Beer

Constellation Buys Corona—but Big Beer Is Still Shrinking


Constellation Buys Corona—but Big Beer Is Still Shrinking

Photograph by Dave Shafer/Getty Images

Constellation Brands (STZ) is expected to become the third-largest beer supplier in the U.S. today, as it closes a $5.3 billion deal with Belgium’s Anheuser-Busch InBev (ABI).

It is buying the rights to Corona, the country’s top import, and the giant Mexican brewery that makes it and a few other brands. But bigger is not necessarily better in the beer business. In fact, it’s a bit of a liability.

U.S. drinkers these days are cooling on Coors Light and Co. They’d rather have Old Stinky’s Strong Ale from Wyoming’s Snake River Brewing, Saison Man from Trinity Brewing in Colorado Springs, or 420 Extra Pale Ale from SweetWater Brewing in Atlanta.

Craft beer sales by volume surged 15 percent last year as the U.S. industry overall grew by less than 1 percent, according to the Brewers Association, a Colorado-based trade group. Small-batch suds now command 6.5 percent of the U.S. beer market by volume and 10 percent by revenue.

Big beer is about to lose another battle, this time in South Carolina, where Governor Nikki Haley is expected to sign a law that will let craft brewers sell suds on-site—up to three pints per customer. In many states, brewers have been restricted to serving just 4-ounce “tastings.” Kentucky passed a similar law this spring, scrapping a requirement that its brewers transfer beer to a third party before serving it in their own tap rooms.

Those new laws and similar ones cropping up in other states are a big reason why the number of breweries in the country is approaching 3,000, including about 400 small operations that opened last year, according to the Brewers Association. South Carolina, for example, is becoming an unlikely craft beer mecca with new offerings like Westbrook Brewing and Holy City Brewing.

Getting their suds to grocery and liquor store shelves is still a challenge, though. Distribution is one of the only barriers still protecting beer giants like AB InBev, Molson Coors Brewing (TAP), and SABMiller (SAB), which together account for 78 percent of U.S. beer volume, according to Bloomberg analysis. In many states, third-party distributors are mandated by law and those distributors are sometimes reluctant to deal with small players, given the amount of business they do with massive brewers. Beer companies big and small are skirmishing over distribution legislation all over the country. How those battles play out will have a major effect on market share.

Kyle-stock-190
Stock is an associate editor for Businessweek.com. Twitter: @kylestock

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Companies Mentioned

  • STZ
    (Constellation Brands Inc)
    • $84.05 USD
    • 1.97
    • 2.34%
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