taproom and kitchen.

The brewery, which bills itself as South Florida’s largest craft brewery and the operator of the state’s busiest taproom, produced 27,000 barrels last year, selling the vast majority in its home state. It is on track to make about 35,000 barrels in 2017, according to the South Florida Business Journal.

Funky Buddha Head Brewer and President Ryan Sentz and his brother KC Sentz will continue to run the day-to-day operations of the business, Constellation said in a statement.

For Constellation, the U.S.’s third-largest brewer, the deal reinforces its strategy “to lead the high-end beer segment in the United States," the company said.

It also comes a month after the company booked an $87 million non-cash impairment charge on the trademarks associated with its Ballast Point purchase. Despite the dampened outlook for its flagship craft beer brand, Constellation continues to invest behind the brand, recently opening a $48 million brewery in Virginia and planning to open a 12,000-sqaure-foot brewery and brewpub in Chicago’s West Loop in 2018.

Constellation’s primary beer business is its Mexican import portfolio, which includes fast-growing brands such as Corona, Modelo Especial and Pacifico. It recently acquired Grupo Modelo’s brewery in Mexico and plans to build another in Mexicali, Mexico, to help meet booming demand. The company, which also imports and sells wine and spirits, said in April that net sales for its beer business rose 17 percent to $4.2 billion in its most recent fiscal year, which ended Feb. 28.

The deal comes a week after Japanese brewer Sapporo said it would buy San Francisco craft brewer Anchor Brewing for $85 million, a roughly 2.6 multiple to annual revenue. The price Constellation paid for Ballast, by contrast, represented an 8.7 multiple.

Since Funky Buddha is less than a third the size of Anchor, which is on track to make about 130,000 barrels in 2017, analysts peg the likely purchase price below $100 million. Brett Cooper, a senior analyst with Consumer Edge Research, said the purchase is “a true bolt-on deal with relatively low risk.”